Federal Insurance v. Pueblo International Insurance

This case involves a claim for attorney fees by an indemnitee against an indemnitor under California Code of Civil Procedure § 1021.6.

American Savings Bank paid out cash on a check bearing a forged endorsement. The check was drawn by Pueblo International, Inc. (misidentified in the caption as Pueblo International Insurance) on a bank account it maintained at Citibank (New York State). When the check was presented to Citibank through the normal Federal Reserve Bank clearing house process, Citibank, without knowledge of the forged endorsement, charged the check to Pueblo’s account.

Pueblo assigned its claims to its insurer, Federal Insurance Company. Federal sued Citibank and American for the amount of the cheek. Citibank cross-claimed against American for indemnification. Citibank prevailed on that cross-claim, but the district court denied its request for attorney fees. The court determined that Citibank had not satisfied the tort requirement of subsection (a) of California Code of Civil Procedure § 1021.6. This subsection provides that attorney fees in an action for implied indemnification may only be recovered by an indemnitee against an indemnitor when the indemnitee is…