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.
The introduction to the chapter on reinsurance in the most recent edition of the other leading insurance treatise makes the point this way: "Reinsurance has emerged from the shadows in the last 20 years. At the time of the publication of the prior edition of this volume and for many decades before that, the reinsurance relationship was a quiet, low-profile backstage business transaction between insurers and their reinsurers. That transaction was carried out as an `honorable undertaking' or a handshake-based `gentleman's agreement.' Policyholders and their attorneys saw no reason to probe those relationships, and courts had few occasions to interpret reinsurance contracts or adjudicate responsibility for the payment of losses. For a variety of reasons, including the sheer enormity of actual and potential liability for environmental and other claims and a series of insolvencies hitting both insurers and reinsurers, all that now has changed." (14 Appleman on Insurance 2d (Holmes ed. 2000) § 102.1, pp. 2-3, fns. omitted (Appleman).)
In other words, all issues are fair game, including statutes of limitations, which brings us to the case at the heart of much discussion below, and here: Continental Casualty Co. v. Stronghold Ins. Co., Ltd. (2d Cir. 1996) 77 F.3d 16 (Stronghold). Stronghold, decided in 1996 by the Second Circuit Court of Appeals, was an action by Continental Casualty Co. (Continental), a reinsured, against several reinsurers that had refused to pay based on the statute of limitations. The district court ruled against the reinsurers, and they appealed. The Second Circuit affirmed, holding that the causes of action accrued when Continental notified the "reinsurers of its losses under the reinsurance policies and the reinsurers subsequently denied coverage." (Stronghold, supra, 77 F.3d at p. 18.) But the Court of Appeals went on: "The timeliness of Continental's claims thus turns on a fairly simple question: when were its losses due and payable under the reinsurance policies? The representative policy offered by the parties is hardly a paragon of clarity. But, we are able to discern at least one condition that Continental had to satisfy before its right to indemnity could mature. `Loss, if any, under' the policy is `to be reported to [the reinsurer] as soon as practicable.' ... [W]e construe the notice provision to mean that Continental had to report any actual losses—i.e., payments made on its underlying insurance policies—within a reasonable period of time under the circumstances. [Citation.] We also conclude that Continental was entitled—indeed probably obligated—to wait a reasonable time for the reinsurers to decide whether they would pay or not, and, if so, how much." (Id. at p. 20, citation omitted.)
Finally, and apropos Transport's "utmost good faith" assertions here, the court said this: "Although it has been said that the relationship between a reinsured and its reinsurer is not technically a fiduciary one [citation], centuries of history have treated both as allies, rather than adversaries. [Citation.] It is customary, for example, for both to share the premium paid by the underlying insured for coverage. [Citation.] Often they jointly prepare and defend unfounded claims by overreaching insureds. [Citation.] [¶] Because custom and usage have established a gentility and unity of interest between the reinsured and its reinsurer, [citation], a generation ago, we doubt that the defendants would even have considered asserting a statute of limitations defense. [Citation.] With the collapse of prominent British reinsurers, and the financial distress of Lloyd's of London, times may have changed. [Citations.] As Francois Villon sighed: Ou sont les neiges d'antan? (`Where are the snows of yesteryear?')." (Stronghold, supra, 77 F.3d at pp. 21-22.)
As noted, Stronghold was decided in 1996. This is how Appleman described the case in 2000: "The Second Circuit held that, where a reinsurance contract required that losses be reported to a reinsurer, the loss did not become due and payable by the reinsurer and the statute of limitations on an action against the reinsurer did not commence to run until a reasonable time
elapsed after the ceding insurer gave notice of the loss to the reinsurer."1 (Appleman, supra, § 107.1, p. 534.) That, then, was the setting when the state of affairs between Transport and its reinsurers reached some significant milestones arising out of Aerojet's claims against Transport.
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].)