Prudential Reinsurance Co. v. Superior Court of Los Angeles County11/30/1992
SUPREME COURT OF CALIFORNIA
No. S014036
1992.CA.40140 ; 14 Cal. Rptr. 2d 749; 3 Cal. 4th 1118; 842 P.2d 48
Decided: November 30, 1992.
PRUDENTIAL REINSURANCE COMPANY, PETITIONER,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, RESPONDENT; JOHN GARAMENDI, AS INSURANCE COMMISSIONER, ETC.; REAL PARTY IN INTEREST.
Superior Court of Los Angeles County, No. C572724, Kurt J. Lewin, Judge.
Adams, Duque & Hazeltine, Robert M. Mitchell, Margaret Levy, John L. Viola, Vicki W. W. Lai, F. Christopher Chrisbens, Wilson, Elser, Moskowitz, Edelman & Dicker, Patrick M. Kelly, Thomas R. Manisero, Blanc, Gilburne, Williams & Johnston, Gary R. Klouse, John A. Kronstadt, Sidley & Austin, Peter R. Chaffetz, Janet M. Letson, Hoon Chun, Mendes & Mount, Valerie A. Gordon, LeBoeuf, Lamb, Leiby & MacRae, Sanford Kingsley, Hufstedler, Miller, Kaus & Beardsley, John P. Olson, Arnold & Porter, Daniel M. Lewis & Gary P. Poon for Petitioner.
Bryan, Cave, McPheeter & McRoberts, Martin J. Foley, Phillip E. Stano, Daniel J. Conway, Richard E. Goodman, Jack H. Blaine, Craig A. Berrington, Ronald S. Gass and John J. Nangle as Amici Curiae on behalf of Petitioner.
No appearance for Respondent.
Rubinstein & Perry, Karl L. Rubinstein, Kathleen M. McCain, Melissa S. Kooistra, Dana Carli Brooks, John K. Van de Kamp and Daniel E. Lungren, Attorneys General, Edmond B. Mamer, Jack T. Kerry and Raymond B. Jue, Deputy Attorneys General, for Real Party in Interest.
Horvitz & Levy, Ellis J. Horvitz, Barry R. Levy, Lisa Perrochet, Spiegel & McDiarmid, Richard A. Brown, Spencer L. Kimball, Cynthia S. Bogorad, Diane J. Lautrup, Jeffrey R. Babbin, Hugh Alexander and Charles E. Erdmann II as Amici Curiae on behalf of Real Party in Interest.
Opinion by Lucas, C. J., with Panelli, Arabian and Baxter, JJ., Concurring. Separate Dissenting opinion by Kennard, J., with Mosk, J., Concurring. Separate Dissenting opinion by Kline, J., with Mosk and Kennard, JJ., Concurring.)
Lucas
Insurance Code section 620 (all further statutory references are to this code unless otherwise stated) defines a reinsurance contract as "one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance." Typically, under a reinsurance contract, the primary insurer "cedes" a portion of the premiums for its policies, and the losses on those policies, to the reinsurer.
In a reinsurance transaction, policyholders pay premiums to their original insurer, who, in turn, pays a reinsurer a percentage of the initial premiums as consideration for reinsuring a specified part of the original risk. If, after a loss, the original insurer must compensate its policyholders, the reinsurer in turn indemnifies the insurer. The advantage of reinsurance is to secure to the original insurer adequate risk distribution by transferring a portion of the risk assumed to another insurer. (Semple & Hall, The Reinsurer's Liability in the Event of the Insolvency of a Ceding Property and Casualty Insurer (hereafter Semple & Hall) (1986) 21 Tort & Ins.L.J. 407 ["A reinsurance agreement is one by which the reinsurer indemnifies the ceding company for losses paid"].)
We granted review to determine as a matter of first impression whether reinsurance debts and credi
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