Snyder v. Cal. Ins. Guarantee Ass'n

• Decision Date: 17 September 2014
• Docket Number: A139263
• Court: California Court of Appeals Court of Appeals
• Parties: STEPHEN M. SNYDER et al., as Trustees, etc., Plaintiffs and Appellants, v. CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Defendant and Respondent.

STEPHEN M. SNYDER et al., as Trustees, etc., Plaintiffs and Appellants, v. CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Defendant and Respondent.

A139263

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE

September 17, 2014

ORDER MODIFYING OPINION AND DENYING REHEARING; NO CHANGE IN JUDGMENT

THE COURT:

The opinion filed herein on September 17, 2014, is modified as follows:

On page 16, at the end of the third sentence of the final paragraph of section 5 of the Discussion, after the words "within the meaning of the statute," add as footnote 7 the following footnote:

7/ Contrary to statements made in CIGA's petition for rehearing, we do not hold that a claimant may not submit to CIGA a specific claim for coverage before exhausting its claims in the insolvency or other proceedings, or that CIGA is precluded from honoring such claims. Our opinion is limited to the time within which the claim must be submitted.

The petition for rehearing is denied. There is no change in the judgment.

Date:

/s/_________ Acting P.J.Superior Court of the County of Alameda, RG13666656, Hon. Steven Brick, Judge.

Counsel for Plaintiffs and Appellants:

MORGAN, LEWIS & BOCKIUS LLP, Michel

Y. Horton, Jason B. Komorsky, Thomas M.

Peterson, Jeffrey S. Raskin.

Counsel for Defendant and Respondent:

LOCKE LORD LLP, C. Guerry Collins, Conrad

V. Sison.

CERTIFIED FOR PUBLICATION

(Alameda County Super. Ct. No. RG13666656)

This appeal presents the difficult question of when a claim against the California Insurance Guarantee Association (CIGA) arises, triggering the three-year statute of limitations for breach of CIGA's statutory obligations. (Code Civ. Proc., § 338.) Trustees of the Western Asbestos Settlement Trust (Western Trust), charged with paying bodily injury claims against companies that distributed asbestos-containing building materials, sought coverage under the companies' insurance policies and, in 2004, after the insurer was declared insolvent, brought a declaratory relief action against CIGA to determine CIGA's obligation to pay the insolvent insurer's policy obligations. After CIGA filed an answer denying such an obligation, the proceedings against CIGA remained dormant for almost six years. In May 2011, the Western Trust dismissed its complaint against CIGA without prejudice. The present declaratory relief action by the Western Trust against CIGA was filed in February 2013. CIGA demurred on the ground, among others, that the complaint is barred by the statute of limitations. On this ground the trial court sustained the demurrer without leave to amend and dismissed the action.

CIGA contends that its answer in the prior declaratory relief action asserting that the trust's claims were not covered claims for which it is statutorily responsible triggered the running of the three-year statute of limitations to bring an action challenging that determination. Western Trust argues that the limitations period does not begin to run until CIGA denies a specific claim for payment and that even at this time no such claim has been submitted, much less denied. We conclude that a cause of action against CIGA for breach of statutory duties does not accrue until all of the events necessary to create a covered claim have occurred, giving rise to the insured's right to demand payment from CIGA. The trust's complaint here alleges no facts indicating that all those events occurred more than three years before the complaint was filed, if they have even occurred at this time. Thus, the trial court erred in concluding that the present action is barred by the statute of limitations. We shall therefore reverse the judgment dismissing the action.

FACTUAL AND PROCEDURAL BACKGROUND

A. The bankruptcy court creates the Western Trust to manage asbestos claims.

Western Asbestos Company, Western MacArthur Co. and Mac Arthur Co. (collectively, the Western Companies) distributed asbestos-containing building materials. In 2002, the Western Companies filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code for the purpose of establishing an asbestos claimants' trust. (In re Western Asbestos Co. (N.D.Cal. 2009) 416 B.R. 670, 676.) Such a trust is authorized by the Bankruptcy Code to manage personal injury claims arising from exposure to asbestos-containing products. (11 U.S.C. § 524(g).) "The procedure under [section] 524(g) involves the establishment of a trust to pay the future claims, coupled with an injunction, referred to as a 'channeling injunction,' which prevents future claimants from suing the debtor." (In re Western Asbestos Co., supra, at p. 676.)

The Western Trust, the trustees of which are plaintiffs here, was created in 2004 by an order of the bankruptcy court. (In re Western Asbestos Co. (Bankr. N.D.Cal. 2004) 313 B.R. 456.) Funded with settlement proceeds from several insurers, Western Trust assumed all liabilities of the Western Companies relating to asbestos claims, estimated at $6 billion. Western Trust was granted authority to initiate legal actions, in its own nameor the name of the debtors, to recover additional insurance proceeds relating to those claims. (Id. at pp. 460-462.) As Western Trust avers in this case, it "is charged with responsibility for marshalling the Western Companies' insurance assets, and the proceeds of those assets, and making distributions to the holders of asbestos bodily injury claims against the Western Companies."

B. Western Trust seeks proceeds from Home Insurance Company, which is insolvent.

The Western Companies held seven liability insurance policies issued by Home Insurance Company (Home) from 1976 through 1983. In June 2003, Home was declared insolvent and proceedings to liquidate it were commenced by the insurance commissioner in New Hampshire, where the insurer had its principal office.¹ The Western Companies timely filed a claim in Home's liquidation proceedings and gave CIGA notice that such a claim had been filed. Western Trust became the successor to the Western Companies' claim.

C. Western Trust files an action against several insurers and CIGA.

In November 2004, the Western Trust and Western Companies (Western plaintiffs) filed an action in San Francisco Superior Court against multiple defendants, including Zurich-American Insurance Company and related entities (collectively, Zurich). The Western plaintiffs alleged that Zurich controlled Home and was responsible for wrongly denying the Western Companies' asbestos claims under the Home policies. The Western plaintiffs further alleged that Zurich "siphoned off Home's profitable business," driving it into insolvency. Several remedial causes of action were stated against Zurich, including fraudulent transfer of property. The Western plaintiffs also pled a cause of action for declaratory relief, seeking a declaration that Zurich is liable under the Home policies as Home's successor or alter ego. The Western plaintiffs joined other insurance companies in the litigation, seeking a declaration of those insurers' obligations under polices issued to the Western Companies.

The 2004 complaint also pled a declaratory relief cause of action against CIGA, which by statute becomes responsible to satisfy certain claims of insolvent insurers.² (Ins. Code, § 1063 et seq.) The Western plaintiffs sought "to determine the existence and scope of CIGA's obligations" to them "[i]n light of Home's liquidation." Plaintiffs alleged they "submitted a claim to CIGA on account of Home's insolvency, but CIGA has failed to accept Plaintiffs' claim." The Western plaintiffs sought a declaration "(i) that the Asbestos-Related Claims are covered under the Home policies at issue, (ii) that CIGA is obligated to pay all sums, up to CIGA's statutory limits, with respect to all Asbestos-Related Claims that trigger one or more of Home's policies, and (iii) that CIGA is obligated to satisfy Home's liabilities for breach of contract, up to CIGA's statutory limit."

CIGA demurred to the complaint on grounds that do not appear in this record. The demurrer was overruled and CIGA filed an answer to the complaint in August 2005. CIGA interposed a general denial of the complaint's allegations, and also alleged that the Western plaintiffs' claims "are not within the statutory definition of 'covered claims' for which CIGA is responsible or [are] otherwise excluded from CIGA coverage." CIGA's answer also pled 24 affirmative defenses. Among those defenses were allegations that Western Trust's complaint was both premature and untimely—that it had been filed too early and too late.³ CIGA asserted that the declaratory relief action was prematurebecause plaintiffs were pursuing other insurance and had not exhausted their remedies in the Home liquidation proceeding. The action against CIGA remained pending but dormant as the Western Trust sought recovery in the Home liquidation proceedings.

D. The Western Trust settles its claim in the Home liquidation proceedings and dismisses CIGA from the Zurich litigation.

In February 2011, the Western Trust reached a settlement agreement with New Hampshire's Insurance Commissioner, as Home's liquidator. The settlement received court approval in May 2011. The Insurance Commissioner allowed a claim of $242.5 million against Home's future liquidation, permitting "distributions on the allowed amount at the same intervals and at the same percentages" as other similarly situated creditors. The settlement agreement acknowledged Western Trust's pending lawsuit against CIGA and pending or potential claims against other insurance guaranty associations and included provisions to address those claims and their potential impact on the liquidation.

As the New Hampshire Insurance Commissioner explained when seeking court approval of the settlement: "When an insurance guaranty association such as the California Insurance Guarantee Association responds to a claim under an insolvent insurer's policy, the association generally has a corresponding claim in the insurer's...