First National Insurance v. Cam Painting, Inc.

Appellant Cam Painting, Inc., was the contractor on a construction project for the Los Angeles Unified School District (LAUSD), the Noble project. Cam hired a subcontractor, Sabco Electrique, Inc. Under the Cam-Sabco contract, Sabco was required to provide a payment and performance bond, with Cam as obligee. Sabco obtained its bond from respondent First National Insurance Company, which, coincidentally, had also issued a bond to Cam on the Noble project, with the LAUSD as obligee. In connection with the issuance of the bonds, both Cam and Sabco signed indemnity agreements in favor of First National.

When Sabco failed to pay a supplier, Allsale Electric, First National paid the claim, allocated half the payment to each bond, and sought indemnity from both Cam and Sabco. The trial court found that First National could allocate the loss to the Cam bond as well as the Sabco bond. We disagree. As obligee on the Sabco bond, Cam was entitled to have First National pay the Allsale claim, which all parties agree was a valid claim. Cam’s rights as obligee were not diminished by the fact that Cam was also the principal on a First National bond. We thus reverse the judgment in favor…