In D. Cummins Corp. v. U.S. Fidelity & Guaranty (no. A142985, filed 3/30/16), a California Court of Appeal upheld the dismissal of a declaratory relief action filed by the parent holding company of an insured corporation seeking coverage for asbestos claims.
Cummings Corp. installed asbestos containing products in California. It had been insured by USF&G between 1969 and 1992. Cummings Holding, LLC was the parent and majority shareholder of Cummings Corp., which had no assets. The holding company claimed to be “the sole entity responsible for managing the affairs of Cummins Corp., including making decisions as to litigation strategy, resolution and settlement,” and sued USF&G seeking a declaratory judgment that the insurer was obligated to defend and/or indemnify Cummins Corp., “in full, including, without limitation, payment of the cost of investigation, defense, settlement and judgment . . . , for past, present and future Asbestos Suits.” The insurer demurred on the ground that the holding company had insufficient interest in its insurance policies and, consequently, lacked standing to sue for declaratory relief.
The trial and appeals courts agreed. The appeals court quoted the declaratory relief statute, Code Of Civil Procedure section 1060, which provides that: “Any person interested under a written instrument . . . or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.”
However, although the statute is couched in broad terms the court noted that under the companion statute, Code of Civil Procedure section 1061: “The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” And the appeals court went on to cite instances where parties had been denied declaratory relief against insurers, such as a subsequent landowner seeking declaratory relief regarding the prior owner’s insurance coverage (Otay Land Co. v. Royal Indem. Co. (2008) 169 Cal.App.4th 556), and shareholders trying to sue their corporation’s insurer for declaratory relief (Seretti v. Superior Nat. Ins. Co. (1999) 71 Cal.App.4th 920).
The Cummings court dismissed authorities cited by the holding company as distinguishable in that all of the parties in the cited cases had a legal interest in, or would have been directly affected by, any interpretation of the terms of the insurance policies. But as the mere parent corporation and majority owner of the insured corporation, the holding company had no facts or legal theories giving it more than an indirect interest in the corporation’s insurance policies.
The Cummings court wrapped up, stating: “In conclusion, given that Holding Co., the controlling shareholder of Cummins Corp., does not have a contractual relationship with the insurers and is not otherwise interested in the contract between the corporation and the insurers (see § 1060), the trial court acted within its discretion when it concluded that a declaration of Holding Co.’s rights was ‘not necessary or proper at the time under all of the circumstances.’”
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