A recent decision issued by the California Court of Appeal, Second Appellate District, analyzed under what circumstances a liability insurer’s declaratory relief action seeking to withdraw from the duty to defend an underlying lawsuit may be stayed – or allowed to proceed.

In Great American Insurance Company v. Superior Court (Angeles Chemical Company, Inc.), issued October 9, 2009, the appellate court remanded the case back down to the trial court to re-evaluate whether the trial court had properly stayed the insurer’s declaratory relief action. In so doing, and in a case where there was no overlapping factual issues between the underlying action and the declaratory relief coverage action, the trial court was directed to exercise its discretion and balance the potential prejudice to both the insured and the insurer.