California Supreme Court Clarifies Pleading Standards for Excess Policy Claims

The California Supreme Court clarified that a policyholder must show a reasonable likelihood that potential liability will reach excess coverage to assert declaratory relief under an excess policy. In Fox Paine & Co., LLC v. Twin City Fire Ins. Co., the court rejected a requirement that underlying limits be exhausted first. It also said a bad-faith claim may be pleaded if the insured alleges that excess coverage will attach, or would have attached absent bad faith, and that the insurer impaired recovery of benefits owed.