June 5, 2020

June 04, 2020

Subscribe to Latest Legal News and Analysis

June 03, 2020

Subscribe to Latest Legal News and Analysis

June 02, 2020

Subscribe to Latest Legal News and Analysis

9th Circuit Holds Insurer May Defend Suspended Corporation

An insurer of a suspended corporation has an incentive to defend the corporation because it may be liable to a judgment creditor that obtains a default judgment against the insured suspended corporate. See Cal. Ins. Code § 11580(b)(2).  However, can the insurer defend a corporation that is suspended? 

The Ninth Circuit Court of Appeals recently held that California law permits an insurer to intervene in its own name to defend an insured suspended corporate.  Travelers Prop. Cas. Co. of Am. v. Liberty Surplus Ins. Corp., 2020 U.S. App. LEXIS 7847.  

Suspension may occur under Revenue & Taxation Code Section 23301 and/or Corporations Code Section 2205  As to the former, the Court of Appeals noted that while California law imposes criminal liability on "[a]ny person who attempts or purports to exercise the powers, rights, and privileges of a corporation that has been suspended pursuant to Section 23301", the statute expressly says that "[n]othing in this section shall create or limit any obligation upon an insurer to defend a suspended corporation."  See Insurance And The Suspended Corporation.  As to the latter, the Court could find no case that expressly prohibits an insurance company from intervening in a lawsuit to protect an insured suspended under Cal. Corp. Code § 2205. 

The case is unpublished and is not precedent except as provided by Ninth Circuit Rule 36-3.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP


About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...