Truck Insurance Exchange v. Amoco Corp.

35 Cal. App. 4th 814, 41 Cal. Rptr. 2d 551, 95 Cal. Daily Op. Serv. 4249, 95 Daily Journal DAR 7263, 1995 Cal. App. LEXIS 518
CourtCalifornia Court of Appeal
DecidedJune 6, 1995
DocketB075894
StatusPublished
Cited by14 cases

This text of 35 Cal. App. 4th 814 (Truck Insurance Exchange v. Amoco Corp.) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Truck Insurance Exchange v. Amoco Corp., 35 Cal. App. 4th 814, 41 Cal. Rptr. 2d 551, 95 Cal. Daily Op. Serv. 4249, 95 Daily Journal DAR 7263, 1995 Cal. App. LEXIS 518 (Cal. Ct. App. 1995).

Opinion

Opinion

KITCHING, J.

In a matter involving issues of insurance coverage, plaintiff and appellant Truck Insurance Exchange (Truck) appeals from the summary judgment entered in favor of defendant and respondent Amoco Corporation (Amoco) in a declaratory relief action alleging Amoco to be the “de facto” insurer for Cyprus Amax Minerals Company (Cyprus), a former wholly owned subsidiary, based on the parent corporation’s corporate policy of self-insuring itself and its subsidiaries. 1 Truck argues summary judgment was improper because Amoco’s statements and actions established the former parent corporation as the functional insurer of Cyprus, thereby obligating Amoco to reimburse Truck who, with other liability insurers, paid for the defense and indemnity of Cyprus in talc-related tort litigation.

We determine Amoco was not Cyprus’s insurer and had not agreed to defend and indemnify its former subsidiary. The trial court properly entered summary judgment. Accordingly, we affirm.

Factual and Procedural Background

This is an action for reimbursement of defense costs. The central issue in this appeal is whether, under the facts of this case, a parent company can be *818 transformed into a liability insurer by virtue of its self-insurance program, enabling a former subsidiary’s insurers to seek contribution for defense and indemnity expenses from the former parent company.

Relationship of Amoco and Cyprus

Amoco is a parent company for a worldwide integrated petroleum and chemical enterprise and has numerous subsidiaries. In 1979, Amoco acquired Cyprus, a company engaged in the business of mining and distributing industrial minerals, including talc. 2 Cyprus remained a wholly owned subsidiary of Amoco until 1985, when it was spun off to the Amoco shareholders and became an entity unrelated to Amoco. As part of Amoco’s divestiture of Cyprus, the parties signed a “Memorandum of Agreement” which stated, in relevant part: “5. Cyprus will be responsible for all claims, whether or not asserted, and liabilities related to its business as it exists on the Distribution Date, including any litigation currently pending or which may be commenced after the Distribution Date.”

Insurance Coverage

Cyprus was insured by Fireman’s Fund Insurance Company (Fireman’s Fund) from May 23, 1961, to October 15, 1964, by Continental Casualty Company (Continental)/CNA Companies from 1964 to 1974, and by Truck from October 1, 1974, to July 1, 1980. In 1980, Cyprus, now an Amoco subsidiary, advised Truck its insurance policies would not be renewed because Cyprus would be included in Amoco’s corporate insurance program.

Under the terms of Amoco’s internal insurance program, Amoco and each of its subsidiaries were self-insured for the first $5 million of loss for third party liability claims. 3 Accordingly, during the period Cyprus was a wholly owned subsidiary of Amoco, 1980 to 1985, Cyprus was also self-insured for $5 million for third party liability claims.

*819 In 1985, after Cyprus became a corporation independent of Amoco, Cyprus purchased liability insurance coverage from Old Republic Insurance Company (Old Republic). 4

Insurance Coverage and Talc-related Litigation

Beginning in 1979, plaintiffs filed actions against Cyprus alleging injuries caused by exposure to asbestos-containing talc in products the company manufactured and distributed (talc-related litigation). In 1986 or 1987, Amoco began receiving correspondence regarding talc-related claims, and forwarded the documents to Cyprus’s insurers. In 1986, Cyprus notified Fireman’s Fund, Old Republic and .Truck of the talc-related claims and demanded a defense and indemnification, which the insurance companies provided. Cyprus did not demand a defense or indemnification from Amoco.

In 1987 Truck and the other primary carriers asked Amoco to join in the coordination of Cyprus’s defense. The insurers made the request on the ground they “were advised that Amoco owned Cyprus from approximately 1980 through 1985, and that Amoco was self insured on the primary level. Hence Amoco may have some responsibility for these [talc] claims.” Amoco told the insurers the company never was the primary insurer for Cyprus, and refused to be involved in coverage negotiations. Amoco told the insurers, in part: “There is no basis in law or fact for your allegation that Amoco Corporation has a duty to defend or indemnify your insured, Cyprus .... You have a contractual obligation to do so under the terms of your contract of insurance.”

In the fall of 1988, Truck and the other insurers entered into an “Interim Compromise Defense and Indemnification Cost Sharing Agreement Re: Cyprus” (Interim Agreement) regarding their defense and indemnification obligations. Pursuant to the terms of the Interim Agreement, Truck, and the others, agreed not to file against Cyprus “any complaint or cross-complaint with respect to Cyprus’ insurance coverage for Talc-Related Cases, unless called for by court order.”

Complaint

On October 4, 1990, Fireman’s Fund, Old Republic and Truck filed a first amended declaratory relief action against Amoco, and additionally alleged causes of action for breach of written contract (first cause of action), breach of oral contract (second cause of action), breach of contract implied by conduct (third cause of action), and equitable contribution (fourth cause of *820 action). 5 The gravamen of the complaint was that as a result of Amoco’s words and conduct, based on the internal self-insurance program, the company functioned as Cyprus’s “de facto” primary insurer and should be obligated to participate with other primary carriers in the defense and indemnification of its former subsidiary.

On October 15, 1990, Amoco filed an answer denying the allegations and asserting as a defense, inter alia, the lack of privity between Amoco and Cyprus. On July 22, 1991, after being granted leave by the court, Amoco filed a cross-complaint against Cyprus for indemnity and contribution. 6 In its answer, Cyprus denied the allegations and asserted various defenses.

Summary Judgment

On March 17, 1992, Amoco moved for summary judgment on grounds (1) Amoco never insured Cyprus, and (2) Cyprus expressly acknowledged liability for all claims asserted against it, and, therefore, had no rights against Amoco to which Truck could allege to be subrogated. Declarations in support of Amoco’s motion provided details of Amoco and Cyprus’s legal relationship and of the insurance program which established the parent company and the subsidiary as separate self-insuring entities, and provided evidence Amoco never agreed to defend or indemnify Cyprus. Discovery responses established lack of any agreements, written or otherwise, to defend or indemnify Cyprus.

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Bluebook (online)
35 Cal. App. 4th 814, 41 Cal. Rptr. 2d 551, 95 Cal. Daily Op. Serv. 4249, 95 Daily Journal DAR 7263, 1995 Cal. App. LEXIS 518, Counsel Stack Legal Research, https://law.counselstack.com/opinion/truck-insurance-exchange-v-amoco-corp-calctapp-1995.