Opinion ID: 779057
Heading Depth: 4
Heading Rank: 7

Heading: Direct Actions Against Insurers

Text: 112 Under MERLO § 8.24.090(B)(1), Lodi may initiate a direct action against a PRP's insurer before the City has obtained a final order or judgment against the insured PRP. The Insurers allege that this portion of MERLO is preempted because it conflicts with CERCLA § 108(c) and California Insurance Code § 11580. Because we find that MERLO § 8.24.090(B)(1) conflicts with California insurance law and is therefore preempted on this basis, we need not consider whether it also conflicts with CERCLA. 113 California Insurance Code § 11580 states that every liability insurance policy issued in California must include [a] provision that whenever judgment is secured against the insured ... in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment. Cal. Ins.Code § 11580(b)(2) (West 2001) (emphasis added). Fireman's Fund asserts that this statute forbids direct actions against an insurer absent a final judgment against the insured. Fireman's Fund further asserts that because MERLO § 8.24.090(B)(1) authorizes direct actions against the insurers of PRPs prior to obtaining a final judgment against the insured, but § 11580 forbids such actions, MERLO § 8.24.090(B)(1) conflicts with and is therefore preempted by California law. Sports Comm. Dist., 113 Cal.App.3d at 159, 169 Cal.Rptr. 652 (stating that conflict preemption under California law includes situations in which a local statute authorizes conduct prohibited by state law). 114 We begin our conflict preemption analysis with the plain language of the statute. See Moyer v. Workmen's Compl. Appeals Bd., 10 Cal.3d 222, 230, 110 Cal.Rptr. 144, 514 P.2d 1224 (1973). Contrary to Fireman's Fund's contention, on its face § 11580 neither prohibits direct actions nor purports to set forth the only circumstances under which one can initiate a direct action against an insurer. It simply allows direct actions after the third-party claimant has obtained a final judgment against the insured. 115 Two California Court of Appeals cases support the conclusion that § 11580 does not set forth the exclusive set of circumstances under which one may initiate a direct action against an insurer. See Roberts v. Home Ins. Indem. Co., 48 Cal. App.3d 313, 317-18, 121 Cal.Rptr. 862 (1975) ([S]ection 11580 ... is silent as to a direct action against the insurer before judgment is obtained against the insured. That silence does not imply a legislative policy against allowing a claimant to pursue any rights which may have been created by contract or by another state's direction action statute.); Turner v. Evers, 107 Cal.Rptr. 390, 31 Cal.App.3d Supp. 11, 22 (1973) ([S]ection 11580, subdivision (b), is a statement of the minimum provisions that must be included in all liability insurance policies issued in this state.). 116 However, there is greater authority to suggest that § 11580 sets forth the exclusive set of circumstances under which a third-party claimant may directly sue another policyholder's liability insurer. See McKee v. Nat'l Union Fire Ins. Co., 15 Cal.App.4th 282, 286-87, 19 Cal.Rptr.2d 286 (1993); Nationwide Ins. Co. v. Super. Court, 128 Cal.App.3d 711, 180 Cal.Rptr. 464, 466 (1982) (noting the general rule of indemnity law that `[w]here the terms of the indemnity contract, or law of the state, require a judgment against the ... [indemnitee] before direct action against the insurer, no liability accrues as an enforceable claim against the insurer until recovery of a final judgment against [the indemnitee].'); Zahn v. Canadian Indem. Co., 57 Cal.App.3d 509, 129 Cal.Rptr. 286, 288 (1976) (It is fundamental that generally speaking the injured party may not directly sue an insurer of the alleged tortfeasor.); see also Tashire v. State Farm Fire & Cas. Co., 363 F.2d 7, 10 (9th Cir.1966), rev'd on other grounds, 386 U.S. 523, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967) (stating that under the law of California ... a direct action against the insurer is not allowable until after the claimant shall have secured a final judgment against the insured); Laguna Publ'g Co. v. Employers Reinsurance Corp., 617 F.Supp. 271, 272 (C.D.Cal.1985) (quoting Tashire ). 117 We find these latter cases (including our own Ninth Circuit decision) persuasive and hold that MERLO § 8.24.090(B)(1) is preempted by California Insurance Code § 11580 to the extent that it expands the ability of Lodi to bring direct actions against a PRP's insurer before entry of a final judgment against the insured.