Fourth Appellate District Grants Writ Petition Overturning Trial Court Order Compelling Interim Payment of Defense Costs

The unpublished opinion of Division Two of the Fourth Appellate District in Wausau Underwriters Insurance Company, et al v. Superior Court (Atlantic Mutual Insurance Company), No. E049323 (February 23), involved a petition for writ of mandate by Wausau.  The body of the opinion is two pages in length and not entirely self-explanatory.  However, what is clear about it is extremely significant.  Wausau apparently petitioned for writ relief from an order by the San Bernadino Superior Court ordering the fixing of sums due by Wausau “and, implicitly at least, authorizing enforcement by real party in interest Atlantic.”  The appellate court found “[t]he issue [defense costs]  has not been bifurcated and there is no enforceable (or appealable) judgment at this time.”

The Court went on to distinguish American Motorists Insurance Co. v. Superior Court (1998) 68 Cal. App. 4th 964, finding that there the appellate court had “construed the lower court’s order (italics in original)” to include what that appellate court found was “an implied order” severing the duty to defend from the remaining issues and entering a final judgment on that collateral issue.  The Court here declined to similarly construe the lower court’s order before it and parenthetically noted that “we express no opinion on the question of whether this limited issue could be properly severed (italics in original).”  The Court went on to write that Watts Industries, Inc. v. Zurich American Insurance Co. (2004) 121 Cal. App. 4th 1029 also does not discuss the propriety of a payment order, and therefore is not authority for that issue which was not actually considered.  Insurers facing interim defense costs payment orders will want to carefully read this short opinion.  It appears to be a substantial judicial pushback from over fifteen years of assumed jurisprudence.  See Montrose Chemical Corp. v. American Motorists Insurance Co. (1993) 16 Cal. Reptr. 516, rev. gtd. and opinion superseded, 18 Cal Reptr. 2nd 868 and review dismissed, cause remanded, 28 Cal. Reptr. 2nd 149.

February 23, 2010   Posted in: Blog