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What is definition of equitable idemnity

Oct 27th, 2014 | By | Category: Litigation Warrior

What is Equitable Indemnity?

insurance subrogation equitable indemnification lawyer

 The right to equitable indemnity arises from the legal concept that when someone has been compelled to pay damages caused by another wrongdoer, in fairness, the innocent party should recover from that wrongdoer.  California recognizes two forms of indemnity, one is express contractual indemnity, and the other is implied (aka “equitable indemnity”).  Express indemnity requires a contract (between the indemnitor and indemnitee), while no contract is required to apply the doctrine of equitable indemnity.

In one California case involving two insurers, the Court held that the existence of a contract with the policy holder was sufficient to create a right to equitable indemnity, and thus trigger a four year (not a two year) statute of limitations:

“Colonial contends that Liberty’s claim is “based upon an implied contract of indemnification and should have been brought within the two year period set forth in Section 339(1) of the Code of Civil Procedure.” A similar contention was held to be without merit in Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 662 [328 P.2d 198, 68 A.L.R.2d 883], wherein our Supreme Court held: “Sloan’s cause of action against the insurer arose on August 13, 1950, when the judgment in the bodily injury action became final. The complaint in the present action was filed on May 28, 1954, less than four years but more than two years after the cause of action arose. (5) Traders contends that an action of implied obligation arising out of contract is not on the written instrument and that therefore the four-year term prescribed in section 337, subdivision 1, of the Code of Civil Procedure is not applicable. We do not agree. The promise which the law implies as an element of the contract is as much a part of the instrument as if it were written out. [Citations.]” Liberty’s quotation from Pacific Employers Ins. Co. v. Hartford Acc. & Indem. Co., 228 F.2d 365, 373, is not applicable to the present situation. There an insurer, as subrogee of its insured, sued to recoup from the negligent employees of the insured under the theory of implied indemnification, which is subject to the two-year period of limitations. The instant action is one brought by one insurer against another insurer upon an “obligation or liability founded upon an instrument in writing,” i.e., the latter’s written policy of insurance.”

 See Liberty Mut. Ins. Co. v. Colonial Ins. Co., 8 Cal. App. 3d 427, 432-33 (1970). 

What must be shown or alleged in a cause of action for equitable indemnification?

1.  Some loss occurred;

2.  Loss was cased by someone else;

These principles were discuss in the case of Heritage Oaks Partners v. First American Title Insurance Company, 155 Cal.App.4th 339 (2007) which discussed:

“As a matter of law, Heritage Oaks has not and cannot allege facts sufficient to state a cause of action for equitable indemnity against First American. “At the heart of the doctrine [of equitable indemnity] is apportionment based on fault. At a minimum equitable indemnity ‘requires a determination of fault on the part of the alleged indemnitor….’ (Coca–Cola Bottling Co. v. Lucky Stores, Inc. (1992) 11 Cal.App.4th 1372, 1378 [14 Cal.Rptr.2d 673], italics added.)” (City of Huntington Beach v. City of Westminster (1997) 57 Cal.App.4th 220, 224–225, 66 Cal.Rptr.2d 826.) Thus, to state a cause of action for equitable indemnity, Heritage Oaks had to allege that it was jointly and severally liable with First American to the Peppertree Owners. “[O]ne point stands clear: there can be no indemnity without liability. In other words, unless the prospective indemnitor and indemnitee are jointly and severally liable to the plaintiff there is no basis for indemnity.”

Insurance Subrogation is a form of equitable indemnity

In Bush v. Superior Court of Sacramento County, 10 Cal.App.4th 1374 (1993) the Third District Court of Appeals held:

“A subrogation right bears a strong resemblance to the right to equitable indemnity sanctioned……Subrogation is an equitable remedy which arises under the following basic circumstances:’

(1) The obligor (defendant) owes a debt or duty of some kind to the creditor (subrogor);

(2) The subrogee (plaintiff), pursuant to his own obligation to the creditor, pays that debt or discharges that duty;

(3) These circumstances make it inequitable that the subrogee should bear the loss while the obligor is unjustly enriched.”

What is the statute of limitations for an action for equitable indemnity in California?

There have been conflicts in the law as to whether a two-year statute of limitations, three year, or four-year statute applies in action of equitable indemnity (not involving a contract, if you have a contract CCP 337.1 would apply and the four year limit as set forth below would govern).

1.  The 2 year statute of limitations in California is found at California Code of Civil Procedure Section 339.1.  This section reads:

Within two years: 1. An action upon a contract, obligation or liability not founded upon an instrument of writing, except as provided in Section 2725 of the Commercial Code or subdivision 2 of Section 337 of this code; or an action founded upon a contract, obligation or liability, evidenced by a certificate, or abstract or guaranty of title of real property, or by a policy of title insurance; provided, that the cause of action upon a contract, obligation or liability evidenced by a certificate, or abstract or guaranty of title of real property or policy of title insurance shall not be deemed to have accrued until the discovery of the loss or damage suffered by the aggrieved party thereunder.

2.  The 3 year statute of limitations is set forth in CCP 338.

This was discussed in one California case involves losses incurred by the City of San Diego in regard to asbestos removal – yet the losses were not pleaded (City of San Diego v. U.S. Gypsum, 30 Cal.App.4th 575 (1994):

“Third, the three-year limitations period of California Code of Civil Procedure section 338, subdivision (b), precludes City’s cause of action for equitable indemnification. Our Supreme Court has consistently ruled that a cause of action for indemnity does not accrue until the indemnitee suffers loss through payment of an adverse judgment or settlement”

CCP 338 reads:

Within three years: 

(a) An action upon a liability created by statute, other than a penalty or forfeiture.

(b) An action for trespass upon or injury to real property.   

(c) (1) An action for taking, detaining, or injuring any goods or chattels, including actions for the specific recovery of personal property.

2.  The 4 year statute of limitations is in CCP 337.1.  This section states:

Within four years: 1. An action upon any contract, obligation or liability founded upon an instrument in writing, except as provided in Section 336a of this code; provided, that the time within which any action for a money judgment for the balance due upon an obligation for the payment of which a deed of trust or mortgage with power of sale upon real property or any interest therein was given as security, following the exercise of the power of sale in such deed of trust or mortgage, may be brought shall not extend beyond three months after the time of sale under such deed of trust or mortgage.

To be cautious, in cases of equitable indemnification the two-year should be observed.

In general, the statute of limitations starts to run when the loss is incurred.  A Plaintiff’s complaint should plead the loss.  In the City of San Diego case cited above, the City was denied relief because the loss had not yet occurred as the Court noted:

“City contends it is entitled to equitable indemnification from defendants because in abating the asbestos in city buildings, it has ameliorated a human health hazard. City acknowledges it has not been sued by any plaintiff for money damages or other relief arising from the presence of asbestos fibers, asbestos dust or in-place asbestos-containing building materials in city buildings. City believes Selma Pressure Treating Co. v. Osmose Wood Preserving, Inc., support City’s recovery in equitable indemnification against defendants, although City is not presently in asbestos-related litigation with any plaintiff. City rests its argument upon the theory that defendants have caused or contributed greatly to the asbestos-related nuisance in city buildings. For several reasons, the trial court properly granted summary judgment regarding City’s cause of action for equitable indemnification. First, City has not incurred damages for payment to any third party in settlement of a claim or in satisfaction of a judgment.”

Can I recover my attorney fees expended as part of defending an action that was necessitated by the wrong doing of another party?

Possibly.  It is settled that attorney’s fees are not available to a prevailing party unless provided for by statute or contract. (See Cal. Code Civ.Proc., §1021; See also Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 504.

California Equitable Indemnity Resources

1.  Los Angeles Bar Association article on equitable indemnity

Contact a litigation lawyer to assert your claims for equitable indemnity in your case.  We can be reached at (877) 276-5084.  Or fill out the form below.



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