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Sawyer v. Westchester Fire Insurance Company11/20/2002
the State was not a named insured in the Westchester policy and no endorsement was issued adding the State as an additional insured to the umbrella policy. The State never contacted Westchester to request that it defend the State in the underlying actions.
The Stipulations Between Appellants and the State
Once the judgment in favor of MCM became final, the State and appellants executed a "Stipulation Re Judgment" on October 27, 1997, in which the State allowed a judgment to be entered against it in an amount to be determined by the court, and assigned its rights against MCM and St. Paul to appellants. The stipulation also provided that appellants would enter into a covenant not to execute the judgment against the State, and that if the assigned claims were found not to be enforceable, appellants' lawsuits would be restored to the civil active list. This stipulation was filed on November 4, 1997. A bench trial was conducted on November 5 and 6, 1997, after which the court entered judgment.
But the court later vacated the judgment on its own motion, expressing the following concerns: (1) the judgment was not final because the stipulation provided the judgment be vacated and the case restored to the civil active list if the judgment proved to be unenforceable, and (2) the judgment was collusive as to the third parties who were expected to pay the judgment because it was not based on evidence presented in a true adversarial proceeding. Following the court's ruling, appellants and the State filed a revised stipulation on February 13, 1998, omitting the provision for reinstatement of the actions against the State if the assigned claims were found to be unenforceable. On March 16, 1998, the court entered a final judgment against the State in the total amount of $8,473,457.47, which included both economic and non-economic damages. The court also found, based on the unrebutted testimony of appellants' accident reconstruction expert, that the State and the driver of the stalled vehicle were each 50 percent at fault for the accident which injured appellants. The Instant Action and the Parties' Motions for Summary Judgment
Appellants, as assignees of the rights of the State, filed their complaint in the present action against MCM and St. Paul on October 19, 1998. Appellants alleged that MCM had breached it contractual indemnity obligations to the State, and that St. Paul had breached its duty to defend the State in the underlying actions and was liable for the judgment against the State. MCM's demurrer to the first amended complaint was sustained without leave to amend. The Court of Appeal affirmed the dismissal of MCM in an unpublished opinion issued August 9, 2000.
A. Appellants and St. Paul's Cross-Motions for Summary Judgment
While St. Paul's demurrer to the first amended complaint was also sustained, its demurrer to the second amended complaint was overruled. Appellants and St. Paul then filed cross-motions for summary judgment, which were heard on March 23, 2000. Appellants moved for summary judgment or summary adjudication on the following grounds: (1) that St. Paul had a duty to defend the State in the underlying actions because it did not establish that there was no potential for coverage; (2) that appellants were entitled to enforce their judgment against St. Paul because of its failure to defend, regardless of whether the judgment was covered by the policy; (3) that the policy exclusions were ambiguous and unenforceable; and (4) that the fact of judicial involvement in obtaining the stipulated judgment made it enforceable regardless of whether it was based on a reasonable assessment of the State's liability.
St. Paul moved for
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