Great American Insurance v. Superior Court

When a liability insurer providing a defense to its insured believes there is no longer a potential for coverage and, therefore, it is no longer required to defend, it may bring a declaratory relief action to obtain a judicial declaration that it need no longer do so. The insured, however, may seek to stay the insurer’s declaratory relief action if proceeding on that action could prejudice its defense of the underlying liability action. In this case, we consider the circumstances in which the trial court must grant a stay, and when the court may exercise its discretion on the issue.

Petitioner Great American Insurance Company (Great American) insured Angeles Chemical Company, Inc. (Angeles), and its officers and directors. Angeles and a neighboring property owner, McKesson Corporation (McKesson), sued each other for cleanup costs relating to environmental contamination of the groundwater beneath both sites. The complaints also named officers and directors of each company. Various cross-complaints were filed; the subsequent owner of the Angeles site sued some, but not all, of the Angeles owners and directors; those owners and directors sued Angeles.

Great American…