Petitioner insurer sought a writ of mandate after respondent Superior Court of Los Angeles County, California, granted real parties in interest insureds’ motion for a stay of the insurer’s declaratory relief action that sought a declaration that its settlements of certain lawsuits against the insureds had exhausted its policy limits and that it was therefore no longer obligated to defend the insureds in the still-pending litigation.
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The key issue to be resolved in connection with the insureds’ motion to stay was whether there were any issues to be resolved in the declaratory relief action that would overlap with issues to be resolved in the underlying action, such that proceeding on the declaratory relief action could prejudice the insureds in the trial of the underlying action. The insureds argued possible overlap of three categories of issues: (1) issues regarding the policy extension; (2) issues regarding the additional aggregate limit for contractual indemnity claims; and (3) issues regarding the insureds’ as yet unfiled counterclaim for bad faith. The court found that there were no issues in either of the first two categories that would overlap with the issues to be litigated in the underlying action, and that it was premature to consider any issues that might be raised in a bad faith counterclaim that had not yet been filed. Accordingly, the trial court erred in issuing a stay of the declaratory relief action on the basis of overlap.
The court granted the insurer’s petition and remanded the case to the trial court with directions to vacate its order staying the proceedings and to reconsider the motion for a stay.