California Supreme Court Watch

#24-232 Fox Paine & Co., LLC v. Twin City Fire Ins. Co., S287404.  (A168803; 104 Cal.App.5th 1034; San Francisco County Superior Court; CGC17557275.)  Petition for review after the Court of Appeal affirmed judgments in a civil action.  This case presents the following issues:  (1) Where an insurance policyholder alleges loss sufficient to reach an excess policy, but that insurer’s obligation to pay is not yet triggered because underlying layers are not yet exhausted, may the policyholder nevertheless seek declaratory relief against the insurer?  (2) Can a policyholder ever state a claim against an excess insurer for “bad faith” conduct if the underlying policy layers are not yet exhausted?

Petition for review granted: 12/11/2024

Case fully briefed: 9/08/2025

Cause argued and submitted: 5/06/2026

Opinion filed: Judgment reversed: 7/27/2026

See the Court of Appeal Opinion.

See the Oral Argument.

See the California Supreme Court Opinion.  (Fox Paine & Co., LLC v. Twin City Fire Ins. Co. (2026) __ Cal.5th __.)

“In this case, we consider whether claims for declaratory relief and breach of the implied covenant of good faith and fair dealing brought by alleged insureds (hereinafter referred to as insureds) against excess insurers are susceptible to demurrer on the ground that the insureds could not allege prior exhaustion of all of the insurance coverage underlying the excess insurers’ policies. We conclude that the absence of exhaustion is not fatal to these claims.

…

[A]n insured may state a viable cause of action for declaratory relief regarding coverage and liability under an excess insurance policy even if all of the underlying insurance coverage has not yet been exhausted. While insureds in this position must adequately plead their covered losses, the relevant principles governing the availability of declaratory relief do not support a strict rule that would withhold this relief whenever exhaustion has not also been alleged. We also hold that an insured suing an excess insurer for tortious breach of the implied covenant of good faith and fair dealing does not have to allege the prior exhaustion of all underlying insurance. It is sufficient to allege facts that, taken as true, show that coverage under an excess policy will attach, and that the insurer’s misconduct has impaired the insured’s recovery of benefits owed to it under the policy.

In light of these holdings, we reverse the judgment of the Court of Appeal and remand the cause to that court for further proceedings consistent with this opinion.”

Chief Justice Guerrero authored the opinion of the Court, in which Justices Liu, Kruger, Groban, Evans, DeSantos,* and Feinberg** concurred.