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Qualcomm, Inc. v. Certain Underwriters at Lloyd's, London

Court of Appeal of California, Fourth Appellate District, Division One

March 25, 2008, Filed

D050433

Opinion

 [**772]  O'ROURKE, J.—In this insurance coverage dispute, plaintiff Qualcomm, Incorporated (Qualcomm), appeals from a judgment entered after the court sustained without leave to amend the demurrer of defendant Certain Underwriters at Lloyd's, London (Underwriters), to Qualcomm's complaint for declaratory relief and breach of contract. Underwriters, which had issued an excess director and officer insurance policy to Qualcomm, refused to pay under that policy after Qualcomm settled a coverage dispute with its primary  [*188]  insurer for an amount less than the primary insurer's policy limit and released its primary insurer. In its complaint, Qualcomm sought a judicial declaration that Underwriters was obligated to indemnify Qualcomm for unreimbursed litigation defense expenses and settlement costs  [***2] incurred by Qualcomm in excess of the primary policy limit. In sustaining Underwriters's demurrer, the trial court ruled excess coverage had not been triggered as a matter of law and Qualcomm's causes of action failed in part under a provision requiring Qualcomm to maintain the primary policy, in view of the complaint's allegations that Qualcomm had settled with the primary insurer in exchange for a release.

On appeal, Qualcomm asks us to hold that when an insured settles with its primary insurer for an amount below the primary policy limits but absorbs the resulting gap between the settlement amount and the primary policy limit, primary coverage should be deemed exhausted and excess coverage triggered, obligating the excess insurer to provide coverage under its policy. It maintains this result does not require the excess carrier to pay any more than it would pay had the primary insurer paid its full policy limits, and furthers public policy of encouraging civil settlements. We decline to reach a broad holding based on public policy considerations, and instead conclude that the literal policy language in this case governs. Our interpretation of the excess policy compels  [**773]  us to conclude  [***3] that Underwriters's coverage obligation did not arise because Qualcomm's pleadings establish the primary insurer neither paid the “full amount” of its liability limit nor had it become legally obligated to pay the full amount of the primary liability limit in the parties' settlement agreement. We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND 1

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161 Cal. App. 4th 184 *; 73 Cal. Rptr. 3d 770 **; 2008 Cal. App. LEXIS 394 ***

QUALCOMM, INCORPORATED, Plaintiff and Appellant, v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, Defendant and Respondent.

Subsequent History: Review denied by Qualcomm, Inc. v. Certain Underwriters at Lloyds, 2008 Cal. LEXIS 6969 (Cal., June 11, 2008)

Prior History:  [***1] Superior Court of San Diego County, No. GIC873829, Jay M. Bloom, Judge.

Disposition: Affirmed.

CORE TERMS

insured, settlement, exhausted, excess policy, coverage, primary insurer, ambiguous, limits, full amount, limitation of liability, policy language, primary policy, insurance policy, parties, primary insurance, liable to pay, excess insurer, excess coverage, demurrer, circumstances, obligations, cases, excess carrier, trial court, unambiguous, attach, authorities, Indemnity, declaratory relief action, underlying policy

Civil Procedure, Responses, Defenses, Demurrers & Objections, Demurrers, Appeals, Standards of Review, General Overview, Contracts Law, Contract Interpretation, Insurance Law, Policy Interpretation, Reasonable Expectations, Ambiguous Terms, Claim, Contract & Practice Issues, Judicial Review, Types of Insurance, Excess Insurance, Unambiguous Terms, Obligations, Indemnification Obligations