Related Practices

Selman Breitman Obtains Summary Adjudication for Steadfast Insurance in Case of First Impression

Los Angeles County, CA

July 25, 2016

The Insurance Company of the State of Pennsylvania v. Steadfast Insurance Company

On July 25, 2016, a California trial court granted summary adjudication for Steadfast Insurance Company on a case of first impression.  The court found that Steadfast, as a primary insurer, did not require a judicial declaration of policy exhaustion before it could withdraw from its insured's defense.  The court also found that Steadfast had no duty to account to the excess carrier for its insolvent insured's unsatisfied self-insured retention obligation. 

Steadfast provided commercial general liability insurance coverage to a dissolved corporation.  The Steadfast policy had a $10,000 per occurrence self-insured retention.  The Insurance Company of the State of Pennsylvania ("ISOP") provided excess, follow form coverage over the Steadfast policy.

ISOP argued that the self-insured retention had not been properly satisfied and ISOP had no obligation to drop down and fund the insured's defense.  Because the insured was insolvent and unable to satisfy the self-insured retention, ISOP argued that Steadfast could never settle a claim against its insured unless it accounted for application of the $10,000 self-insured retention in the settlement.  

Judge Terry Green of the Los Angeles County Superior Court noted that California law requires that insurance policies, such as Steadfast's and ISOP's, contain a "provision that the insolvency or bankruptcy of the insured will not release the insurer from the payment of damages for injury sustained or loss occasioned during the life of such policy."  (Cal. Ins. Code § 11580(b)(1).)  He wrote that the intent of the statute is to prevent an insurer from abrogating its obligations under its policy because of the insured's insolvency and to protect and make whole those negligently injured by the insured.  Steadfast chose to defend its insured and negotiate settlements.  As the only primary carrier on the risk, Steadfast complied with Ins. Code § 11580 by adjusting more than 200 claims.  Steadfast's actions allowed claimants to be made whole.

Judge Green also reasoned that under the terms of the Steadfast policy, Steadfast has the right to defend and settle claims at its discretion.  Moreover, there is nothing in the Steadfast policy that requires Steadfast to collect an uncollectible self-insured retention or to apply credits for self-insured retention amounts before the Steadfast policy can be exhausted.  Additionally, the Steadfast policy provides that only the named insured can satisfy the self-insured retention; that is,: neither Steadfast nor any other entity may do so. ISOP, as a stranger to the insurance contract, may not impose its views on how or whether Steadfast pursues recovery of its self-insured retention. 

Plaintiff, ISOP,  was represented by Hillary C. Agnost of Colin Adkins.

Defendant, Steadfast, was represented by Sheryl W. Leichenger, Hee Sung Yoon, and Gail L. Orr of Selman Breitman LLP.


Selman Breitman provides this information for educational purposes. Case results depend upon a variety of factors unique to each case. Case results do not guarantee or predict a similar result in any future case. This information should not be construed or relied on as legal advice or to create a lawyer-client relationship.