Amer. Internat. Specialty Lines Ins. v. Continental Casualty Ins.

Filed 8/16/06 Amer. Internat. Specialty Lines Ins. v. Continental Casualty Ins. CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEAL from a judgment of the Superior Court of Los Angeles County.

James R. Dunn, Judge. Affirmed.

McCormick, Barstow, Sheppard Wayte & Carruth, James P. Wagoner, Jay A. Christofferson and David W. Burnett for Plaintiffs and Appellants.

Woolls & Peer, John E. Peer and Beth E. Yoffie for Defendant and Respondent Continental Casualty Insurance Company.

Greenan, Peffer, Sallander & Lally, James S. Greenan, John P. Makin and Nelson S. Hsieh for Defendant and Respondent Gulf Underwriters Insurance Company.

Gray & Prouty, Malcolm D. Schick and David J. Gittelman for Defendant and Respondent Admiral Insurance Company.

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The question presented is whether respondents Continental Casualty Company (Continental), Gulf Underwriters Insurance Company (Gulf), and Admiral Insurance Company (Admiral) (collectively objecting insurers) are liable for equitable indemnity or equitable contribution to appellants American International Specialty Lines Insurance Company (American) and Lexington Insurance Company (Lexington) (collectively settling insurers). The settling insurers paid $21.5 million to fund a settlement and $3,214,612 in defense costs on behalf of Walt Disney Company (Disney) (the insured of Continental, American and Lexington) in connection with an action by Goto.Com, Inc. (Goto.com) against Disney and Infoseek Corporation (Infoseek) (the insured of Gulf and Admiral). The settling insurers sued the objecting insurers, who then moved for summary judgment, inter alia, due to lack of notice of the Goto.com action and settlement to Continental, and lack of coverage on the part of Gulf and Admiral. Summary judgment was entered for the objecting insurers and the settling insurers appeal. We find no error and affirm the judgment.

CONTENTIONS

According to the settling insurers:

1. Even if Continental did not have notice of the Goto.com action, there is a triable issue as to whether notice was required. Under Continental's insurance policy, Disney was excused from providing notice of the Goto.com action if it had a reasonable belief that the occurrence, injury or offense was not covered. Disney reasonably believed it was not covered, so notice was not required.

2. The trial court erred when it ruled that Continental did not receive notice of the Goto.com action prior to Disney's settlement. There was a triable issue as to whether Continental received constructive notice of the Goto.com action through AON Risk Services, Inc. (AON).

3. Because Continental had no right to control Disney's defense, notice would not have changed the settlement. As a result, Continental cannot avoid its equitable duty to contribute to the settlement.

4. The trial court improperly relied on Truck Ins. Exchange v. Unigard Ins. Co. (2000) 79 Cal.App.4th 966 (Unigard) in ruling that Continental's nonvoluntary payment clause was a defense to the settling insurers' claims. Unigard is distinguishable and should not be applied to this case.

5. The trial court erroneously applied the provision in Gulf's insurance policy that excluded coverage if Infoseek had prepolicy knowledge of circumstances that could lead to an insurance claim. There are triable issues as to Gulf's duty to defend because Infoseek might not have known of a prior wrongful act before the February 12, 1999, inception date of Gulf's insurance.

6. Even if Infoseek was not entitled to coverage for prior wrongful acts, Gulf was required to provide a defense for wrongful acts occurring within the policy period. The trial court erred when it concluded that all Infoseek's wrongful acts should be treated as one prior wrongful act.

7. Admiral, which issued an excess policy that followed form to Gulf's insurance, breached a contractual duty to conduct an investigation and determine coverage. Admiral must contribute to the settlement because the allegations of the Goto.com action triggered Admiral's insurance policy.

FACTS

Goto.com

In December 1997, Goto.com began operating a search engine with the internet address â€