Procedural Posture

Appellant insured sued respondent excess insurer alleging that the excess insurer refused to defend and indemnify the insured in connection with underlying environmental claims and a resulting lawsuit by federal and state governmental entities. The Superior Court for the County of Los Angeles (California), dismissed the lawsuit, and the insured appealed.

Overview

This lawsuit rosed out of a partnership disputes. The excess insurer successfully demurred to the insured's first amended complaint on the ground that it was barred by the four-year statute of limitations of Code Civ. Proc., § 337. The court held that the trial court erred in concluding that the insured's suit against the excess insurer was barred by the four-year statute of limitations. The complaint contained no allegations as to when the insurance contract was breached, that is, when the excess insurer refused to defend. The statute of limitations in a general liability insurance coverage case accrued when the insurer refused to defend the insured in the underlying litigation. Because the duty to defend was continuing, the statute was tolled until the underlying action was terminated by final judgment. The fact that the insured sued its primary insurers in 1996, designating "excess insurers" as Doe defendants, had no bearing on the accrual or tolling of the statute of limitations applicable to an excess insurer who was never identified or served in the 1996 lawsuit. The excess insurer's obligation to defend the insured did not even arise until the insured's primary coverage was exhausted.

Outcome

The court reversed the trial court's judgment and remanded the case to the trial court with instructions to vacate its order sustaining the demurrer and to enter a new order overruling the demurrer.