Pacific Indemnity Co. v. Imperial Casualty & Indemnity Co.

Citations: 176 Cal. App. 3d 622; 222 Cal. Rptr. 115; 1986 Cal. App. LEXIS 2464Docket: B004413

Court: California Court of Appeal; January 14, 1986; California; State Appellate Court

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In the case of Pacific Indemnity Company v. Imperial Casualty and Indemnity Company, the California Court of Appeals affirmed the trial court's judgment that both defendants, Imperial and California, were obligated to indemnify and defend their insureds under their professional liability insurance policies at the time the claim was made. The court mandated these defendants to reimburse Pacific for its share of costs incurred in defending and indemnifying the insureds, as Pacific was the insurer during the relevant acts. The court's decision hinged on three main issues: whether the insurance policies were similar, whether the insured entities or persons were the same, and whether there was an overlap in coverage.

The case arose from actions taken by John K. Dees, a former partner at an accounting firm, who certified financial statements for Sun Fruit, Ltd. This led to a federal lawsuit filed by the receiver for Sun Fruit, which named Dees and other former partners as defendants. Dees later pled guilty to a related crime. Following the dissolution of the original accounting partnership, new firms were formed, each insured by the defendants. At the time of the lawsuit, Pacific was defending the original firm, while Imperial and California were defending the new partnerships and individuals. The case settled in 1981, with each insurer contributing significant amounts to the settlement and associated costs, while preserving their rights to recover these costs from each other.

On April 20, 1978, Pacific initiated a declaratory relief action to determine whether the insurance policies of the appellants and respondent are similar. The Pacific policy obligates payment for damages due to acts or omissions arising from professional services. The Imperial policy covers damages from claims made against the insured for professional services performed as an accountant, while the California policy similarly covers damages from acts, errors, or omissions in professional services rendered by the insured as an accountant.

The appellants argue that their 'claims made' policies differ from the respondent's 'occurrence' policy, suggesting a lack of similarity. However, an analysis of the coverage clauses reveals that all policies address the same risk. The definition of 'similar' includes characteristics such as resemblance and comparability, supporting the conclusion that the policies are indeed similar.

The determination of policy similarity is crucial for identifying which policy was active when a claim arose. The Pacific policy specifies that coverage applies to claims related to services performed before the policy's termination, including those reported later. The court emphasizes that, for uniform interpretation of insurance contracts, each policy should be evaluated independently. When the appellants issued their policies covering the same risks previously held by the respondent, the respondent's obligation for unreported claims under its policy ceased. Insurers have the right to define and limit policy coverage, and such limitations must be honored as per the policy's language.

The legal document addresses the liability and coverage overlap among multiple insurance policies related to the actions of a partnership, GDK. It establishes that although the appellants (insurance companies) did not agree to insure GDK, partners are jointly and severally liable for partnership obligations. California and Imperial, upon defending their respective clients, acknowledged their obligations under their insurance policies, with Dotson and Dees being jointly liable for actions related to GDK.

The text further analyzes the overlap in coverage between the insurance policies, particularly focusing on the difference between 'claims made' policies and 'occurrence' policies. The appellants argue for primary liability on the respondent due to their 'occurrence' coverage, citing precedents where 'occurrence' policies were deemed primary. However, a key distinction is noted: in the cited cases, the policies were concurrent, whereas here, Pacific's liability ceased when the insured acquired similar insurance.

The court emphasizes that insurance policies must be interpreted based on their clear language, affirming that Imperial and California's overlapping policies necessitate shared indemnification and defense responsibilities. The judgment was affirmed, with subsequent petitions for rehearing and review by the Supreme Court denied. The document concludes with a note on the distinctions between 'claims made' and 'occurrence' insurance policies.