NORCAL Mutual Ins. Co. v. Certain Underwriters at Lloyd’s of London
(Cal. App. February 22, 2010)
Certain Underwriters at Lloyd’s of London, CNA Reinsurance Company Limited and Terra Nova Insurance Company, Limited (“reinsurers”) reinsured NORCAL Mutual Insurance Company (“NORCAL”) for any liability NORCAL might incur under a managed health care professional liability policy issued by NORCAL for the initial policy period of August 1999 through August 2000. After the reinsurers denied NORCAL’s claim for reinsurance, NORCAL sued for breach of contract, insurance bad faith, and negligence.
The trial court granted summary judgment to the reinsurers, reasoning that NORCAL’s claim for reinsurance was not based on liability arising under the 1999 – 2000 policy because the February 2001 claim by NORCAL’s insured that created NORCAL’s liability fell outside the period of that policy.
NORCAL appealed, arguing that the policy period was extended by operation of law until June 2001 because its insured was not provided with notice of nonrenewal of the 1999 – 2000 policy, as required by the California Insurance Code. Accordingly, NORCAL argued, the claim made by the insured in February 2001 fell within the policy period, and the reinsurers were obligated to indemnify NORCAL under the reinsurance agreement.
The Second District of the California Court of Appeal agreed with NORCAL regarding the interpretation and application of the California Insurance Code and reversed the lower court to the extent that it granted summary judgment as to NORCAL’s causes of action for breach of contract and insurance bad faith. The appellate court concluded, however, that the California Insurance Code placed the obligation to provide an insured with notice of nonrenewal on the insurer, in this case NORCAL. Accordingly, the appellate court granted summary judgment to the reinsurers as to NORCAL’s cause of action alleging that the reinsurers negligently failed to provide NORCAL’s insured with notice of nonrenewal.
The appellate court remanded the case to the trial court for further proceedings. A copy of the decision can be found here.
Toni Frain and Jeff Kingsley
https://www.goldbergsegalla.com/attorneys/Frain.html