County of Orange v. FST Sand & Gravel, Inc.

The County of Orange sued the Serrano Irrigation District and a sand and gravel company, FST Sand & Gravel, Inc. (Frank Smith Trucking), for removing sand and gravel from county land. Frank Smith Trucking was insured by Citation General Insurance Company, which became insolvent. The California Insurance Guarantee Association (CIGA), took over Frank Smith Trucking’s defense, and filed a summary judgment motion against the county on the theory that CIGA was not statutorily required to pay any obligation to the county. The trial court granted the motion, and this appeal followed in the wake of the ensuing judgment.

CIGA’s job is to pay “covered claims” arising out of the obligations of an insolvent insurer (Ins. Code, § 1063.2, subd. (a)), but its liability cannot exceed the amount of covered claims. (Ins. Code, § 1063.12, subd. (a); Isaacson v. California Ins. Guarantee Assn. (1988) 44 Cal.3d 775, 786 [ 244 Cal.Rptr. 655 , 750 P.2d 297 ].) (1) In bringing its summary judgment motion, CIGA successfully argued that subdivision (c)(3) of section 1063.1 (now subd. (c)(4)) excluded from the definition of “covered claim” any obligation to the county because of the county’s…