Century Indemnity Co. v. Superior Court

In this case we are called upon to decide whether an action brought by one insurance company against another insurance company to recoup a pro rata share of defense costs expended by the first in defense of their coinsured is governed by the two-year statute of limitations of Code of Civil Procedure section 339 as an action not founded on an instrument in writing, or by the four year statute of limitations of section 337.

We conclude the trial court erred when it relied on the court’s decision in Liberty Mut. Ins. Co. v. Colonial Ins. Co. (1970) 8 Cal.App.3d 427 [ 87 Cal.Rptr. 348 ] to determine Scottsdale’s action is one founded on an instrument in writing within the meaning of section 337. Our review of the relevant case law indicates Liberty Mutual was wrongly decided. We further conclude that “an action upon [a] contract obligation or liability founded upon an instrument in writing” is an action on the contract between or among contracting parties who are in privity. We hold, therefore, that Scottsdale’s action against Century is governed by the two-year statute of limitations of section 339 as an action not founded on an instrument in writing. In so holding, we do…