California Appellate Victory for Swiss Re
On April 3rd, the California Court of Appeal issued a landmark decision on the use of “course of performance” evidence in the interpretation of insurance policies, reversing a lower court decision adverse to Swiss Re in a major insurance coverage dispute pending in Los Angeles. The Court held that where parties “have, for years, harmoniously performed the contract in a way that reflects a particular, reasonable understanding of the terms of the contract,” that performance is relevant and admissible in a subsequent dispute over the meaning and application of the contract. The lengthy, published ruling authored by one of California’s leading appellate jurists makes an important contribution to insurance law generally, and constitutes a critical victory for Swiss Re in this long-running insurance coverage matter.
Simpson Thacher was retained by Swiss Re following an adverse trial court ruling excluding highly probative evidence that asbestos bodily injury claims against policyholder Thorpe Insulation Company are—and have always been considered by the parties to be—subject to aggregate limits. Thorpe moved in limine, prior to any meaningful discovery, to prohibit Swiss Re and other insurers from relying on decades’ worth of conduct inconsistent with Thorpe’s new claim for unlimited “non-products” coverage. The trial court granted Thorpe’s motion in full. Securing appellate review of the trial court’s ruling required petitioning for a writ of mandate, an extraordinary remedy granted in fewer than 3% of all cases statewide. This past fall the California Court of Appeal determined that Swiss Re’s petition raised a “novel and important issue of law which warrants immediate appellate review,” and voted to hear the merits of the matter. Barry Ostrager argued the case before the appellate court on behalf of Swiss Re and over a dozen other insurers before a panel that included Justice H. Walter Croskey, the author of the leading California treatise on insurance law. Justice Croskey's opinion for the court reversed the trial judge’s wholesale exclusion of course of performance evidence, and directed the trial court “to vacate its order granting the motion in limine, and enter a new and different order consistent with the views expressed in this opinion.” Under that mandate, the trial judge must admit all evidence of the parties’ dealings during the years in which Swiss Re insured Thorpe, as well as in subsequent years through the date of a claim handling and settlement agreement that governed the defense and indemnification of asbestos claims from 1984 forward.
The STB team was comprised of Barry Ostrager, Rob Pfister, Lucy Atwood, Starling Marshall, Nathan Agam and Samuel Goldberg.