National Casualty Co. v. Sovereign General Insurance Services Inc.

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 814 OPINION This is a declaratory relief action. Plaintiff, National Casualty Company (National), appeals from a judgment in favor of Sovereign General Insurance Services, Inc. (Sovereign), National's insured under a policy of errors and omissions insurance. The policy is a claims-made policy. The policy period was August 17, 2000, to August 17, 2001. The policy covered Sovereign for its actual or alleged negligent acts, errors or omissions, libel, slander, or invasion of privacy, provided the claim for such act(s) was made within the policy period and was brought in the United States, Puerto Rico, or Canada. Sovereign was authorized to issue certificates of insurance by Certain Underwriters at Lloyd's London (Lloyd's) and to process claims for Lloyd's. On March 20, 2001, attorneys for Lloyd's sent a letter to Sovereign at its offices in Stockton, California, asserting that Sovereign's underwriting and claims handling activities engaged in pursuant to agreements between Lloyd's and Sovereign, had caused Lloyd's to suffer losses, and that…

This is a declaratory relief action. Plaintiff, National Casualty Company (National), appeals from a judgment in favor of Sovereign General Insurance Services, Inc. (Sovereign), National’s insured under a policy of errors and omissions insurance. The policy is a claims-made policy. The policy period was August 17, 2000, to August 17, 2001.

The policy covered Sovereign for its actual or alleged negligent acts, errors or omissions, libel, slander, or invasion of privacy, provided the claim for such act(s) was made within the policy period and was brought in the United States, Puerto Rico, or Canada.

Sovereign was authorized to issue certificates of insurance by Certain Underwriters at Lloyd’s London (Lloyd’s) and to process claims for Lloyd’s. On March 20, 2001, attorneys for Lloyd’s sent a letter to Sovereign at its offices in Stockton, California, asserting that Sovereign’s underwriting and claims handling activities engaged in pursuant to agreements between Lloyd’s and Sovereign, had caused Lloyd’s to suffer losses, and that Lloyd’s intended to recover such losses from Sovereign. Sovereign submitted the claim to National. The letter was sent during the policy period…

I concur in the result. I write separately to make an observation or two regarding the majority opinion. First, the majority opinion can be read to suggest that valid territorial clauses are limited to automobile liability policies. I find no such restriction. Indeed, it would be entirely understandable for an insurance company to want to limit the coverage of its policy to actions prosecuted only in particular jurisdictions and not want to obligate itself to the defense of claims in foreign jurisdictions having different laws and different legal systems. There is no reason why an unambiguous clause limiting coverage in that manner should not, as a matter of contract, be enforceable. Second, the majority opinion sees support for its holding in the thought that, since the "majority of Sovereign's business was contracted through Lloyd's and Sovereign's agreement with Lloyd's contained an arbitration clause mandating that all disputes be arbitrated in London" (maj. opn., ante , at p. 820), it would have been unreasonable for Sovereign to buy a policy that did not cover a majority of its business. But there is no evidence in this record that National Casualty knew of the arbitration…