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Woodliff tendered payment of his judgment against LMI to CIGA. Both motions raised the same legal issue: Did Woodliff's claim fall within the statutory exclusion found in section 1063.2, subdivision (h)? Rptr.2d 405].)“ ‘Since “covered claims” are not coextensive with an insolvent insurer's obligations under its policies, CIGA cannot and does not “ ‘stand in the shoes' of the insolvent insurer for all purposes.” [Citation.] Indeed, CIGA is “expressly forbidden” to do so except where the claim at issue is a “covered claim.” [Citation.] It necessarily follows that CIGA's first duty is to determine whether a claim placed before it is a “covered claim.” ’ [Citation.]” (Industrial Indemnity Co. Based on its interpretation of the phrase “loss adjustment expense,” the majority concludes that section 1063.2 has no application to this case.
Insofar as is relevant to this appeal, the trial court ruled in favor of CIGA as follows:“The sole issue in dispute is the interpretation of Ins. As a statutory entity, CIGA's duties are expressly defined by the Insurance Code. But it is section 1063.2, subdivision (a), which appellant cites and relies on for the proposition that CIGA has a duty to pay the judgment.
The Insurance Code defines ‘covered claims' and specifically excludes certain obligations for which the insolvent insurer would otherwise be liable. Code 1063.2(h) excludes loss adjustment expenses, including attorneys' fees. I agree with appellant that section 1063.2 is the authority that controls the outcome of this case.
In 1981, the statutory language was amended, deleting the words ‘adjustment expense and attorneys' fees incurred by the insolvent insurer’ and inserting the language ‘any loss adjustment expense, court costs, interest and bond premiums incurred.’“Covered claims are not co-extensive with an insolvent insurer's obligations under its policies. I must admit I am at a loss to understand why the majority concludes that section 1063.2 has no application to the case.
Code 1063.2(h), Defendant's Motion for Summary Judgment is granted.”This appeal by Woodliff follows. Woodliff's Claim Is a “Covered Claim” Within the Meaning of Statutory Law The Courts of Appeal have summarized the history of CIGA and its general principles as follows:“CIGA was created in 1969 as a compulsory association of state-regulated insurance companies. (a).) Its purpose is ‘to provide insurance against loss arising from the failure of an insolvent insurer to discharge its obligations under its insurance policies.’ [Citation.] CIGA assesses its members when another member becomes insolvent, thereby establishing a fund from which insureds whose insurers become insolvent can obtain financial and legal assistance.
[Citation.] Member insurers then recoup assessments paid to CIGA by means of a surcharge on premiums to their policy holders. (a).) In this way the insolvency of one insurer does not impact a small segment of insurance consumers, but is spread throughout the insurance consuming public, which in effect subsidizes CIGA's continued operation.
He alleged LMI “refused without good cause to provide coverage and a defense to [him] despite the existence of facts indicating potential coverage.” The third, for negligent infliction of emotional distress, alleged Woodliff suffered foreseeable emotional distress because of LMI's failure to defend. It provides, in pertinent part: “ ‘Covered claims' means the obligations of an insolvent insurer, including [those] (i) imposed by law and within the coverage of an insurance policy of the insolvent insurer.” (See also California Ins. But I do not agree with the conclusion that the phrase can refer only to attorney fees and costs when they are incurred by the carrier. But it is section 1063.2 that delineates the duties CIGA must provide when a claim falls within section 1063.1. After the phrase “loss adjustment expenses, including adjustment fees and expenses,” subdivision (h) lists “attorney fees and expenses [and] court costs.”“We begin with the fundamental rule that a court ‘should ascertain the intent of the Legislature so as to effectuate the purpose of the law.’ [Citation.] In determining such intent ‘[t]he court turns first to the words themselves for the answer.’ [Citation.] We are required to give effect to statutes ‘according to the usual, ordinary import of the language employed in framing them.’ [Citations.] ‘If possible, significance should be given to every word, phrase, sentence and part of an act in pursuance of the legislative purpose.’ [Citations.] ‘When used in a statute [words] must be construed in context, keeping in mind the nature and obvious purpose of the statute where they appear.’ [Citations.] Moreover, the various parts of a statutory enactment must be harmonized by considering the particular clause or section in the context of the statutory framework as a whole. Subdivision (c) of section 1063.1 enumerates many separate categories of claims clearly within the coverage of an insurance policy of an insolvent insurer but which nevertheless are not “covered claims.” None of these categories is applicable to this case.6. the type of expense CIGA can or cannot pay), thereby fostering abuse, collusion, coercion, and fraud.” (Fn. Pursuant to Government Code section 68081, we requested and received supplemental letter briefs on this issue.14. On this latter theory, the insurer could be liable for tort damages not embraced in the breach of contract action such as compensation for emotional distress and punitive damages. In 1994, he purchased a commercial property liability insurance policy from LMI Insurance Company (LMI). There, in regard to the requirement that a “covered claim” be “imposed by law,” we held: “ ‘A judgment is the final determination of the rights of the parties in an action or proceeding’ (Code Civ. However, realistically such a conclusion is not acceptable. In 2000, before satisfying the judgment, LMI declared insolvency and a liquidator was appointed. The policy was in effect in 1995 when two actions were brought against Woodliff for violation of the federal Fair Housing Act. Proc., § 577), and the phrase ‘imposed by law’ squarely denominates a judgment․ [¶] ․ [B]y excluding from the primary definition of covered claims a default or stipulated judgment against the insolvent insurer, the Legislature necessarily determined that a judgment obtained in an adversary setting would constitute an obligation imposed by law.” (Aloha Pacific, Inc. A cardinal rule of statutory construction is that a literal meaning of a statute may be disregarded to avoid an absurd result. Woodliff tendered his judgment to CIGA which denied the tender. All further references will be to the Insurance Code unless otherwise noted.2. Law360 provides the intelligence you need to remain an expert and beat the competition. CIGA contended, and the trial court agreed, that it had no obligation to pay based upon subdivision (h) of Insurance Code section 1063.2. Other creditors of the insurance companies, such as attorneys, have an ongoing relationship with the company and can presumably judge its financial position. 697.) The Ohio Court of Appeals reached a similar conclusion in Ohio Ins. CIGA next points to a 1981 amendment of subdivision (h) of section 1063.2. First, the language “incurred by the insolvent insurer” was deleted. 4614.) As so amended, the provision now reads (as set forth earlier in this opinion): “ ‘Covered claims' shall not include any loss adjustment expenses, including adjustment fees and expenses, attorney fees and expenses, court costs, interest, and bond premiums, incurred prior to the appointment of a liquidator.”From this CIGA argues: “[T]he Legislature clearly expressed an intent to exclude from CIGA's obligations any pre-liquidation attorneys' fees and costs regardless of who incurred them (the insolvent insurer, the insured, or anyone else).” We are not persuaded. omitted.) Our conclusion is fortified by applying a venerable principle of statutory construction. The first step is to determine whether the proffered claim is a “covered claim” as defined by section 1063.1, subdivision (c)(1). CIGA relied upon the provision, now found in subdivision (g) of section 1063.2 that a “covered claim” does “not include any judgments against or obligations or liabilities of the insolvent insurer ․ resulting from alleged or proven torts.” The Court of Appeal rejected this argument.
Because we conclude the exclusion in section 1063.2, subdivision (h) does not apply, CIGA is obligated to pay the insured's claim since, as conceded by CIGA, the insured's judgment otherwise falls within the statutory definition of a “covered claim.” We therefore reverse the judgment. Thus the reading of the pertinent portion of subdivision (c)(1) would be: the obligations of an insolvent insurer within the risks of loss protected against by an insurance policy of the insolvent insurer.” (Aloha Pacific, Inc. The dissent's response to our analysis is that a literal reading of section 1063.2 subdivision (h) requires rejection of Woodliff's argument. Superior Court (1991) 53 Cal.3d 1082, 1098, 282 Cal. Requiring CIGA to pay Woodliff's claim is consistent with CIGA's objective to protect against a “ ‘loss arising from the failure of an insolvent insurer to discharge its obligations under its insurance policies.’ [Citation.]” (Biggs v. As a result, Woodliff personally incurred attorney fees and costs to defend the claim.