Recent California Court of Appeal decision suggests insured should consider answering and cross-complaining before moving to stay insurer’s declaratory relief action
When a liability insurer wishes to avoid all coverage obligations with respect to a claim against its insured, it may seek an adjudication that it has no duty to defend or indemnify the policyholder. If the insurer files for such declaratory relief while the underlying litigation is still pending, California insureds will frequently move to stay the coverage action, pursuant to Montrose Chemical Corp. v. Superior Court, 6 Cal. 4th 287 (1993) ("Montrose I"). The purpose of such a Montrose stay is to avoid the risk of prejudice to the insured in the underlying action, if it is simultaneously forced to litigate an insurance coverage dispute.