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Snyder v. California Insurance Guarantee Association

California Court of Appeals, First District, Third Division

September 17, 2014

STEPHEN M. SNYDER et al., as Trustees, etc., Plaintiffs and Appellants,

[As modified Oct. 7, 2014.]

Superior Court of Alameda County, No. RG13666656, Hon. Steven Brick, Judge.

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Morgan, Lewis & Bockius, Michel Y. Horton, Jason B. Komorsky, Thomas M. Peterson and Jeffrey S. Raskin for Plaintiffs and Appellants.

Locke Lord, C. Guerry Collins and Conrad V. Sison for Defendant and Respondent.



This appeal presents the difficult question of when a claim against the California Insurance Guarantee Association (CIGA) arises, triggering the three-year statute of limitations for breach of CIGA’s statutory obligations. (Code Civ. Proc., § 338.) Trustees of the Western Asbestos Settlement Trust (Western Trust), charged with paying bodily injury claims against companies that distributed asbestos-containing building materials, sought coverage under the companies’ insurance policies and, in 2004, after the insurer was declared insolvent, brought a declaratory relief action against CIGA to determine CIGA’s obligation to pay the insolvent insurer’s policy obligations. After CIGA filed an answer denying such an obligation, the proceedings against CIGA remained dormant for almost six years. In May 2011, the Western Trust dismissed its complaint against CIGA without prejudice. The present declaratory relief action by the Western Trust against CIGA was filed in February 2013. CIGA demurred on the ground, among others, that the complaint is barred by the statute of limitations. On this ground the trial court sustained the demurrer without leave to amend and dismissed the action.

CIGA contends that its answer in the prior declaratory relief action asserting that the trust’s claims were not covered claims for which it is statutorily responsible triggered the running of the three-year statute of limitations to bring an action challenging that determination. Western Trust argues that the limitations period does not begin to run until CIGA denies a specific claim for payment and that even at this time no such claim has been submitted, much less denied. We conclude that a cause of action against CIGA for breach of statutory duties does not accrue until all of the events necessary to create a covered claim have occurred, giving rise to the insured’s right to demand payment from CIGA. The trust’s complaint here alleges no facts indicating that all those events occurred more than three years before the complaint was filed, if they have even occurred at this time. Thus, the trial court erred in concluding that the present action is barred by the statute of limitations. We shall therefore reverse the judgment dismissing the action.

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A. The bankruptcy court creates the Western Trust to manage asbestos claims.

Western Asbestos Company, Western MacArthur Co. and Mac Arthur Co. (collectively, the Western Companies) distributed asbestos-containing building materials. In 2002, the Western Companies filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code for the purpose of establishing an asbestos claimants’ trust. (In re Western Asbestos Co. (N.D.Cal. 2009) 416 B.R. 670, 676.) Such a trust is authorized by the Bankruptcy Code to manage personal injury claims arising from exposure to asbestos-containing products. (11 U.S.C. § 524(g).) “The procedure under [section] 524(g) involves the establishment of a trust to pay the future claims, coupled with an injunction, referred to as a ‘channeling injunction, ’ which prevents future claimants from suing the debtor.” (In re Western Asbestos Co., supra, at p. 676.)

The Western Trust, the trustees of which are plaintiffs here, was created in 2004 by an order of the bankruptcy court. (In re Western Asbestos Co. (Bankr. N.D.Cal. 2004) 313 B.R. 456.) Funded with settlement proceeds from several insurers, Western Trust assumed all liabilities of the Western Companies relating to asbestos claims, estimated at $6 billion. Western Trust was granted authority to initiate legal actions, in its own name or the name of the debtors, to recover additional insurance proceeds relating to those claims. (Id. at pp. 460-462.) As Western Trust avers in this case, it “is charged with responsibility for marshalling the Western Companies’ insurance assets, and the proceeds of those assets, and making distributions to the holders of asbestos bodily injury claims against the Western Companies.”

B. Western Trust seeks proceeds from Home Insurance Company, which is insolvent.

The Western Companies held seven liability insurance policies issued by Home Insurance Company (Home) from 1976 through 1983. In June 2003, Home was declared insolvent and proceedings to liquidate it were commenced by the insurance commissioner in New Hampshire, where the insurer had its principal office.[1] The Western Companies timely filed a claim in Home’s liquidation proceedings and gave CIGA notice ...

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