Author: William J. Baron

By: William J. Baron

The Ninth Circuit has held that the California rule permitting insurers to intervene to defend suspended corporate insureds also applies under federal procedural rules.  (See California Dept. of Toxic Substances Control v. Jim Dobbas, Inc. (9th Cir. 2022) 54 F.4th 1078, 1082.)

In Jim Dobbas, the Department of Toxic Substances Control (DTSC) sought a default judgment against a bankrupt limited liability company (Collins), which formerly owned contaminated land in Elmira, California.  The DTSC had obtained an order in Bankruptcy Court permitting it to sue Collins, but only to seek recovery from Collins’ insurers.

Upon receiving notice of the suit and the request for a default judgment, Collins’ insurers filed a motion to intervene as of right under Federal Rule of Civil Procedure 24(a)(2) to defend the claims against Collins, and also moved to set aside the default that had been entered.  (Id. at 1083-1084.)  The District Court denied the insurers’ motions to intervene and declined to set aside the default.  (Id. at 1084-1085.)

The Ninth Circuit reversed the first ruling, holding that the insurers were entitled to intervene as of right.  (Id. at 1082, 1090-1092.)  The Court found that California law applied and that the insurers had a legally protectable interest in intervening to defend the action, based on California’s direct action statute, Insurance Code section 11580.  (Id. at 1089-1093.)  The opinion noted that California courts have “repeatedly held that insurers have a protectable interest under § 11580 in preventing defaults by their insureds that are incapable of defending themselves or otherwise unwilling to do so,” because this statute permits plaintiffs to seek recovery on judgments from the defendants’ insurers.  (Id. at 1090 and 1090 fn. 14.)

Continue reading “Jim Dobbas to the Rescue”

By: Gina Foran, Bill Baron, and Phil Matthews

Duane Morris lawyers helped secure a victory at the California Court of Appeal when the court held Tuesday that ConAgra’s insurers have no duty to indemnify ConAgra against a public nuisance action in which ConAgra was ordered to contribute to an abatement fund due to its predecessor’s promotion of the use of lead paint in pre-1950 homes.  (See Certain Underwriters at Lloyd’s London, et al. v. ConAgra Grocery Products Company, et al., Case No. A160548, April 19, 2022, certified for publication (“ConAgra”).)

The underlying case (the “Santa Clara Action”) began in 2000 when Santa Clara County, later joined by other California government agencies filed a class action complaint against certain lead paint manufacturers, including ConAgra, NL Industries, Inc., and Sherwin-Williams Company. The focus of the underlying case was narrowed, and that case ultimately went to trial on one cause of action for representative public nuisance.  In pursuing that causes of action, the underlying plaintiffs alleged that the presence of lead in paint and coatings in and around homes and buildings in California created a public health crisis created and/or assisted by the defendants.  In a pre-trial appeal in the Santa Clara County action, the court held that the representative public nuisance cause of action required as an essential element that the paint manufacturers had acted intentionally with actual knowledge that their marketing of lead paint for interior residential use would cause harm.  (See County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 299 (“Santa Clara I”).)  The underlying case went to trial under that standard, and the court found the manufacturers jointly and severally liable for representative public nuisance.

Continue reading “Lead Paint Coverage Claim Bites the Dust”