Garamendi

The question presented is whether, as prevailing parties in a declaratory relief action brought against the Insurance Commissioner as conservator of an insolvent insurance company to challenge the commissioner’s designation of priority status, appellant policyholders are entitled to attorney fees and costs as provided for in their contract with the insurance company. We hold that they are and reverse the trial court’s ruling.

I

Facts and Procedural History

The judgment in favor of appellants was affirmed by Division Four of this district in Texas Commerce Bank v. Garamendi (1992) 11 Cal.App.4th 460 [ 14 Cal.Rptr.2d 854 ], review denied. The following brief statement of the facts underlying the judgment is taken from that opinion.

Executive Life Insurance Co. (ELIC) sold municipal guaranteed investment contracts (Muni-GICs) to the appellant banks as the indenture trustees for municipal entities which had issued low-income housing bonds and transmitted the proceeds to the banks for purchase of Muni-GICs. The Muni-GICs were to accumulate at a guaranteed rate and to pay accumulated interest on semiannual payment dates. (Id., at p. 466.)

After it began experiencing severe…