In Amer. States Ins. v. Progressive Casualty Ins., 180 Cal. App. 4th 18 (2009), the California Court of Appeal addressed the “peculiar risk” doctrine in the context of an insurer’s duty to defend.

Victor Meza was a self-employed truck driver who was hired by Western Trucking LLC (“Western”) as an independent contractor.  While driving a tractor trailer owned by Western and insured by Wilshire Insurance Company (“Wilshire”), Meza collided with a pedestrian, Yevdokia Bristman, seriously injuring him.  Bristman later sued the grading contractor who hired Western, Vinci Pacific Corporation and the general contractor, Garden Communities (collectively “Vinci Pacific”).

Meza’s liability insurance carrier was Progressive Casualty Insurance Company (“Progressive”) and American States Insurance Co (“American”) provided the commercial auto liability policy covering Western and Vinci Pacific.  American tendered its defense of the Bristman suit to Progressive who disclaimed coverage.  American then sued Progressive, seeking a declaration that Progressive had a duty to defend. The trial court held that the “peculiar risk” doctrine did not apply and that Progressive did not have a duty to defend.

American appealed and the appellate court reversed the trial court’s decision, holding that the Progressive had a duty to defend American against Bristman’s lawsuit based on the “peculiar risk” doctrine.  The “peculiar risk” doctrine is a form of vicariously liability where an owner or contractor can be held directly liable for damages that an independent contractor causes by negligently performing his work.  Progressive argued that this was a simple automobile accident that did not implicate any special or inherent danger in connection with the subcontractor’s operation of the truck.  The Court of Appeal disagreed.  Instead, the court noted that the Vinci Pacific allowed its subcontractors to use an entrance that required drivers to execute a U-turn, jump a curb, cross two pedestrian crosswalks and drive on the sidewalk, all without the assistance of flagmen.  This, the court reasoned, represented a level of control by the general contractor over the contractor’s work that involved a special, recognizable and inherent danger.  As a result, Vinci Pacific was potentially liable for Bristman’s injuries under the vicarious liability theory of the “peculiar risk” doctrine.

Having established that potential liability existed, the court then held that Progressive had a duty to defend stating, “It is enough that a single claim is potentially covered by the policy; the insurer owes a duty to defend even if all other claims against the insured are clearly not covered […] [T]he insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot; the insurer, in other words, must present undisputed facts that eliminate any possibility of coverage.”

In holding that Progressive owed a duty to defend Vinci pursuant to the “peculiar risk” doctrine, the court noted two caveats.  First, that “where more than one insurer owes a duty to defend, a defense by one constitutes no excuse of the failure of any other insurer to perform.”  Second, that Progressive “may have a right to be reimbursed for defense costs allocable solely to claims for which there was no potential vicarious coverage under their policies.”

Having concluded that a duty to defend existed based on potential liability under the peculiar risk doctrine, the Court of Appeal reversed and remanded the case for further proceedings.