NATIONAL CASUALTY COMPANY v. SOVEREIGN GENERAL INSURANCE SERVICES, INC

Filed 3/14/06

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(San Joaquin)

APPEAL from a judgment of the Superior Court of San Joaquin County, K. Peter Saiers, Judge. Affirmed.

Selman Breitman, Alan B. Yuter and Rachel E. Hobbs for Plaintiff and Appellant.

Aguilar & Sebastinelli, Dominic G. Flamiano for Defendant and Respondent.

This is a declaratory relief action. The plaintiff, National Casualty Company (National), appeals from a judgment in favor of Sovereign General Insurance Services, Inc. (Sovereign), National's insured under a policy of errors and omissions insurance. The policy is a claims-made policy. The policy period was August 17, 2000, to August 17, 2001.

The policy covered Sovereign for its actual or alleged negligent acts, errors or omissions, libel, slander, or invasion of privacy, provided the claim for such act(s) was made within the policy period and was brought in the United States, Puerto Rico, or Canada. Sovereign was authorized to issue certificates of insurance by Certain Underwriters at Lloyd's London (Lloyd's) and to process claims for Lloyd's. On March 20, 2001, attorneys for Lloyd's sent a letter to Sovereign at its offices in Stockton, California, asserting that Sovereign's underwriting and claims handling activities engaged in pursuant to agreements between Lloyd's and Sovereign, had caused Lloyd's to suffer losses, and that Lloyd's intended to recover such losses from Sovereign. Sovereign submitted the claim to National. The letter was sent during the policy period and National does not dispute that the letter constituted a claim made during the policy period for the purpose of determining coverage.

The agreements between Sovereign and Lloyd's provided for mandatory arbitration in London, England, of any disputes arising out of the agreements. Slightly less than three years after Lloyd's sent Sovereign its first letter demanding payment of its losses, and two years after this declaratory relief action was commenced, Lloyd's instituted arbitration proceedings in London against Sovereign to recover its alleged losses.

The issue on appeal is whether the claim made against Sovereign during the policy period was also â€