Judge: Ronald F. Frank, Case: 19STCV27867, Date: 2023-05-10 Tentative Ruling
Case Number: 19STCV27867 Hearing Date: May 10, 2023 Dept: 8
Tentative Ruling
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HEARING DATE: May 10, 2023¿
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CASE NUMBER: 19STCV27867
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CASE NAME: Rafael Torres v. Technion
Contractors TCI, Inc., et al
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MOVING PARTY: Cross-Defendant, Asbestos Instant Response, Inc
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RESPONDING PARTY: Cross-Complainant, Technion Contractors TCI, Inc.
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TRIAL DATE: Not
set.
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MOTION:¿ (1) Demurrer
Tentative Rulings: (1) Demurrer is SUSTAINED IN
PART, with 20 days leave to amend, and OVERRULED IN PART.
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I. BACKGROUND¿¿
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A. Factual¿¿
Plaintiff Rafael Torres filed First Amended Complaint
(“FAC”) against defendants Technion Contractors TCI, Inc. (“TCI”), Suttles
Plumbing, Inc. (“Suttles”), and Does 1 through 50, alleging one cause of action
for negligence arising out of a construction project for the Los Angeles
Unified School District at Paseo Del Rey Elementary School in Playa Del Rey (the
“Property”). Defendants were alleged to be negligent in the construction of the
gas pipe systems and their related parts (the “Gas System”) at the Property. The Complaint alleges that on July 1, 2019, while
Plaintiff was working at the Property he cut into a gas pipe, causing an
explosion that resulted in Plaintiff’s severe and permanent injuries.
On September
16, 2020, TCI filed a Cross-Complaint against cross-defendants Asbestos Instant
Response, Inc. (“AIR”) and Roes 1 through 20. The Cross-Complaint asserts eight
causes of action, but as of 2023 only the claims for express indemnity and
breach of written contract remained. After this Court sustained a Demurrer to the
original Cross-Complaint, on March 3, 2023, TCI filed a First Amended
Cross-Complaint (“FAXC”) alleging causes of action for: (1) Express Indemnity;
(2) Breach of Written Contract; (3) Subrogation; (4) Violation of Civil Code
section 2782.05(f); and (5) Equitable Indemnity – Civil Code section 2782.05(j).
TCI’s FAXC alleges that AIR entered into a written
Subcontract Agreement (“Agreement”) with TCI to provide demolition work at the
Property. The Agreement stated that AIR agreed to indemnify TCI from all
claims, debts, attorney’s fees, costs, and expenses of any kind that arise out
of the performance of the subcontracting work, including claims by AIR’s
employees. The FAXC further alleges that the incident described in Plaintiff’s
FAC arose from AIR’s scope of work because Plaintiff was AIR’s employee at the
time performing work at the Property pursuant to the Agreement. Plaintiff sued TCI and the plumbing
subcontractor 5 weeks after the incident.
According to the FAXC, TCI’s insurers settled Plaintiff’s bodily injury
claim for $9.9Million in February of 2022, and are now seeking to subrogate against
the alleged culpable parties who are alleged to be the Cross-Defendants
including AIR. TCI asserts that it has incurred attorneys’
fees, court costs, and settlement proceed expenses to defend against
Plaintiff’s Complaint and prosecute AIR. Therefore, the FAXC asserts, among other
things, that TCI by the express terms of the Agreement is entitled to be
indemnified by AIR.
As it did with respect to the original
Cross-Complaint, Cross-Defendant AIR demurs to TCI’s FAXC.
B. Procedural¿¿
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On
April 14, 2023, AIR filed this (corrected) demurrer to the entire FAXC. On
April 25, 2023, TCI filed an opposition. On May 3, 2023, AIR filed a reply
brief.
¿II. GROUNDS FOR DEMURRER
& MOTION TO STRIKE
AIR
demurs on the grounds that it claims: (1) the Assignment by TCI’s insurers is
inadequate under California law to convey a complete assignment of “title” to
the causes of action alleged in the FAXC; (2) TCI has no standing to asset any
of the non-subrogation causes of action; (3) TCI failed to comply with the
20-day notice provision in the subcontract agreement thereby barring any
contractual or express indemnity claim against AIR; (4) TCI cannot seek
indemnification for any portion of the settlement arising from its own active
negligence under Civil Code section 2782.05(a); (5) TCI cannot seek indemnification
for any passive negligence because it faced no risk of liability for passive
negligence; (6)TCI fails to state sufficient facts to support its express
indemnity cause of action; (7)TCI fails to state sufficient facts to allege a
breach of contract claim; and (8) TCI fails to state sufficient facts to allege
a subrogation cause of action. Although the Demurrer itself purports to assert
a general demurrer to the entire FAXC, it argues on page 2 and subsequently
that the FAXC has a single cause of action for subrogation and non-substantive
causes of action. The supporting brief
asserts what appear to be special demurrer arguments as to specific individual
causes of action alleged in the FAXC.
III. ANALYSIS¿
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A.
Legal
Standard
A demurrer can be used only
to challenge defects that appear on the face of the pleading under attack or
from matters outside the pleading that are judicially noticeable. (Blank v.
Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint
need only allege facts sufficient to state a cause of action; each evidentiary
fact that might eventually form part of the plaintiff’s proof need not be
alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53
Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of
action, the demurrer admits the truth of all material facts properly pleaded. (Aubry
v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does
not admit contentions, deductions or conclusions of fact or law.” (Daar v.
Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿¿¿
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A pleading is uncertain if
it is ambiguous or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).) A demurrer for
uncertainty may lie if the failure to label the parties and claims renders the
complaint so confusing defendant cannot tell what he or she is supposed to
respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d
135, 139, fn. 2.) However, “[a] demurrer for uncertainty is strictly construed,
even where a complaint is in some respects uncertain, because ambiguities can
be clarified under modern discovery procedures.” (Khoury v. Maly's of
California, Inc. (1993) 14 Cal.App.4th 612, 616.)¿
B.
Discussion
Assignment
First, AIR
asserts that the assignment by TCI’s insurers of their subrogation rights, if
any, against AIR was inadequate and failed to satisfy basic legal requirements
for the “complete” assignment of rights.
AIR submits that under the express terms of the Assignment, Everest – and
Everest alone – maintains full control and discretion over the prosecution of
the FAXC against AIR: “Everest will solely control the prosecution of
any action seeking to enforce the Recovery Rights and whether to accept any
settlement relating to the Recovery Rights.” (Assignment, p. 3, Section
III.(5).) AIR argues that TCI is a nominal party at best, a cross-plaintiff in
name only, and has no risk since Everest has agreed it will pay all of TCI’s
fees, expenses, and costs, and agrees to indemnify TCI for any judgment, fees,
costs, and/or sanctions without limitation. (Assignment, p. 3, Section
III.(3-4).)
In opposition, TCI notes that AIR is correct that it
agreed to repay Everest and then Liberty from its recovery, and that Everest
controls the litigation and is responsible for the fees, costs, and any
liabilities to TCI arising out of the case. However, TCI argues that this
“collateral arrangements” do not prevent the assignment from being complete. The Opposition argues that as long as the
assignment is absolute, so as to vest legal title in the assignee, the latter
is entitled to sue in his own name, whatever collateral arrangements have been
made between him and the assignor respecting the proceeds." (Fink
v. Shemtov (2012) 210 Cal.App.4th 599, 611 [internal quotation omitted,
emphasis added]; see also Jim 82 Props., LLC v. Montgomery Cleaners
(C.D. Cal 2015) 151 F. Supp. 3d 1092, 1101 ["So long as the transfer
itself was absolute, any ancillary terms between the assignor and the assignee
will not render the immediate transfer itself void...."].) TCI argues that
because the Assignment Agreement passed title from the insurers’ claims to TCI’s,
there was a complete assignment and TCI may sue in its own name. Lastly, TCI
argues that by the Assignment Agreement, Liberty and Everest passed titled for
all their claims against AIR, and TCI therefore has the right to pursue the
assigned claims. TCI further notes that AIR faces no threat of multiple
lawsuits and has no valid grounds for objection to the assignment.
“An assignment requires very little by way of formalities and is essentially free from substantive restrictions. “[I]n the absence of [a] statute or a contract provision to the contrary, there are no prescribed formalities that must be observed to make an effective assignment. It is sufficient if the assignor has, in some fashion, manifested an intention to make a present transfer of his rights to the assignee.” (9 Corbin on Contracts (rev. ed.2007) § 47.7, pp. 147–148; see Rest.2d Contracts, §§ 317, 324.) Generally, interests may be assigned orally (Civ.Code, § 1052; 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 709, p. 795), and assignments need not be supported by any consideration.”
The Demurrer cites to Amalgamated Transit Union at page 5, but proceeds to argue that the Assignment Agreement is ineffective to vest TCI with a complete assignment because of the retention by TCI’s insurers of the right to control the litigation. Without directly so stating, AIR is arguing that Everest and Liberty, TCI’s insurers, are the real parties in interest and that they rather than TCI should be prosecuting the FAXC, citing to Bank of the Orient v. Superior Court (1977) 67 Cal.App.3d 588, 595 (“where . . . there has been a partial assignment all parties claiming an interest in the assignment must be joined as plaintiffs, and as indispensable parties.) The Demurrer seems to argue that Everest or Liberty must be joined or are indispensable parties, yet still seeks to have the FAXC dismissed. This inconsistent position may need to be explained in oral argument.
The Court’s tentative is to overrule the Demurrer as to the
subrogation claim. In the Court’s view, TCI
has adequately alleged a complete assignment notwithstanding the fact that its
insurers have retained a continuing equitable interest in the FAXC. The Court interprets the Assignment Agreement
as manifesting the insurers’ intention to assign their rights to pursue claimed
tortfeasor AIR, as an insurer does in most insurance subrogation agreements. TCI has contracted to sue in its own name,
bearing the duty to account to and repay its insurers if and when it collects
on the FAXC. The facts that Everest and
Liberty maintain an equitable interest in the FAXC including the right as FCI’s
principal to decide whether to settle or drop the cross-complaint, and the duty
to indemnify TCI for any costs or fees incurred or judgment against it, do not alter
the parties intention that the insurers assigned and delegated their rights to
TCI to litigate the FAXC in TCI’s own name.
Standing for Non-Subrogation Causes of Action
Next, AIR asserts that TCI has no
standing to pursue any of its non-subrogation causes of action because it has
suffered no damages under any of them. AIR asserts that those claims require
TCI to establish that it paid sums of money for which it is entitled to
indemnity, or that it has suffered out-of-pocket losses as a result of AIR’s
breach of contract. AIR cites in this part
of its brief to Bramalea California, Inc. v. Reliable Interiors, Inc.
(2004) 119 Cal.App.4th 468, 474 as support for its argument. AIR notes that the FAXC does not allege that
TCI paid Plaintiff anything, and in fact, it is undisputed that TCI’s insurers
– not TCI – paid the entire $9.9 million to settle Plaintiff’s personal injury
claims. But Bramalea and the earlier case it relied on (Patent Scaffolding)
are both equitable subrogation cases, not an express contractual subrogation
case. The Fourth District in Bramalea
specifically noted, id. at p. 473, that the insured Bramalea California could have
pursued the claim for attorney’s fees there in its own name if there were an
express assignment of the claim which was not alleged in that case. Accordingly, the only two cases cited by AIR
in this section of its Demurer brief are distinguishable. Neither case arose form an express
contractual assignment by the insurer to its insured to pursue the tortfeasor
in the name of the insured.
In
opposition, TCI asserts that AIR’s argument relies on the contention that that
the Assignment Agreement was ineffective to convey the right to litigate the FACX,
but the Court finds, as TCI argues, to the contrary. The Court does not believe
that an insured must pay money out of its own pocket (other than insurance
premiums) in order to pursue a subrogation claim in the insured’s own name
after the insured has obtained its contracted-for indemnification from its
insurers who paid to settle a covered claim.
20-Day Notice Provision
The
subcontract included the following notice provision that the Demurrer alleges
to preclude the contractual or express indemnity causes of action in the FACX:
“Neither party
shall be entitled to recover damages from the other as a result of any act,
omission, or event without proof that it gave the other party, within 20 days
of the first occurrence of the action, omission[,] or event, written notice
that it was being or would be damaged by such act, omission[,] or event. A
failure to provide this notice is conclusive proof of a failure to mitigate
damages and a complete defense to recovery of any damages, including damages
for delay, caused by such act, omission[,] or event regardless of whether the
theory of recovery is legal, contractual, equitable, or otherwise.”
(FAXC,
Ex. B at 3.)
In its demurrer, AIR asserts that
because the incident occurred on July 1, 2019, the subcontract agreement
required TCI to give AIR written notice by July 21, 2019. AIR also asserts that
the FAXC fails to provide the requisite proof of written notice as an exhibit.
As such, AIR argues that TCI’s failure to comply with the 20-day notice acts as
a complete bar to any claim by TCI for contractual indemnity.
In its opposition, TCI assert that
even if this notice provision was a condition precedent to indemnity, the pled
allegations would be sufficient since it alleges: “Plaintiff Mr. Torres was
injured in an accident while working for AIR on July 1, 2019. (FAXC, ¶ 10.) Mr.
Torres filed suit against Technion on August 8, 2019. (Id., ¶ 11.)
Technion tendered its defense and indemnification to AIR pursuant to the
Subcontract on or about August 20, 2019.” (Id., ¶ 12.) RCI asserts that based
on the pled allegations, if did not become clear that TCI would be damaged by
Mr. Torres’ accident until he sued TCI on August 8, 2019, at which point
incurring defense costs became certain. Further, the FAXC alleges that TCI
tendered its defense and indemnity to AIR on August 20, 2019, just 12 days
after the lawsuit was filed (FAXC, ¶¶ 11, 12.)
In its reply brief, AIR asserts that
TCI ignores the express language of the provision and then injects language (or
concepts) that do not apply, nor are remotely reasonable. Instead, AIR argues
that TCI was required to give notice within 20 days of the act, omission, or
event, which was when Plaintiff sustained personal injuries. AIR contends that
TCI was the general contractor for a project where a worksite gas line was cut
and then ignited, causing injury to Mr. Torres. AIR asserts that this accident
was undoubtably an “event” that “would damage” TCI. Lastly, AIR asserts that
the FAXC ignores the requirement that “written notice” must be given, instead,
vaguely alleging that TCI “tendered” its defense and indemnification to AIR
fifty-one (51) days after plaintiff’s injury.
The Court disagrees with the premise
of the Demurrer on this point. The FACX
sufficiently alleges a cause of action for contractual or express
indemnity. Whether AIR may pursue or
possibly obtain summary judgment on these causes or action, the Court finds the
causes of action to be sufficiently pleaded and are not barred based on what is
alleged as to the 20-day notice provision.
Equitable Subrogation/ Indemnity
“An
indemnitee seeking to recover on an agreement for indemnification must allege
the parties’ contractual relationship, the indemnitee’s performance of that
portion of the contract which gives rise to the indemnification claim, the
facts showing a loss within the meaning of the parties’ indemnification
agreement, and the amount of damages sustained.” (Four Star Electric, Inc. v. F & H Construction (1992) 7
Cal.App.4th 1375, 1380.)
“In the case of insurance, subrogation takes the form of an insurer’s right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid.” (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1291).) The doctrine of equitable subrogation “is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter.” (Ibid.)
“The essential elements of an insurer’s cause of action for
equitable subrogation are as follows: (a) the insured suffered a loss for which
the defendant is liable, either as the wrongdoer whose act or omission caused
the loss or because the defendant is legally responsible to the insured for the
loss caused by the wrongdoer; (b) the claimed loss was one for which the
insurer was not primarily liable; (c) the insurer has compensated the insured
in whole or in part for the same loss for which the defendant is primarily
liable; (d) the insurer has paid the claim of its insured to protect its own
interest and not as a volunteer; (e) the insured has an existing, assignable
cause of action against the defendant which the insured could have asserted for
its own benefit had it not been compensated for its loss by the insurer; (f)
the insurer has suffered damages caused by the act or omission upon which the
liability of the defendant depends; (g) justice requires that the loss be
entirely shifted from the insurer to the defendant, whose equitable position is
inferior to that of the insurer; and (h) the insurer’s damages are in a
liquidated sum, generally the amount paid to the insured.”
(Fireman’s
Fund, supra, 65 Cal.App.4th at p. 1292.)
Here, AIR’s demurrer argues that TCI does not allege that it provided a complete written tender of the claim to AIR as required by Civil Code § 2782.05(e). Preliminarily, AIR argues that TCI does not attach a copy of that tender/demand to their FAXC. Second, AIR argues that there is no indication that TCI fully complied with the requirements under Civil Code § 2782.05(e). For instance, AIR notes that TCI does not state that the tender/demand by Technion included an itemization of the claims caused by AIR’s scope of work in their tender letter. Moreover, AIR asserts that Technion does not allege in its FAXC that their demand/tender provides a written statement regarding how the reasonable allocated share of fees and costs was determined.
In opposition, TCI asserts that it has sufficiently met its pleading standard because it’s FAXC alleges that:
On or about August 20, 2019, Cross-Complainant demanded in writing
that AIR, Inc. defend and fully indemnify Cross-Complainant against Plaintiff’s
claims. The tender included information describing how Plaintiff was injured in
the course and scope of his work as an AIR, Inc. employee when he cut into a
gas pipe that was designated "No Demo." The tender also explained
that AIR, Inc.'s negligence included, but was not limited to, its failure to
provide its employees with safety orientation, and its failure to comply with
Cal/OSHA safety standards.
(FAXC, ¶ 47.) TCI asserts that there is no pleading requirement for it to attach the demand, or to plead facts referenced in AIR’s demurrer. While this may be true, TCI’s pleading is devoid of the indemnitee’s performance of that portion of the contract which gives rise to the indemnification claim, namely, that it provided a complete written tender, does not attach said tender/demand to its FAXC, does not state the tender/demand by TCI included an itemization of the claims caused by AIR’s scope of work, or that TCI does not allege in its FAXC that their demand/tender provides a written statement regarding how the reasonable allocation share of fees and costs was determined.
Without so alleging, the Court sustains the demurrer to the
equitable subrogation cause of action, with leave to amend.
Breach
of Written Contract
To state a cause of action for breach of contract, Plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)
AIR’s
demurrer argues that TCI has not performed as required by the terms and
conditions of the subcontract because TCI failed to allege in their FAXC that
they gave written notice to AIR within 20 days of Plaintiff’s incident that it
was being or would be damaged as a result of Plaintiff’s incident.
The FAXC alleges that TCI entered into an agreement whereby AIR agreed, and was required, to defend and indemnify cross-complainant against claims of any kind arising out of or in any way connected with the performance of AIR, Inc.’s work at the project that did not arise out of, pertain to, or relate to the active negligence or willful misconduct of cross-complainant or other subcontractors. (FAXC, ¶ 30.) TCI goes on to allege that it has performed, or been excused from perming, all conditions, covenants and promises required, by it in accordance with the terms and conditions of the agreement. (FAXC, ¶ 31.) The FAXC contends that pursuant to the agreement, AIR was required to defend and indemnify cross-complainant with respect to the claim in Plaintiff’s complaint against cross-complainant. (FAXC, ¶ 32.) TCI contends in its FAXC that AIR has breached the Agreement by failing to defend and indemnify cross-complainant against the Complaint as required by sections 4(c) and 8 of the agreement. (FAXC, ¶ 33.) Lastly, TCI has alleged damages. (FAXC, ¶ 34.)
As noted above, the Court finds that
TCI has sufficiently alleged the elements of its breach of contract cause of
action, notwithstanding AIR’s 20-day notice argument. For
purposes of the pleading stage, rather than at the MSJH / MSA stage of this case,
the Demurrer to this cause of action is overruled.
Subrogation
AIR asserts that TCI’s FAXC fails to
allege a subrogation cause of action. AIR indicates that the elements of a cause
of action for subrogation are: (1) the insured suffered a loss for which the
defendant is liable, either as the wrongdoer whose act or omission caused the
loss or because the defendant is legally responsible to the insured for the
loss caused by the wrongdoer; (2) the claimed loss was one for which the
insurer was not primarily liable; (3) the insurer has compensated the insured
in whole or in part for the same loss for which the defendant is primarily
liable; (4) the insurer has paid the claim of its insured to protect its own
interest and not as a volunteer; (5) the insured has an existing, assignable
cause of action against the defendant which the insured could have asserted for
its own benefit had it not been compensated for its loss by the insurer; (6) the
insurer has suffered damages caused by the act or omission upon which the
liability of the defendant depends; (7) justice requires that the loss be
entirely shifted from the insurer to the defendant, whose equitable position is
inferior to that of the insurer; and (8) the insurer's damages are in a
liquidated sum, generally the amount paid to the insured.”
AIR argues that the FAXC does not
allege that TCI suffered a loss for which AIR is allegedly liable as required
by the first element, nrt could the FAXC so allege since TCI made no such
payments. AIR asserts that the FAXC only alleges that Liberty and Everest paid
for the settlement with Plaintiff. (FAXC, ¶ 42.)
In opposition, TCI argues that the
subrogation claim is adequately pled because TCI has been has been assigned the
subrogation claims held by Liberty and Everest, and the FAXC alleges that these
insurers made payments for which subrogation rights have been assigned to TCI.
(FAXC, ¶¶ 19-21, 39-44.) TCI also argues that TCI bore liability risk for AIR’s
own negligence under rules of joint and several liability, and TCI bore
litigation risk against Mr. Torres arising out of claimed passive negligence.
The
Court overrules the Demurrer on this point as detailed above.
Indemnification
for Negligence under Civil Code § 2782.05(a)
When it comes to negligence, AIR
argues that TCI cannot seek indemnification for any portion of the settlement
arising from its own active negligence under Civil Code § 2782.05(a). However
AIR also argues that TCI cannot seek indemnification for any passive negligence
because if faced no risk of liability for passive negligence. AIR notes that
Plaintiff was employed by TCI, and California’s Workers’ Compensation Act is
the exclusive remedy of employees against their employers for injuries arising
out of and in the court of employment. As such, AIR argues that TCI faced no
possible liability for its passive negligence, and all settlements amounts paid
on TCI’s behalf by its insurers to Plaintiff would necessarily have been for
TCI’s active negligence and therefore unrecoverable.
In opposition, TCI notes it does not
seek indemnification for its own active negligence, but recovery is not limited
to its passive negligence. TCI’s opposition is riddled with statements like
“potential liability” and “could have been held liable.” The Court will take
oral argument as to whether the passive-active distinction has been adequately
fleshed out in the FACX for purposes of this cause of action.
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