Wells Fargo Bank v. California Insurance Guarantee Ass'n

In this case we examine the specific terms of the insurance policies before us to determine whether a third level insurer “drops down” to assume the obligations of a second level insurer when the second level insurer becomes insolvent. We agree with the trial court that the third level policy incorporates an endorsement that unambiguously precludes it from “dropping down" to provide second level coverage upon the underlying insurer’s insolvency. Consequently, we affirm the summary judgment entered in favor of the insurer.

I. Facts

In 1985, 12 former managers who were fired from Wells Fargo Bank, N.A. (Wells Fargo) in 1984 and 1985, filed suit alleging wrongful termination, defamation and other causes of action. None of Wells Fargo’s insurers agreed to defend or indemnify Wells Fargo in this lawsuit. Consequently, Wells Fargo paid its own defense costs and negotiated and obtained settlements with all plaintiffs. Wells Fargo paid approximately $7.2 million to defend and settle the lawsuit.

When the wrongful termination lawsuit was filed, Wells Fargo had three levels of general liability insurance, providing aggregate coverage of $31 million. Truck Insurance Exchange…