Quackenbush

Defendant Imperial Casualty and Indemnity Company (Imperial) reinsured Mission Insurance Company (Mission) and two of its subsidiaries under various reinsurance agreements. In turn, Mission (but none of its subsidiaries) reinsured Imperial.

In 1985, the Insurance Commissioner (the Commissioner) placed Mission and its affiliated companies into conservatorship due to insolvency. In 1987, the Commissioner instituted liquidation proceedings. The Commissioner filed suit against numerous reinsurers of the Mission companies, including Imperial, to recover amounts due under the reinsurance agreements.

Imperial and the Commissioner entered into a settlement agreement resolving all of their disputes except one: whether Imperial could set off amounts owed to it by Mission against what it owed all three Mission companies. The settlement agreement provided that this issue would be resolved, if possible, in accordance with the California Supreme Court’s anticipated decision on setoff issues in a pending case, Prudential Reinsurance Co. v. Superior Court (S014036, review granted Apr. 19, 1990).

After the high court rendered its decision in Prudential Reinsurance Co. v. Superior Court…