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TRANSPORT INS. CO. v. TIG INS. CO.
202 Cal.App.4th 984 (2012)
Court of Appeals of California, First District, Division Two.
January 13, 2012.
Reinsurance is defined in Insurance Code section 620: "A contract of reinsurance is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance." As described in a leading insurance treatise, reinsurance is a contract by which one insurer transfers to another insurer "all or part of the risk it has assumed under a separate ... policy or group of policies in exchange for a portion of the premium. In essence, reinsurance is insurance for insurance companies. Reinsurance provides insurers with the ability to spread the risk that they have assumed, thereby preventing any one insurer from suffering a catastrophic loss." (1A Couch on Insurance 3d (2010 rev. ed.) Reinsurance, § 9.1, pp. 9-3 to 9-5, fns. omitted (Couch).) The insurer obtaining the reinsurance is called the "ceding insurer." Our colleagues in Division Four described it this way: "`Reinsurance is a special form of insurance obtained by insurance companies to help spread the burden of indemnification. A reinsurance company typically contracts with an insurance company to cover a specified portion of the insurance company's obligation to indemnify a policyholder in the event of a valid claim.... When a valid claim is made, the insurance company pays the first level insured, and the reinsurance company pays the insurance company. The reinsurance company's obligation is to the insurance company, and the insurance company vis-[à]-vis the reinsurer is thus the insured, or more appropriately the "reinsured."'" (Ascherman v. General Reinsurance Corp. (1986) 183 Cal.App.3d 307, 311-312, fn. 5 [228 Cal.Rptr. 1]; accord, Catholic Mutual Relief Society v. Superior Court (2007) 42 Cal.4th 358, 368 [64 Cal.Rptr.3d 434, 165 P.3d 154].) One aspect of reinsurance that distinguishes it from other insurance is that reinsurance contracts have no limitation provision, no reference to when suit has to be brought on the reinsurance contract. According to Couch, "As there is typically no special statute of limitations for reinsurance contracts, the statute of limitations for contracts generally will apply." (Couch, supra, § 9.33, p. 9-135.) Among the other distinguishing attributes of reinsurance are the sophistication and expertise of the insured—more accurately, reinsured—which are themselves insurance companies. Another is that the reinsurer does not itself investigate or adjust claims, but relies on the ceding insurer to do that. So, as Transport's briefing repeatedly tells us, the parties are essentially aligned—not adverse. This passage is illustrative: "[R]einsurers must treat their reinsureds with `utmost good faith.' [Citation.] This duty of extreme good faith arises out of `the traditional mores of the industry' under which reinsurance is
seen as `an honorable engagement' where `gentlemen's agreements' were often secured by a handshake. [Citation.] Indeed, case law has referred to reinsurers and their cedents as `partners' rather than adversaries. [Citation.] Because of this venerable history, `[d]efences [sic] based on available periods of limitation usually have not been taken by insurers in the London [reinsurance] market, and some participants in the market feel that it is a custom not to assert them.' [Citation.] Moreover, this duty of utmost good faith does not terminate when litigation commences. [Citation.]." Indeed, Transport asserts, "Seaton and TIG can hardly feign ignorance of their duty to treat Transport at all times with `utmost good faith,' as that duty was the subject of considerable expert testimony and argument at trial." (Fns. omitted.) Apparently alluding to this concept in her closing argument at trial, Transport's counsel quoted a "statement that [she] saw written in a reinsurance book, a book that was a whole catalog of cases about reinsurance and how reinsurance works .... The quote goes like this: `Reinsurance is insurance between consenting adults.'" Seemingly based on the above principles, Transport infers that it is unseemly, if not downright inappropriate, for reinsurers to even think of asserting such a thing as a limitations defense. What might have been, might have been. It is no longer.
1. Ario v. Underwriting Members of Lloyd's of London (Pa.Commw.Ct. 2010) 996 A.2d 588, 597, the case cited to us by Transport after the briefing was closed, describes Stronghold similarly: "In Continental Casualty, where the policy established that loss covered under the policy must be reported to the reinsurer `as soon as practicable,' the court concluded that the insurer's cause of action for payment did not arise until notice of loss was provided to the reinsurer and the reinsurer was afforded a reasonable time in which to decide whether and how much it would pay."
2. In fact, the claimed reasons for Transport's overlength reply brief are that the reinsurers' respondent's briefs do not accurately recite the evidence and cite "irrelevances," and that because the primary issue is "whether the trial court committed instructional error, Transport is entitled to view and present the trial evidence in the light most favorable to the claim of instructional error."
3. At trial, Nalepa testified as follows: "I, quite frankly, to this day don't know what Transport was doing with [its collection efforts] and who had the responsibility at their end."
4. Seaton requests judicial notice of material it asserts might be germane, and TIG's brief also mentions this. We deny the request for judicial notice.
5. According to Transport, this and the earlier draft complaint are of no significance because they were for declaratory relief only and did not contain a cause of action for breach of contract.
6. Focusing on Judge Woolard's comments in her tentative ruling, and that her subsequent order did not contain what she said, Transport's brief says things such as this: "[T]he trial court did not expressly address the equitable tolling issue in its written rulings, but clearly ruled against Transport on this issue because it did not include equitable tolling in the rule it ultimately adopted, despite Transport's detailed argument on this point in its moving papers. [Citations.] ... Given that, in its tentative ruling, the trial court indicated it would apply equitable tolling [citation] but, after hearing TIG's arguments on this issue [citations], it excluded equitable tolling from its written ruling, we would ... argue that the trial court unquestionably `determined that equitable tolling should not apply.'" As will be shown, this is an overstatement.
7. TIG's proposed instruction would have told the jury: "TIG contends that Transport filed this lawsuit too late. To establish this defense, TIG must prove that this action was not commenced within four years of the date on which the claim sued on arose. You must decide when the claim arose, that is when TIG failed to pay the amounts allegedly due under the terms and conditions of [policies] FR 297 and FR 298. If TIG's failure to pay the alleged amounts due took place before January 26, 2002, Transport's lawsuit was filed too late and is barred by the statute of limitations."
8. As indicated, Transport's opening brief referred to its reply in support of its new trial motion, which contained an argument that Judge Woolard's ruling was "law of the case." TIG took issue with this, and Transport's reply brief concedes that law of the case could not pertain, as the doctrine "has no application in trial court proceedings without an appellate decision. (People v. Barragan (2004) 32 Cal.4th 236, 246 [9 Cal.Rptr.3d 76, 83 P.3d 480].)"
9. The treatise goes on to note that "review on appeal from the final judgment has been allowed in exceptional cases," citing Gackstetter v. Frawley (2006) 135 Cal.App.4th 1257, 1269 [38 Cal.Rptr.3d 333]. (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial, supra, ¶ 10:385, pp. 10-149 to 10-150 (rev. # 1, 2011).) Gackstetter is one of the cases Transport relies on here.
10. This may be problematic, in light of the lengthy statute of limitations involved. (See Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 380 [2 Cal.Rptr.3d 655, 73 P.3d 517] ["Because plaintiffs had three or four years after discovery, and up to ten years after the project's completion, to bring their suits for latent construction defects, many of the concerns that might warrant equitable tolling are ameliorated."]. Cf. Flintkote v. General Accident Assurance Co. of Canada (N.D.Cal. 2007) 480 F.Supp.2d 1167, 1179-1180 [holding equitable tolling could apply to four-year statute of limitations in asbestos case].)
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