Ohrbach's, Inc. v. California Insurance Guarantee Ass'n

Opinion

ROTH, P. J. Ohrbach’s, Inc. appeals from a summary judgment in favor of California Insurance Guarantee Association (CIGA). The question is [1091]whether claims by California residents against Ohrbach’s, a nonresident insured, are “covered claims” within the meaning of former Insurance Code section 1063.1, subdivision (c)(l)(vii) so that CIGA must defend Ohrbach’s. We think that they are, and therefore reverse.

The Legislature created CIGA in 1969 to provide “insurer insolvency insurance,” i.e., CIGA satisfies certain claims arising out of policies issued by insurers who have become insolvent. CIGA is an involuntary association of insurance companies; membership is a condition of doing business in California. (Isaacson v. California Ins. Guarantee Assn. (1988) 44 Cal.3d 775, 784 [244 Cal.Rptr. 655, 750 P.2d 297].) CIGA need satisfy only “covered claims,” as defined by statute.

The parties have stipulated that appellant is not a California resident, although doing considerable business in California. It was insured by the Ideal Mutual Insurance Company, a New York enterprise. Thirteen California residents have filed tort actions against appellant. Ideal Mutual Insurance Company became insolvent, and unable to defend or settle the claims. Appellant therefore tendered the claims to CIGA. CIGA declined the claims, on the ground that they were not “covered claims,” because appellant is a nonresident. CIGA concluded that it was therefore not authorized to pay them.

Appellant filed a complaint for declaratory relief. CIGA moved for summary judgment, which was granted. This appeal followed.

The question, one of first impression, is whether the claims of California residents against appellant, a nonresident, are “covered claims” as defined in former Insurance Code section 1063.1, subdivision (c)(1), which stated at the time the subject claims arose: “ ‘Covered claims’ means the obligations of an insolvent insurer . . . (vii) in the case of other classes of insurance if the policy is issued to a resident of this state or claim against an insured thereunder is made by a resident of this state.”

Subdivision (c)(l)(vii) has two clauses divided by the disjunctive “or.” The claim is covered if:

1. The policy is issued to a resident of this state.