In a reinsurance dispute, the doctrine of “invited error” prevented plaintiff, a ceding insurer, from complaining about a jury instruction given on a statute of limitations defense asserted by the defendants, two reinsurers. ( Transport Insurance Co. v. TIG Insurance Co. (2012) 202 Cal.App.4th 984)
Facts
Transport Insurance Company (Transport) issued a liability policy to Aerojet – General Corporation (Aerojet). Transport then entered into three reinsurance contracts to insure Transport against the risk of loss under the policy it issued to Aerojet. The first two reinsurance contracts were with a predecessor to TIG Insurance Company (TIG). The third reinsurance contract was with a predecessor to Seaton Insurance Company (Seaton). All three reinsurance contracts provided that losses would be paid upon receipt of “proof of loss.”
Various parties subsequently sued Aerojet for damages arising from groundwater contamination. Transport denied Aerojet’s claims for loss arising out of those actions. Aerojet then sued Transport. The coverage litigation ended in a settlement by which Transport agreed to pay Aerojet $26.6 million.
In December 1999 , Transport submitted its final billing and proofs of loss to TIG and Seaton and requested payment of over $12 million of the Aerojet settlement under the reinsurance contracts. The three insurers subsequently exchanged extensive correspondence regarding Transport’s claim. However, ultimately, TIG and Seaton did not pay any portion of Transport’s claim arising from the Aerojet settlement.
On January 26, 2006 , Transport filed suit against TIG, and on January 30, 2006 , Transport filed suit against Seaton. Both complaints contained causes of action for declaratory relief and breach of contract, based on the reinsurers’ failure to pay their proportionate share of the Aerojet settlement. In response, TIG and Seaton both asserted that Transport’s claims were barred by the four-year statute of limitations applicable to claims for breach of written contract.
The two lawsuits were consolidated and later proceeded to a jury trial. Before closing arguments, the trial court considered two different proposed special jury instructions regarding the statute of limitations. TIG submitted one instruction, and Seaton submitted the other. Transport objected to TIG’s proposed instruction, but expressed approval of Seaton’s proposed instruction. The trial court ultimately gave Seaton’s proposed instruction, which stated: “Transport’s claims against the defendants accrued after Transport submitted its claims to defendants and when (1) defendants denied the claims, or (2) a reasonable period of time elapsed after the submission of claims without a decision by defendants.”
The jury found that Transport’s claims against TIG and Seaton were barred by the four-year statute of limitations. Transport appealed, arguing that the trial court erred by including in the statute of limitations instruction language indicating that Transport’s cause of action could accrue “ a reasonable period of time … after the submission of claims without a decision by defendants.”
Holding
The Court of Appeal affirmed the judgment. However, the appellate court declined to address the substantive issues regarding the statute of limitations for a claim under a reinsurance contract. Instead, the appellate court affirmed the trial court’s judgment in favor of TIG and Seaton based on the doctrine of “invited error.” Under the doctrine of invited error, a party may not argue on appeal that the judgment should be reversed when that party has, by its own conduct, invited the commission of the error.
The appellate court found that at trial Transport had proposed or at least agreed to the special jury instruction given on the statute of limitations. The appellate court cited several sections of the trial court record to support its finding. After finding that Transport agreed to the jury instruction, the appellate court held that the doctrine of invited error barred Transport from arguing that the jury instruction was erroneous.
The appellate court also rejected Transport’s arguments that the trial court had made other instructional errors. Thus, the trial court had no duty to instruct the jury about tolling the statute of limitations because Transport did not submit a proposed jury instruction on that issue. Further, the trial court properly denied Transport’s proposed instruction regarding estoppel because Transport presented no evidence that it reasonably relied on conduct by TIG or Seaton in delaying to file suit.
Comment
California law regarding accrual of the statute of limitations on a reinsurance claim remains somewhat murky. The appellate court in this case refused to consider the substantive issues, because the appellate court found that the doctrine of invited error destroyed Transport’s ability to pursue an appeal of those issues. As such, the substantive issues will have to be resolved in future cases.