Defendant insurer appealed from a judgment of the Superior Court of Santa Clara County (California), obtained against it by plaintiff assignee of defendant's insureds under a policy of directors and officers liability and corporate reimbursement insurance issued by defendant.

Overview

Plaintiff, assignee of insureds' claims under a policy of directors and officers' liability and corporate reimbursement insurance issued by defendant insurer, obtained a judgment against defendant. Defendant was aware of a lawsuit brought by plaintiff against the corporation of which the insureds were officers and directors. In an unrelated lawsuit against the insureds, defendant concurred in the selection of counsel. Plaintiff sued the insureds, who were represented by the same counsel as in the unrelated lawsuit, but defendant was not informed of this lawsuit. Plaintiff and the insureds entered into an agreement to stipulate to an arbitration award and confirmatory judgment against them plus fees and costs, the insureds would receive a covenant not to execute. Defendant was informed four days before the scheduled start of the arbitration "trial" and refused to participate. On appeal by defendant, the court held that defendant breached the contract. However the jury should have been permitted to consider the full merits of plaintiff's underlying claims against the insureds. A retrial was needed for a valid determination of plaintiff's damages. The parties were represented by California business and employment lawyerLinks to an external site..

Outcome

The court remanded the case because while defendant insurer had breached the policy of insurance by declining to defend the insureds, the trial court failed to fully inform the jury as to both the facts of the underlying dispute between plaintiff and the insureds with respect to their contract and the applicable law. The court reversed the jury's assessment of damages attributable to the breach and remanded for further proceedings on damages.

Procedural Posture

Appellant insurers and an asbestos manufacturer challenged the judgments of the Los Angeles County Superior Court (California) and the San Francisco County Superior Court (California) in favor of respondent insurance manufacturers, in complex litigation, related to insurance coverage of releases of asbestos fibers and the presence of asbestos containing building materials and the duty to defend and indemnify.

Overview

Actions of asbestos manufacturers and their insurance carriers were coordinated, and issues pertaining to insurance coverage for bodily injury and the presence of asbestos containing building materials (ACBM), and the duty to defend and indemnify were litigated in phases over a five year period. The court affirmed the trial court's continuous trigger decision that asbestos related bodily injury coverage was triggered when actual injury was shown retroactively to have occurred and modified the judgment to provide that policies that were in effect from the date of the claimant's first exposure to the policyholder's asbestos product until the date of death or claim occurred were triggered and the burden was on the insurer to prove that the claimant was not exposed to its policyholder's product before or during the policy period. The court affirmed the allocation of indemnity and defense costs among the insurers. Alleged injury from installation of ACBM qualified as physical injury to tangible property under policies' terms, and duty to indemnify was triggered when it was shown that ACBM was installed or fibers were released into the air during the policy period.

Outcome

The court affirmed the trial court's decision that all claims for releases of asbestos fibers or for the presence of asbestos containing building material (ACBM), were covered claims for physical injury to tangible property, that coverage was triggered if ACBM was installed or released during a policy period, and that the policies provided coverage "in full." The court also affirmed the judgment concerning duties to defend and to indemnify.