The California Court of Appeals recently held in D.Cummins Corp. v. U.S. Fidelity & Guar. Co., 246 Cal.App.4th, 201 Cal.Rptr.3d 585 (1st Dist., 2016), that a parent corporation lacked standing to sue one of its subsidiary’s insurers for declaratory relief. In this case, the parent corporation did not qualify as an insured under the subsidiary’s liability policies. Therefore, the Court held that the parent company lacked standing to seek a declaratory judgment establishing the duties of the subsidiary’s liability insurers to defend and indemnify for asbestos claims. The Court found that a mere practical interest in the outcome of a contractual dispute was not sufficient to establish standing. Under the Declaratory Judgment Act the plaintiff must show the existence of an “actual controversy” which required the court to evaluate the rights and duties that the plaintiff was asserting in making a standing determination. The Court found that the parent corporation’s responsibility for the subsidiary’s litigation strategy, which included making decisions about when to settle the personal injury actions, did not give the parent corporation sufficient direct in the subsidiary’s liability policy to support jurisdiction. The California Declaratory Judgment Act gave discretion to the trial court in which the court could refuse to exercise the power granted by the Act in any case where the declaration or determination was not necessary or proper at the time under all of the circumstances presented. When the trial court declined jurisdiction under the Act, the trial court’s decision would be viewed on an abuse of discretion standard.
Steven Plitt is an accomplished author and expert witness, and has been a licensed attorney for 33 years. During his career, he has reviewed and analyzed more than 6,000 claim files from 100 different insurance companies. Based in Phoenix, Arizona, he serves as counselor and expert for insurance coverage and bad faith claims nationwide. For more information or to set up an appointment, please visit his website at insuranceexpertplitt.com.