California Union Insurance v. Central National Insurance

[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.

In January 1977, Cal Union filed a complaint for declaratory relief against Signal and Central. Cal Union sought a declaration that it had no liability on its policy because it was never notified of the action until the verdict was returned.

In November 1977 Central cross-complained against Signal and Cal Union. Central claimed that although it had caused the judgment to be [732]satisfied, actually none of the alleged errors or omissions of the insured occurred during Central’s policy period, and that Signal and Cal Union were liable to Central for the amounts paid by Central on the judgment.