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Appellant insurer sought review of an

Appellant insurer sought review of an

By: SMITH THOMPSON

Appellant insurer sought review of an order of the Superior Court of Santa Clara County (California), which granted respondent insured’s demurrer to sustain appellant’s complaint for declaratory relief as to insurance coverage on the basis of the statute of limitations.

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Overview

Appellant insurer sought review from a judgment in favor of respondent insured denying appellant’s complaint for declaratory relief as to insurance coverage on the basis of the statute of limitations, and sustained respondent’s demurrer to the complaint. Appellant was defending respondent in a pending tort action. Appellant claimed no breach had occurred to trigger the running of the limitations period. The court reversed, concluding that the underlying cause of action would have accrued upon breach of the contract of insurance, and such a breach would have occurred had appellant refused to defend the tort action. However, because appellant assumed defense of the tort action, and had continued to discharge its obligations under the policy, no breach of contract existed. In the absence of any breach, no cause of action for coercive remedy had accrued, and no statute of limitations had been set in motion.

Outcome

The court reversed the trial court’s judgment in favor of respondent insured in appellant insurer’s action for declaratory action on an insurance contract. Because appellant continued to defend respondent in a pending tort action, the running of the statute of limitation period was not triggered until a breach of that contract, which had not occurred.

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