Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Injuries Archives

Does a Parent Corporation Have Standing to Bring a Declaratory Judgment Action Against One of Its Subsidiaries Insurers? This question was recently answered by the California Court of Appeals.

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.

In a Split Decision, the Colorado Supreme Court Recently Rejected an Actual Prejudice Standard in Determining Whether an Insured Violated the Policy's Consent No-Voluntary-Payments Clause When it Settled a Claim Without the Insurance Company's Permission

In Travelers' Property Cas. Co. of America v. Stresscon Corp., 370 P.3d 140 (Colo. 2016), the Colorado Supreme Court held that an insured contractor's settlement for a bodily injury claim that arose on a construction site where the subcontractor was working, without the insurance company's consent, violated the insurance policy's no-voluntary-payments clause and forfeited coverage as a matter of law irrespective of whether the insurer was able to prove that it was actually prejudiced by the settlement.

Requirement for pro rata allocation of defense costs among successive insurers

The California Third District Court of Appeals recently required pro rata allocation of defense costs among successive insurers. In Certain Underwriters at Lloyds, London v. Arch Specialty Ins. Co., 246 Cal.App.4th 418, 200 Cal.Rptr.3d 786 2016 WL 1436362 (3rd Dist. 2016), the Court reaffirmed California public policy as prohibiting enforcement of "escape" other insurance clauses inequitable contribution actions between successive primary insurers seeking to allocate the cost of defending construction defect litigation. Under existing law, each insurer was responsible for a pro rata share of defense costs notwithstanding the fact that one insurer's policy contained language in both the insuring agreement and the conditions section both stating that the insurer had a duty to defend only if no other insurance afforded a defense. The Court found that the placement of the escape language in the insuring agreement was not sufficient to differentiate the case from prior California precedent prohibiting the enforcement of escape other insurance clauses which appeared elsewhere in the insurance policy.

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