Roman Catholic Bishop of Oakland v. Travelers Casualty & Surety Company, et al.

Background

The Roman Catholic Bishop of Oakland brought related insurance-coverage disputes against various insurers. The disputes arise from hundreds of claims alleging that certain clergy members engaged in sexual misconduct and that the Bishop is legally responsible for resulting harm. The Bishop seeks a declaration about the insurers’ obligations to indemnify it and alleges that the insurers acted in bad faith by reserving the right to deny indemnification.

Certain excess and umbrella insurers moved to dismiss claims in the Sixth Amended Complaint. The court ruled on motions identified as Docket Nos. 287, 288, 291, 292, 293, 294, 305, and 306 after written submissions and oral argument on September 10, 2026.

Declaratory-relief claims

The insurers argued that the declaratory-relief claims should be dismissed because there was no actual legal dispute and because the Bishop had not exhausted the underlying insurance policies. The court denied those motions.

The court found an actual controversy because none of the insurers had unequivocally agreed to provide coverage, and each had reserved the right to deny coverage or seek reimbursement. The Bishop contended that each insurer had an indemnification obligation without exception, while the insurers disagreed.

The court also relied on the California Supreme Court’s 2026 decision in Fox Paine & Co., LLC v. Twin City Fire Insurance Co. That decision held that an insured need not allege exhaustion of all underlying insurance to bring a timely declaratory-judgment claim against excess insurers. Instead, the allegations must plausibly show that excess coverage will attach and that the insurer’s misconduct impaired the insured’s recovery of benefits.

The court held that the Bishop met that pleading standard. It cited a $16 million jury verdict in the first case against the Bishop to go to trial, allegations that the Bishop had settled 52 clergy-sexual-abuse claims during the previous 20 years for an average of more than $1 million per settlement, and other large verdicts identified in the complaint. The court concluded that these allegations plausibly supported an inference that excess coverage was reasonably likely to be reached for the claimants at issue.

Bad-faith claim

The Bishop’s 28th cause of action alleged that all insurers breached the implied covenant of good faith and fair dealing. The claim was based on a settlement demand within policy limits that the Unsecured Creditors’ Committee sent to each insurer and on the insurers’ alleged failure to respond in good faith.

The court concluded that this type of bad-faith claim is not ripe—meaning not ready for judicial decision—until there is a judgment against the insured, unless the insured proceeds under the alternative theory described in the applicable California model jury instruction. The instruction requires proof of an excess judgment or that the insurer’s failure to accept the settlement demand substantially caused the insured’s harm.

The court held that the claim was ripe only as to the Woodall matter because a jury had entered a $16 million verdict against the Bishop there. No verdict had been entered in the other matters. The court distinguished Fox Paine because the Bishop was not proceeding under the theory addressed in that decision.

Disposition

The court granted the motions to dismiss the 28th cause of action for bad faith as to all insurers and claimants except the insurers involved in the Woodall matter. The dismissal was without prejudice to renewal when the bad-faith refusal-to-settle claims become ripe. The court denied California Insurance Guaranty’s motion without prejudice to discussing the issue with the Bishop. The court scheduled a further case-management conference for October 7, 2026, and stated that the order disposed of the listed motions.