Forum-Shopping Insurance Companies' Latest Tricks

by Nossaman LLP

Daily Journal

Decades ago, insurance companies tried to persuade trial courts in California to apply the law of some other state to multi-party environmental and asbestos insurance coverage disputes because the insurance companies believed that the other state's substantive law could lead to a more favorable outcome. The policyholders would oppose such maneuvers, and the trial courts typically decided in such cases to apply California law. Such challenges to forum law by insurers took place in many jurisdictions.

Fast forward to the present. An insurance company and a policyholder are in coverage litigation over a new asbestos or environmental lawsuit in California. The insurance company argues that, 20 years ago, the policyholder and the insurer were in coverage litigation in a forum other than California (Massachusetts, for example) involving the same insurance policies. In that earlier coverage litigation the insurer moved to have a different state's substantive law applied to the coverage dispute (New York or Connecticut, for example). The insurance company further argues in the present case that the policyholder successfully opposed the motion in the earlier coverage litigation. Let us assume the insurance company believes Massachusetts law favors the insurer on a key issue, and California law does not. Insurers have under these circumstances argued that collateral estoppel mandates that the court in California apply Massachusetts law to the present California coverage litigation.

But collateral estoppel has no place in a choice-of-law analysis, especially when applied to a comprehensive general liability policy that covers risks throughout the U.S.; interpreting identical language in an insurance policy can vary from state to state depending on the public policy of the particular state where the claim is made. Downey Venture v. LMI Ins., 66 Cal. App 4th 478, 514 (1998) ("A liability insurance policy issued on a nationwide basis may be construed in accordance with the law of the jurisdiction in which a particular claim arises").

Insurance company collateral estoppel arguments in a choice-of-law context should be rejected because the factual circumstances and legal standards applied in a choice-of-law analysis necessarily differ from case to case and state to state, and the issues presented are not "identical." See, e.g., Bleeck v. State Bd. of Optometry, 18 Cal. App. 3d 415, 428 (1971); Don King Productions Inc. v. Douglas, 742 F. Supp. 741, 751 n.7 (S.D.N.Y. 1990) (rejecting the "peculiar form of collateral estoppel" which is employed to export choice-of-law determinations of one forum (presumably predicated on the rendering forum's choice-of-law rules) to another forum that would otherwise adhere to its own choice-of-law rules in making its selection of governing law); see also Rimkus Consulting Group Inc. v. Commarata, 257 F.R.D. 127, 138 (S.D. Tex. 2009); Maryland Cas. Co. v. W.R. Grace & CoConn., 1991 U.S. Dist. Lexis 15354 (S.D.N.Y. Oct. 24, 1991); Dracos v. Hellenic Lines Ltd., 762 F. 2d 348, 353-54 (4th Cir. 1985).

Collateral estoppel cannot be used to bind a California litigant to a principle of law adopted in a prior foreign court litigation that is contrary to California law. See American Continental Ins. Co. v. American Casualty Co., 86 Cal. App. 4th 929, 942-46 (2001); see also Wimsatt v. Beverly Hills Weight Loss Clinics Int'l., 32 Cal. App. 4th 1511, 1520-21 (1995) (forum selection clause will not be enforced if it results in a choice of law that circumvents California law). In Application Group Inc. v. Hunter Group Inc., 61 Cal. App. 4th 881, 887 n.3 (1998), the court declined to give collateral estoppel effect in a California case to a prior determination that Maryland law applied. The court held that "even if it did decide that Maryland law determines the enforceability of Hunter's covenant not to compete in all circumstances, the court's ruling on the choice-of-laws issue was not essential to the judgment in favor of Pike and AGI and, thus, need not be given issue preclusive (collateral estoppel) effect." The court cited to the requirement that an issue be necessarily decided in the final decision on the merits.

Courts outside of California have applied the same rationale for denying collateral estoppel effect to choice-of-law rulings. See, e.g., In re DES Lit., 7 F.3d 20, 23 (2d Cir. 1993) (choice-of-law ruling by district court not given collateral estoppel effect because "relitigation of an issue in a second action is precluded only if 'the judgment in the prior action was dependent upon the determination made of the issue'"); Lewis v. Horace Mann Ins. Co., 410 F. Supp. 2d 640, 653 (2005) (res judicata does not apply to choice-of-law determination because case was subsequently dismissed and choice-of-law ruling was thus "an interlocutory order since it did not completely dispose of the cause by adjudicating the rights and liabilities of the parties").

Finally, the elements of collateral estoppel present a hurdle that the insurance companies should not be able to clear if the court applies each element:

1. The issue is identical to an issue decided in a prior proceeding;
2. The issue was actually litigated;
3. The issue was necessarily decided;
4. The decision in the prior proceeding is final and on the merits;
5. The party against whom collateral estoppel is asserted was a party to the prior proceeding or in privity with a party to the prior proceeding.

Lucido v. Superior Court, 51 Cal. 3d 335, 341 (1990). If the issue decided in the prior adjudication was not identical to the issue in the current action, collateral estoppel, does not apply. Bleeck at 428; Bridgeford v. Pacific Health Corp., 202 Cal. App. 4th 1034, 1042 (2012) ("identical issue" requirement is whether "identical factual allegations" are at stake in the two proceedings, not whether the ultimate issues or dispositions are the same).

Coverage counsel for insurance companies will continue to try to persuade trial courts to apply the law of a foreign jurisdiction if the substantive law on insurance in the forum in which they have been sued by a policyholder is unfavorable on key issues. Collateral estoppel should not be applied when doing so abandons California's choice-of-law principles and public policy.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Nossaman LLP | Attorney Advertising

Written by:

Nossaman LLP

Nossaman LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.