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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.
Transport's reply on its own motion asserted that "The custom and practice of the industry confirm that the claims did not accrue until a final offer or denial was communicated. The only reinsurance case on point, Stronghold, confirms this. Further, California coverage law comes to the same result via the Prudential-LMI line of cases where the statute is tolled while the insurer investigates and negotiates the claim." The four motions were heard on March 7, 2008, before the Honorable Charlotte Woolard, who began by announcing her rulings on the numerous evidentiary objections. She then turned to announcement of the "tentative rulings regarding the motions that bring us here today," and in connection with Transport's motions referred to "equitable tolling" and "equitable estoppel."6 After Judge Woolard completed her tentative rulings, counsel for TIG argued at length against the applicability of equitable tolling. Similarly, counsel for Seaton asked that Judge Woolard "take another look" at Prudential-LMI. On April 4, 2008, Judge Woolard issued two orders, each addressing Transport's motion against the particular reinsurer and that reinsurer's motion
against Transport, orders that were thorough indeed, with lengthy discussions of the law. The two orders were similar—in fact, in great part identical—and as relevant here, provided in pertinent part as follows: "The parties have not cited, and the court has not found, any reported California decision addressing the question of when a cause of action for breach of reinsurance contract accrues. A persuasive decision from the Second Circuit Court of Appeals is most directly on point. In Continental Cas. Co. v. Stronghold Ins. Co., Ltd.[, supra,] 77 F.3d 16, the Second Circuit held that, under New York law, a reinsurance cause of action accrues `when the loss insured against becomes due and payable under the policy.' [Citation.] Looking to the policy at issue, the court found that the reinsured was required to report its losses within a reasonable period of time. [Citation.] The onus was then on the reinsurer to decide, after a reasonable amount of time in which to make its coverage determination, whether it would pay the claim. [Citation.] Under these circumstances, the Second Circuit found that the plaintiff's causes of action accrued after the plaintiff submitted its claims to the defendant, and either: (1) the defendant denied the claim; or (2) a reasonable period of time elapsed without a decision from the defendant. [Citation.]" From there, and addressing, for example, the Seaton-related motions, Judge Woolard went on to note that "[A]fter Transport submits a proof of loss, Seaton allegedly breaches the contract, and Transport's causes of action accrue, where (1) Seaton denies a covered claim; or (2) Seaton takes an unreasonable amount of time to communicate its coverage decision. From that point, Plaintiff has four years in which to file its action against Defendant." And from there, Judge Woolard went on to deny the motions on the ground that "triable issues exist as to whether Seaton ever formally denied Transport's claims reflected in the 1999 [proofs of loss] and when the causes of action nonetheless accrued after a reasonable amount of time passed for Seaton to have evaluated the claims." The analysis in the order as to the TIG-related motions was similar. The TrialThe case proceeded to a jury trial, which began on May 12, 2008. As that trial is described by Transport: "The coverage dispute here included the defendant reinsurers' contentions that: (1) the facultative reinsurance certificates did not mean what they stated and are `excess of loss' certificates as opposed to pro rata; (2) Transport suffered no loss to be reinsured; and (3) Transport allegedly made a bad faith allocation to the reinsurers of the underlying settlement." And, of course, there was the issue of the statute of limitations. The parties had submitted trial briefs, and as to the statute of limitations issue Transport's brief said this: "The Defendants' first stated defense focused
primarily on statute of limitations which fails under the holding of Stronghold decision and pursuant to this Court's orders denying the motions for summary judgment. As this Court well knows, Continental Casualty Co. v. Stronghold Insurance Co.[, supra,] 77 F.3d 16 held that the statute of limitations does not start to accrue until the reinsurance claim is denied. In passing discussion, the Stronghold court also noted that an alternative time would be a reasonable time following submission of the final proofs of loss if the reinsurer did not act upon the final proofs. This Court referenced both accrual tests in the orders finding triable issues of fact and denying the summary judgment motions."
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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