Calif. Union Ins. Co. v. Cent. Natl. Ins. Co.

California Court of Appeal Apr 3, 1981 No. Docket Nos. 57822, 59316Published

Before: Ashby

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Holding. The court held that claims asserted by insurers against the California Insurance Guarantee Association (CIGA) for subrogation or reimbursement are not "covered claims" under the Insurance Code, as they are specifically excluded by statute. These statutory exclusions are constitutional because the legislature intended to protect the public rather than other insurance companies.

Issues

Whether claims by insurers against CIGA for subrogation or reimbursement constitute "covered claims" under Insurance Code section 1063.1.
Whether the statutory exclusions of claims by insurers against CIGA are constitutional.

Disposition. affirmed

Quotations verified verbatim against the opinion

“The trial court correctly held that appellants' claims are not covered claims against CIGA because they are specifically excluded by section 1063.1, subdivisions (c)(4) and (c)(7), and that such exclusions are not unconstitutional.”

“The Legislature chose to provide a limited form of protection for the public, not a fund for the protection of other insurance companies from the insolvencies of fellow members.”

117 Cal.App.3d 729 (1981) 173 Cal. Rptr. 35 CALIFORNIA UNION INSURANCE COMPANY, Plaintiff, Cross-defendant and Appellant,

CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA, Defendant, Cross-complainant and Appellant; CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Cross-defendant and Respondent.

Docket Nos. 57822, 59316. Court of Appeals of California, Second District, Division Five.

April 3, 1981. [730] COUNSEL

Bolton, Hemer & Dunn and Donald H. Moore for Plaintiff, Cross-defendant and Appellant.

Greenberg, Bernhard, Weiss & Karma, Arthur Karma, Ralph R. Blair and Stanley R. Coleite for Defendant, Cross-complainant and Appellant.

Clausen, Harris & Campbell and Lon Harris for Cross-defendant and Respondent.

[731] OPINION

ASHBY, J.

Appellants Central National Insurance Company of Omaha (Central) and California Union Insurance Company (Cal Union) appeal from orders of dismissal following the sustaining of demurrers to their complaints against respondent California Insurance Guarantee Association (CIGA).

CIGA is a compulsory association of insurers created by statute (Ins. Code, § 1063 et seq.)[1] whose purpose is to provide insurance against loss arising from the failure of an insolvent insurer to discharge its obligations under its insurance policies. (§§ 1063, subd. (a), 119.5; see Barger, California Insurance Guarantee Association (1970) 45 State Bar. J. 475, 482; Trunk v. Orr (1979) 94 Cal. App.3d 761, 763 [156 Cal. Rptr. 662].) The trial court held that appellant insurers had stated no cause of action against CIGA.[2]

Central, Cal Union, and Signal Insurance Company (Signal) all wrote policies of insurance against legal malpractice by a certain law firm (the insured). Central's policy, on an "occurrence" basis, was for the policy years 10-1-69 to 10-1-71. Signal's policy, on an occurrence basis, was for the policy years 10-1-71 to 10-1-73. Cal Union's policy, on a "claims made" basis, was for the policy years 10-1-73 to 10-1-76. In January 1974, former clients of the insured filed a malpractice action which was defended by Central. Judgment was rendered against the insured in May 1976 for $337,000. Central requested Signal and Cal Union to contribute to the judgment but they refused, except that Signal contributed approximately $24,000. Central then caused the entire judgment to be satisfied, intending to pursue its own remedies against Signal and Cal Union.

Calif. Union Ins. Co. v. Cent. Natl. Ins. Co.

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ASHBY, J.

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