229 Cal. App. 4th 1196
Cal. Ct. App.2014Background
- Western Companies (asbestos defendants) entered chapter 11 and, in 2004, the bankruptcy court created the Western Asbestos Settlement Trust (Western Trust) to administer asbestos bodily-injury claims and pursue insurance recoveries.
- Home Insurance Company (insurer) was declared insolvent in 2003; Western timely filed a claim in Home’s liquidation and notified CIGA; Western Trust succeeded to those claims.
- In 2004 Western (and related plaintiffs) sued multiple insurers and sued CIGA for declaratory relief, alleging submission of a claim to CIGA and seeking a binding declaration that CIGA must pay covered asbestos claims; CIGA answered in 2005 denying that plaintiffs’ claims were "covered claims” and pled defenses including prematurity and statute-of-limitations.
- The Home liquidation was later settled in 2011 (allowing Western a $242.5M allowed claim); Western dismissed without prejudice its 2004 declaratory claim against CIGA as part of the settlement; CIGA was dismissed from the Zurich litigation.
- Western filed a new declaratory relief complaint against CIGA in 2013; CIGA demurred, contending the three-year statute of limitations (Code Civ. Proc. § 338) began to run in 2005 when CIGA answered, so the 2013 suit was time-barred; the trial court sustained the demurrer without leave to amend and dismissed.
- The Court of Appeal reversed, holding accrual occurs only when all events creating a statutory "covered claim" have occurred (i.e., when the insured has a matured right to demand payment from CIGA, including exhaustion of other coverage and resolution of insolvency recoveries), and the record did not show accrual more than three years before the 2013 suit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When does a cause of action against CIGA accrue for statute-of-limitations purposes? | Accrual does not start until a specific covered claim is presented and denied; no covered claim was ever denied here. | Accrual started when CIGA answered the 2004 declaratory action denying that plaintiffs’ claims were "covered claims," thus triggering the 3-year period. | Accrual requires that all events necessary to create a statutory "covered claim" have occurred (including exhaustion of other insurance and maturity of the right to payment); declaratory litigation and a defendant’s general denial do not alone trigger accrual. |
| Whether the 2004 declaratory complaint + CIGA’s 2005 answer constituted a claim presentation and denial that started the limitations clock | The 2004 complaint was an early, non-breach declaratory action; the complaint and answer do not equate to a specific claim presentation and denial that would ripen accrual. | The 2004 complaint alleged a claim to CIGA and CIGA’s 2005 answer denied coverage; that constituted a demand and denial, starting the limitations period. | The court rejected CIGA’s position: a declaratory complaint and a defensive answer disputing coverage do not substitute for presentation of a matured covered claim and an affirmative denial of payment; the face of the pleadings did not show a covered claim had accrued more than three years earlier. |
Key Cases Cited
- Aubry v. Tri-City Hospital Dist., 2 Cal.4th 962 (standards for reviewing sustaining demurrer)
- Blank v. Kirwan, 39 Cal.3d 311 (leave-to-amend standard on demurrer)
- Aryeh v. Canon Business Solutions, Inc., 55 Cal.4th 1185 (last-element accrual rule)
- Maguire v. Hibernia Savings & Loan Society, 23 Cal.2d 719 (declaratory relief subject to limitations of underlying obligation)
- Berger v. California Ins. Guarantee Assn., 128 Cal.App.4th 989 (CIGA breaches by denying covered claims)
- Isaacson v. California Ins. Guarantee Assn., 44 Cal.3d 775 (CIGA statutory duties in context of denial of coverage)
- Norgart v. Upjohn Co., 21 Cal.4th 383 (accrual when cause of action complete)
- United Pacific-Reliance Ins. Co. v. DiDomenico, 173 Cal.App.3d 673 (declaratory action does not itself start limitations where no breach occurred)
- Saylin v. California Ins. Guarantee Assn., 179 Cal.App.3d 256 (CIGA’s initial duty is to determine whether a claim is a "covered claim")