Reported / Citable
Background
A pedestrian, Ferial Harb, was struck and killed by a vehicle while walking on or near a roadway in Riverside, California. His relatives sued the City of Riverside, the County of Riverside, the State of California, the driver, and the owner of the vehicle. The complaint alleged that the City’s roadway was a dangerous condition of public property because of inadequate lighting, signs, and visibility.
The City had earlier contracted with Design Services, Inc. (DSI) for professional consulting services on a citywide LED street light conversion project. The contract required DSI to evaluate street lighting, including on the road where the accident occurred, and recommend a sequence for replacement. The contract also required DSI to defend and indemnify the City for claims arising from DSI’s work, and required DSI’s insurer, RLI Insurance Company, to add the City as an additional insured under DSI’s liability policies. RLI’s endorsement reflected the City’s additional insured status.
The City filed a cross-complaint against DSI, several other contractors and consultants, and their insurers, including RLI. The City sought indemnification, apportionment of fault, declaratory relief, breach of contract, and bad faith damages. RLI demurred on the ground that under Royal Globe Ins. Co. v. Superior Court, a plaintiff may not sue an insurer and the insurer’s insured in the same action. The trial court sustained the demurrer without leave to amend.
The Court’s Holding
The Fourth District Court of Appeal, Division One, reversed and remanded. The court explained that the Royal Globe rule was crafted to address the conflict of interest that arises when a third-party plaintiff sues both an insurer and its insured for the same loss. The Supreme Court was concerned that the insurer’s duties to its insured would be undermined if the same insurer were defending the insured in court while also being sued by the same plaintiff for bad faith.
That concern is not present here. The City is itself an additional named insured under RLI’s policies. As an additional insured, the City has its own contract rights against RLI, and its claims against RLI for defense, indemnity, and breach of contract are not third-party-style claims at all. They are first-party claims by an insured against its own insurer. Joining RLI in the same action with DSI does not put RLI in conflict with itself or compromise its duties to either insured. To the extent there is any tension, the trial court has tools to manage it under cases like Royal Surplus Lines, including bifurcation, sequencing trials, and managing discovery.
The court also explained that any factual dispute about whether the City actually qualifies as an additional insured under the policy can be resolved in the same action, particularly because that question is bound up with DSI’s contractual obligation to procure additional insured coverage. The court declined to reach RLI’s additional grounds for demurrer, leaving those for the trial court on remand. The trial court must vacate its dismissal order, consider RLI’s alternative arguments, and proceed with the case.
Key Takeaways
- The Royal Globe rule against joining an insurer and its insured in the same action does not apply when the plaintiff is itself an additional insured asserting its own contract rights against the insurer.
- An additional insured can sue both the named insured contractor and the insurer in a single action for defense, indemnity, and breach of contract claims, subject to the trial court’s management tools.
- Disputes over whether a party qualifies as an additional insured under a policy are appropriately resolved in conjunction with the related contract claims against the named insured.
- Trial courts can use bifurcation, sequencing, and discovery management to address any practical concerns about conflicts of interest in mixed insurer/insured litigation.
- Public agencies that obtain additional insured status from contractors can pursue coverage litigation as part of the same case in which the underlying claims are being defended.
Why It Matters
This decision is an important development for public agencies and other businesses that routinely require contractors to add them as additional insureds. By confirming that Royal Globe does not bar joinder of the insurer in the same action, the opinion gives additional insureds a more efficient path to enforce their coverage rights without spinning off a separate declaratory relief action.
For insurers and their counsel, the case is a reminder that defenses based on Royal Globe should be carefully evaluated when the plaintiff is itself an insured. A blanket joinder objection is unlikely to succeed in additional insured litigation. Insurance practitioners should also expect more coordinated litigation involving construction, professional services, and municipal contracts, with insurers brought in early to address coverage and breach claims alongside the underlying liability dispute.