Eaton Hydraulics Inc. v. Continental Casualty Co.

SUMMARY

In this insurance coverage case, the trial court erred in concluding the insured’s suit against an excess insurer was barred by the four-year statute of limitations. Under settled principles, the statute of limitations in a general liability insurance coverage case accrues when the insurer refuses to defend the insured in the underlying litigation. Since the duty to defend is continuing, the statute is tolled until the underlying action is terminated by final judgment—in this case, August 2, 2000. The fact that the insured sued its primary insurers in 1996, designating “excess insurers” as Doe defendants, has no bearing on the accrual or tolling of the statute of limitations applicable to an excess insurer who was never identified or served in the 1996 lawsuit.

FACTUAL AND PROCEDURAL BACKGROUND

On September 28, 2001, Eaton Hydraulics Inc. filed this lawsuit against its insurers, including Continental Casualty Company and CNA Casualty of California (collectively, CNA). CNA is one of Eaton’s excess or umbrella insurers. The suit alleges that Eaton’s primary and umbrella insurers refused to defend and indemnify Eaton in connection with underlying environmental…