People Ex Rel. City of Willits v. Certain Underwriters at Lloyd's of London

Insurance Code section 11580 (section 11580) requires certain insurance policies to include a provision that allows an action against the insurer after a judgment has been secured against its insured. If this direct action provision is not included in the policy, it is read into the policy.

The People of the State of California and the City of Willits, California, (collectively, the state) brought this action pursuant to section 11580 against Certain Underwriters at Lloyd’s of London, and Certain London Market Insurance Companies (collectively, London Insurers). In bringing the action the state was attempting to collect a judgment for property damage caused by environmental contamination. The trial court granted summary judgment in favor of London Insurers after ruling that, in cases involving property damage, section 11580 allows a direct action against an insurer only when the property damage is caused by a vehicle or draught animal.

We conclude the trial court misinterpreted section 11580 and reverse the judgment.

I. Background

The state sued Pneumo Abex Corporation (Pneumo Abex) and Whitman Corporation (Whitman) in federal court for damages for environmental…