Court Opinion

ID: 854764
Source: CourtListenerOpinion
Date Created: 2013-03-09 00:36:02.417853+00
Date Added: 2024-06-11T13:22:29.772861
License: Public Domain

Filed 3/8/13 Lumbermens Mutual Casualty Co. v. Superior Court CA1/1
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

               IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION ONE

LUMBERMENS MUTUAL CASUALTY
COMPANY,
         Petitioner,
v.                                                                   A137141
THE SUPERIOR COURT OF MARIN
COUNTY,                                                              (Marin County
                                                                     Super. Ct. No. CIV 1105680)
         Respondent;
MARIN CLEANERS,
         Real Party in Interest.

By the Court:1
         Lumbermens Mutual Casualty Company (Lumbermens) seeks a writ of mandate
directing the superior court to stay or dismiss proceedings in a lawsuit involving
Lumbermens and its insured, Marin Cleaners. Lumbermens asserts stay or dismissal is
warranted because it is presently subject to an ―Agreed Order of Rehabilitation‖
(rehabilitation order) issued by the Cook County Circuit Court, Illinois, which enjoins all
persons from prosecuting any lawsuits against Lumbermens, and the rehabilitation order
is effective in California under the Uniform Insurers Liquidation Act (UILA; Ins. Code,2
§ 1064.1 et seq.). Finding merit in Lumbermens’ contention, we grant the petition.

         1
             Before Marguiles, Acting P.J., Dondero, J., and Banke, J.
         2
             All statutory references are to the Insurance Code.
                                      I. BACKGROUND
       In April 2012, Lumbermens filed a first amended complaint for declaratory relief
and equitable contribution against Insurance Company of the West (ICW) and Marin
Cleaners, real party in interest in this writ proceeding. The complaint alleged Marin
Cleaners operated a dry cleaning business at certain real property in San Rafael for over
50 years and in 2007, the California Regional Water Quality Control Board (RWQCB)
identified Marin Cleaners as a possible source of a chemical contaminant in the
groundwater near the property. As a result of RWQCB directives, Marin Cleaners
retained environmental consultants, began investigation and remediation work at the
property, and tendered claims to Lumbermens and ICW for defense and indemnity under
policies of insurance issued by them to Marin Cleaners. Lumbermens agreed to defend
under a reservation of rights, but stated it would not pay remediation costs. ICW refused
to participate in the defense. In its complaint, Lumbermens requested, among other
things, the court declare it had no duty to defend or indemnify Marin Cleaners for costs
associated with the RWQCB action. In September 2012, Marin Cleaners filed a first
amended cross-complaint against Lumbermens, seeking damages for breach of contract,
breach of the implied covenant of good faith and fair dealing, and declaratory relief.
       In July 2012, the Circuit Court of Cook County, Illinois entered a rehabilitation
order, placing Lumbermens into rehabilitation pursuant to article XIII of the Illinois
Insurance Code. (215 Ill. Comp. Stat. 5/187 et seq. [Ill. Ins. Code, art. XIII].) The
rehabilitation order appointed the Director of Insurance of the State of Illinois as the
rehabilitator of Lumbermens, and directed him to take immediate possession of its
property, business and affairs, and vested authority in him to ―take such actions as the
nature of the cause and the interests of Lumbermens, . . . [its] policyholders, claimants,
beneficiaries, creditors, or the public may require. . . .‖ The rehabilitation order also
issued mandatory and prohibitive injunctions, including the following: ―[A]ll other
persons and entities having knowledge of this Order are restrained and enjoined from
bringing or further prosecuting any claim, action or proceeding at law or in equity or
otherwise, whether in this State or elsewhere, against Lumbermens . . . , or their property

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or assets, or the Director or Rehabilitator, except insofar as those claims, actions or
proceedings arise in or are brought in the rehabilitation proceedings prayed for herein; or
from obtaining . . . judgments . . . against Lumbermens . . . .‖
       In July 2012, Lumbermens filed a motion to stay or dismiss the entire action in
light of the above rehabilitation order. Lumbermens argued the action should be stayed
or dismissed on the grounds the Illinois court order enjoining proceedings against
Lumbermens is enforceable in the California Superior Court under the UILA.
Subsequently, the trial court denied the motion, ruling the Illinois court lacked in
personam jurisdiction over Marin Cleaners and California’s UILA statutes did not
preclude Marin Cleaners’ in personam action for breach-of-contract damages against
Lumbermens.
                                       II. DISCUSSION
       California’s version of the UILA3 governs proceedings against any insurer subject
to a ―delinquency proceeding‖ in a ―reciprocal state.‖ (See § 1064.1, subds. (b) & (f).)
Here, the proceedings involving Lumbermens are subject to the UILA because Illinois is
a reciprocal state. (See ―Table of Jurisdictions Wherein Act Has Been Adopted,‖ 42A
West’s Ann. Ins. Code (2005 ed.) preceding § 1064.1, p. 347.) Where the UILA applies,
the Legislature has deemed it ―shall be so interpreted and construed as to effectuate its
general purpose to make uniform the law of those states that enact it.‖ (§ 1064.12,
subd. (b).) Moreover, where the UILA’s provisions conflict with other sections of the
Insurance Code, the UILA controls. (§ 1064.12, subd. (b).)
       In pertinent part, the UILA provides, ―Controverted claims belonging to claimants
residing in this state may either (1) be proved in the domiciliary state as provided by the
laws of that state, or (2), if ancillary proceedings have been commenced in this state, be
proved in those proceedings. In the event that any such claimant elects to prove his or
her claim in this state, he or she shall file his or her claim with the ancillary receiver in

       3
        Under section 1064.12 California’s version of the UILA may be referred to as
the ―Uniform Insurers Rehabilitation Act.‖

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the manner provided by the law of this state for the proving of claims against insurers
domiciled in this state, and he or she shall give notice in writing to the receiver in the
domiciliary state, either by registered mail or by personal service at least 40 days prior to
the date set for hearing. The notice shall contain a concise statement of the amount of the
claim, the facts on which the claim is based, and the priorities asserted, if any. If the
domiciliary receiver, within 30 days after the giving of notice, shall give notice in writing
to the ancillary receiver and to the claimant, either by registered mail or by personal
service, of his or her intention to contest that claim, he or she shall be entitled to appear
or to be represented in any proceeding in this state involving the adjudication of the
claim. The final allowance of the claim by the courts of this state shall be accepted as
conclusive as to its amount, and shall also be accepted as conclusive as to its priority, if
any, against special deposits or other security located within this state.‖ (§ 1064.5,
subd. (b), italics added.)
       Because no ancillary delinquency proceedings have been commenced against
Lumbermens in California, Lumbermens contends Marin Cleaners’ remedy under section
1064.5 is to file and prove its claims in the rehabilitation action in Illinois, and therefore,
the California action should be stayed or dismissed. Lumbermens’ contention accords
with a plain reading of the statute and is also consistent with out-of-state cases that
interpret the UILA to require claimants to file claims against an insolvent insurer in the
state where delinquency proceedings are initiated unless an ancillary receiver has been
appointed in their state. (See Rose v. Fidelity Mut. Life Ins. Co. (E.D.N.Y. 2002) 207
F.Supp.2d 50, 53 [where no ancillary receiver was appointed in New York, the UILA
requires New York residents to file claims with domiciliary receiver in Pennsylvania
rehabilitation proceeding]; Integrity Ins. Co. v. Martin (Nev. 1989) 769 P.2d 69, 70
[absent appointment of an ancillary receiver in Nevada, the UILA requires ―claimant
prove his claim in the domiciliary state‖]; G. C. Murphy Co. v. Reserve Ins. Co. (N.Y.
1981) 429 N.E.2d 111, 115 (Murphy) [―in the absence of an ancillary receiver in New
York, [plaintiff] must pursue its claim against the liquidator in Illinois‖].)

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       Marin Cleaners acknowledges the UILA precludes any action against a delinquent
insurer in the nature of an attachment, garnishment or execution. (See § 1064.9 [―During
the pendency of delinquency proceedings in this or any reciprocal state, no action or
proceeding in the nature of an attachment, garnishment, or execution shall be commenced
or maintained in the courts of this state against the delinquent insurer or its assets. . . .‖]
(Italics added.).) However, Marin Cleaners asserts the UILA does not preclude its in
personam, breach-of-contract action because it is not an attachment, garnishment, or
execution against Lumbermens’ assets.
       Marin Cleaners relies on two cases from the federal courts, Hawthorne Savings v.
Reliance Ins. Co. (9th Cir. 2005) 421 F.3d 835 (Hawthorne) and Wallis v. Centennial Ins.
Co. (E.D.Cal. Jan. 31, 2012, CIV. 08-02558 WBS GGH) 2012 U.S. Dist. LEXIS 11655
(Wallis). The Hawthorne court addressed the issue of whether ―[u]nder California law,
. . . California state courts must defer to rehabilitation and liquidation proceedings
commenced in Pennsylvania‖ in plaintiff’s contract action against insurer. (Hawthorne,
at p. 852.) Noting an absence of California precedent, the court adopted the principle
enunciated in Hoiness-LaBar Ins. Co. v. Julien Const. Co. (Wyo. 1987) 743 P.2d 1262
and Fuhrman v. United America Insurors (Minn. 1978) 269 N.W.2d 842—―reciprocity
does not apply to the determination of in personam legal rights, as opposed to the
enforcement of any resulting judgment against the estate of an insolvent company in state
court proceedings,‖ since ―an action in personam to establish the extent of an insolvent’s
liability on a claim is held not to interfere with the receivership res.‖ (Hawthorne, at pp.
854–855.)
       Moreover, the Hawthorne court opined that ―[t]he text of the UILA manifests this
principle‖ and distinguishes between in personam actions against the insurer and those
directed against the receivership res. (Hawthorne, supra, 421 F.3d at p. 855.) On this
point, the court focused on section 1064.9, reasoning that because the section precludes
only actions or proceedings ―in the nature of an attachment, garnishment, or execution‖
against the delinquent insurer or its assets in California courts, it permits any other type
of action or proceeding. (Hawthorne, at p. 855, italics added.) On that basis, the

                                                5
Hawthorne court concluded ―a California state court would not stay its proceedings but
would decide the merits of this dispute, as did the district court.‖ (Id. at p. 856.)
         However, in making that determination, Hawthorne looked only to that portion of
the UILA prohibiting a garnishment, attachment or execution under section 1064.9. For
reasons unexplained in the opinion, Hawthorne failed to discuss section 1064.5, which, as
noted above, specifically governs controverted claims belonging to claimants residing in
this state and provides only two options for such claims—either prove the claim in
Illinois or prove it in California, if ancillary proceedings have been commenced in this
state. Because Hawthorne ignored section 1064.5, it does not advance Marin Cleaners’
cause.
         Marin Cleaners fares no better in its reliance on Wallis. In Wallis, the federal
district court addressed an insurer’s motion to stay an action on account of liquidation
proceedings in New York. The Wallis court rejected the insurer’s argument that pursuant
to section 1064.5 California residents must file claims against a delinquent New York
insurer in New York if no ancillary proceedings had been commenced in California.
Rather, the Wallis court reasoned section 1064.5 is a permissive statute that allows
claimants to file their claims with the receiver and section 1064.9 is a mandatory statute
that limits the type of actions that can be filed in court against a delinquent insurer.
(Wallis, supra, 2012 U.S. Dist. LEXIS 11655 at pp. *8–*9.) Thus, according to the
Wallis court, ―Section 1064.5 . . . qualifies as an alternative remedy to claimants who
would prefer to not pursue their in personam action in court or who are barred from
pursuing their in rem action in court pursuant to section 1064.9.‖ While ―the law . . .
requires that in rem claims be filed with the appropriate receiver, . . . in personam actions
may either proceed in court or be filed with the receiver.‖ (Wallis, at p. *10.)
         The Wallis court’s interpretation does not accord with the purpose of section
1064.5 or with the intent of the UILA as a whole. Section 1064.5 addresses the filing and
proving of claims by residents of this state against delinquent insurers domiciled in
reciprocal states. Specifically, section 1064.5 states residents may file their claims
―either with the ancillary receiver, if any, appointed in this state, or with the domiciliary

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receiver.‖ (§ 1064.5, subd. (a).) Also, residents may prove any controverted claims in
the domiciliary state or in ancillary proceedings in California, if ancillary proceedings
have been commenced. (See § 1064.5, subd. (b).) Accordingly, section 1064.5 governs
all claims by California residents against a delinquent insurer domiciled in a reciprocal
state, both controverted and uncontroverted; its sweep is comprehensive and permits no
exception for an ―in personam action,‖ as asserted by Marin Cleaners.
       Furthermore, the public policy behind the UILA favors issuance of the writ. As
the New York Court of Appeals explained, ―By enacting the Uniform Insurers
Liquidation Act, our Legislature has determined that such occasional instances of
adversity [to state residents] are outweighed by the paramount interest of the various
States in seeing that insurance companies domiciled within their respective boundaries
are liquidated in a uniform, orderly and equitable manner without interference from
external tribunals.‖ (Murphy, supra, 429 N.E.2d at p. 117.)
       For these reasons, we grant the writ relief requested by Lumbermens.
                                     III. DISPOSITION
       In accordance with our prior notification to the parties that we might do so, we
will direct issuance of a peremptory writ in the first instance. (Palma v. U.S. Industrial
Fasteners, Inc. (1984) 36 Cal.3d 171, 177–180.) Petitioner’s right to relief is obvious,
and no useful purpose would be served by issuance of an alternative writ, or by further
briefing and oral argument. (Ng v. Superior Court (1992) 4 Cal.4th 29, 35; see also
Lewis v. Superior Court (1999) 19 Cal.4th 1232, 1236–1237, 1240–1241; Brown,
Winfield & Canzoneri, Inc. v. Superior Court (2010) 47 Cal.4th 1233, 1240–1244.)
       Let a peremptory writ of mandate issue commanding respondent the Superior
Court of Marin County, in its case No. CIV 1105680, to vacate the order of October 10,
2012, denying petitioner’s motion to dismiss or stay the action and, in the exercise of its
discretion, to issue a new and different order either staying or dismissing the action.
Petitioner is entitled to costs incurred in these writ proceedings. (See Cal. Rules of Court,
rule 8.493(a)(1).) Our decision is final in this court immediately. (Cal. Rules of Court,
rule 8.490(b)(3).)

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