Ringler Associates Inc. v. Maryland Casualty Co.

of defamatory material whose first publication took place before June 4, 1990.

Ringler was one of several other firms named as a defendant in two related lawsuits filed in San Francisco Superior Court: Weil Insurance Agency, Inc. v. Manufacturers Life Ins. Co. (Super. Ct. S.F. City and County, 1990, No. 920327) (Weil), and Legal Economic Evaluations, Inc. v. Metropolitan Life Ins. Co. (Super. Ct. S.F. City and County, 1990, No. 928624) (Legal Evaluations). The predecessor of the Legal Evaluations case, arising out of the same underlying facts, was originally filed in Santa Clara County on April 27, 1989, over a year before the inception of the Policy on June 4, 1990. The Weil case was filed on June 7, 1990, just three days after the inception of the Policy; the Legal Evaluations lawsuit was subsequently filed in San Francisco Superior Court on February 6, 1991. The cases were vigorously litigated and ultimately decided by the California Supreme Court. (Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257 [ 41 Cal.Rptr.2d 220 , 895 P.2d 56 ].)

Both the Weil and Legal Evaluations actions concerned “certain acts perpetrated ... in connection with the sale of annuities used to fund ‘structured settlements’ of personal injury claims.” The plaintiffs described themselves as corporations engaged in the business of providing consulting and annuity brokerage services in connection with such annuity-funded structured settlements. The lawsuits targeted life insurers that sold annuities to liability insurers to fund structured settlements, as well as brokers—such as Ringler—that arranged for the sale of annuities and provided consulting services to liability carriers in the negotiation of settlements.

Specifically, the underlying lawsuits alleged that in order artificially to depress the cost of structured settlements, various named defendants, including Ringler, conspired to boycott and injure the plaintiffs through various alleged practices, including the publication and dissemination of false, disparaging, defamatory and derogatory statements about the plaintiffs and their

services. These alleged defamatory statements included, among other things, that the plaintiffs were unprofessional and conducted their business contrary to lawful industry standards, and injury victims and their attorneys doing business with the plaintiffs would forfeit the available tax exemption applicable to structured settlement proceeds. The Weil complaint specifically alleged that beginning “in the early 1980’s” the defendants conspired to prohibit brokers from providing “critical information” to victims, to boycott any broker who provided such information or consulting services to injury victims, and to defame and disparage any brokers (allegedly including the plaintiffs) who provided such services to injury victims; all the named defendants had joined the conspiracy “[a]t least by 1986”; and in late 1987 and early 1988, Ringler itself specifically schemed with annuity sellers to disparage the plaintiffs. The Weil complaint alleged various specific acts in furtherance of the defendants’ conspiracy, occurring on various occasions between May 1985 and June 1988. Identical allegations were made in the Legal Evaluations complaint. Notably, both the Weil and the Legal Evaluations complaints made only broad, generalized allegations that Ringler and the other defendants had made defamations disparaging the respective plaintiffs’ businesses in specified ways. Neither complaint actually set out any alleged defamatory statements verbatim or with specificity.

Ringler tendered the defense of the Weil action to respondents in June 1990, the same month it was filed. Respondents promptly agreed to contribute pro rata to Ringler’s defense, along with Ringler’s prior insurers. In April 1991, Ringler tendered the defense of the Legal Evaluations action, even though the complaint had not yet been served and Ringler conceded that “[tjhere is presently no need for a defense.” In December 1991, when respondents’ claims adjuster contacted Ringler’s counsel, the Legal Evaluations action still had not been served. After respondents’ claims adjuster told Ringler’s attorney that the plaintiffs’ counsel in the Weil and Legal Evaluations cases had stated that there were “several incidents of slander” at issue, Ringler’s attorney told the claims adjuster to “stop talking with” the plaintiffs’ attorney about the nature and extent of the allegations in the case.

In July 1992, respondents again asked Ringler’s counsel for a status report on the Weil and Legal Evaluations actions “in order to properly evaluate coverage,” and specifically inquired whether the Legal Evaluations action had yet been served. Respondents also advised Ringler that “[rjeview of the complaint reveal[s] that there are allegations that are not covered under the [Pjolicy,” and “[ajny defense of this action will be done . . . under a strict reservation of rights.” By letter dated August 31, 1992, respondents sent Ringler’s counsel a letter formally reserving respondents’ rights with respect

interpretation of deposition testimony from the underlying Weil and Legal Evaluations lawsuits. Ringler’s counsel argued that the first-publication exclusion must be “read narrowly to exclude coverage only for verbatim ‘republications,’ and not to exclude similar remarks made in different contexts at different times.” In support of Ringler’s further assertions that “the exclusion is not applicable” because “it cannot presently be ascertained what specific remarks were made and when,” and “[t]here is simply no testimony that says definitively that all of the alleged defamation took place prior” to the inception of the Policy, Ringler’s attorney cited deposition testimony by personnel of the Weil and Legal Evaluations plaintiffs to the effect that Ringler’s alleged defamations “all ran together” so they “couldn’t really differentiate” between them, and “[t]here may have been other acts” of defamation occurring after 1988, even though they “don’t recall any other such acts.”

In response, respondents’ attorney again pointed out there was no evidence of defamation occurring during the Policy period, and rejected Ringler’s assertion that a hypothetical “ ‘potential’ for defamatory remarks” of which there was no actual evidence could create a duty either to defend or to indemnify on the part of the insurers. In subsequent letters, Ringler’s attorney continued to argue that because neither the Weil nor the Legal Evaluations plaintiffs had specified the exact dates of Ringler’s allegedly “on-going course of defamation,” “the evidence discovered thus far does not conclusively preclude the possibility that the plaintiffs will seek to hold Ringler liable for allegedly defamatory remarks made during the [Policy] period,” and respondents therefore continued to bear the duty to defend Ringler in the underlying lawsuits. Aside from asserting the abstract possibility that, despite their actual failure to make any such specific allegation, the Weil and Legal Evaluations plaintiffs theoretically might claim Ringler continued to slander them after June 4, 1990, Ringler’s attorneys never cited any facts suggesting that the hypothetical post-1990 defamations differed in any way from those alleged to have been made before 1990.

In May 1996, Ringler demanded that respondents participate in a settlement of the underlying litigation in the aggregate amount of $1.65 million. Asserting that “[o]ther insurers have agreed to contribute on behalf of . . . Ringler ... in varying amounts, but we are short $250,000 in funds in order to complete this settlement,” Ringler’s attorney demanded that respondents pay that sum toward the settlement. Respondents promptly declined, citing additional evidence elicited in discovery to the effect that all of the underlying plaintiffs’ actual or potential claims of defamation occurred outside the Policy period, and moreover constituted continuing defamations arising out of republication of material whose first publication took place before the

beginning of the Policy period on June 4, 1990. As such, respondents contended that coverage was barred by the first-publication exclusion. Ringler ultimately contributed $260,000 to settle the underlying actions.

Ringler filed suit against respondents on December 26, 1996, alleging breach of contract and breach of the covenant of good faith and fair dealing. Both parties filed competing motions for summary judgment. After extensive briefing and oral argument, the trial court determined there was no triable issue of material fact and that respondents were entitled to judgment as a matter of law. The trial court found that the first-publication exclusion “bars any potential coverage for the defamation claims asserted in the underlying [Weil and Legal Evaluations] actions against Ringler,” based on the pleadings, declarations and undisputed evidence establishing that the defamation alleged in the Weil and Legal Evaluations actions “arose out of oral publication of material whose first publication took place before June 4, 1990,” when respondents’ Policy began. “Therefore, [respondents] had no duty to defend or indemnify Ringler with respect to the Weil and [Legal Evaluations] actions, nor [were respondents] required to participate in settlement of the Weil and [Legal Evaluations] actions, as a matter of law. Because [respondents] had no obligation to defend or indemnify Ringler or to participate in settlement of the underlying Weil or [Legal Evaluations] actions, [respondents] also cannot be held liable to Ringler on its bad-faith theory, as a matter of law.” On this basis, the trial court entered judgment in favor of respondents and against Ringler. This appeal timely followed.

Extent and Application of First-publication Exclusion

Although both the Weil and Legal Evaluations complaints made numerous allegations against Ringler of antitrust violations, illegal boycott, discrimination, unfair competition, unjust enrichment, and interference with contract and prospective business advantage, none of these claims are at issue in this case. Only the underlying lawsuits’ ancillary claims of defamation potentially fell within the Policy’s “personal” or “advertising” injury coverage. Thus, the central and ultimately controlling issue of this case is whether the trial court erred in finding that the first-publication exclusion barred any potential coverage for the defamation claims in the underlying lawsuits against Ringler. The interpretation of the first-publication exclusion in insurance contracts appears to be a question of first impression in California.

The specific Policy language at issue excludes from coverage any “personal” or “advertising” injury “[a]rising out of oral or written publication of material whose first publication took place before the beginning of the policy period . . . .” (Italics added.) Both parties agree that this exclusion is

applicable to certain claims of defamation. They disagree on the limits or scope of the exclusion with respect to particular kinds of defamatory claims; specifically, the precise nature or description of the kinds of defamatory statements which would be excluded from coverage because they constitute republications of “material” that was first published before the beginning of the Policy period.

Ringler urges that because the terms “material” and “first publication” are not defined in the Policy, the language of this exclusion is ambiguous and unclear, and must therefore be strictly and “narrowly” construed against the insurers’ interest “to exclude coverage only for ‘identical republications’ of slanderous ‘material’ (meaning identical or substantially identical oral utterances) by the same person.” (Fn. omitted.) Respondents counter that the first-publication exclusion is not ambiguous, and that it applies to the content or substance of a defamatory publication rather than its form or the particular set of words used. Instead of limiting the exclusion to very specific defamatory statements that have been repeated verbatim in “identical” words or phrases “by the same person,” respondents construe the exclusion as applying more broadly to republication of any identifiably defamatory “material,” a term that encompasses any particular defamatory idea, claim, charge, assertion, contention, accusation, or allegation, without regard to whether the defamation is restated in precisely the same words.

Clearly, any useful interpretation of the exclusionary language necessarily turns on the meaning of the word “material.” We therefore turn to the question of how this word should be construed in the context of the law of defamation.

Applicable Principles of Defamation Law

Defamation is an invasion of the interest in reputation. The tort involves the intentional publication of a statement of fact which is false, unprivileged, and has a natural tendency to injure or which causes special damage. (Smith v. Maldonado (1999) 72 Cal.App.4th 637 , 645 [ 85 Cal.Rptr.2d 397 ]; Civ. Code, §§ 45, 46; 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts § 471, pp. 557-558.) Publication, which may be written or oral, is defined as a communication to some third person who understands both the defamatory meaning of the statement and its application to the person to whom reference is made. Publication need not be to the public or a large group; communication to a single individual is sufficient. (Cunningham v. Simpson (1969) 1 Cal.3d 301 , 306 [ 81 Cal.Rptr. 855 , 461 P.2d 39 ]; 5 Witkin, Summary of Cal. Law, supra, Torts, §§ 471, 476, pp. 557-558, 560-561.)

truth of every word of the allegedly defamatory matter. It is sufficient if the substance of the charge is proven true, irrespective of slight inaccuracy in the details, “so long as the imputation is substantially true so as to justify the ‘gist or sting’ of the remark.” (Campanelli v. Regents of University of California, supra, 44 Cal.App.4th at pp. 581-582; see also Smith v. Maldonado, supra, 72 Cal.App.4th at pp. 646-647; Gantry Constr. Co. v. American Pipe & Constr. Co. (1975) 49 Cal.App.3d 186 , 194 [ 122 Cal.Rptr. 834 ]; Rest.2d Torts, § 581A, com. f, pp. 236-237; 5 Witkin, Summary of Cal. Law, supra, Torts, § 495, pp. 583-584.)

It is an essential element of defamation that the publication be of a false statement of fact rather than opinion. (Gertz v. Robert Welch, Inc. (1974) 418 U.S. 323 , 339-340 [ 94 S.Ct. 2997 , 3006-3007, 41 L.Ed.2d 789 ]; Gregory v. McDonnell Douglas Corp. (1976) 17 Cal.3d 596 , 600 [ 131 Cal.Rptr. 641 , 552 P.2d 425 ]; Campanelli v. Regents of University of California, supra, 44 Cal.App.4th at p. 578.) Nevertheless, a statement of opinion may be actionable “ ‘. . . if it implies the allegation of undisclosed defamatory facts as the basis for the opinion.’ ” (Okun v. Superior Court (1981) 29 Cal.3d 442 , 451-452 [ 175 Cal.Rptr. 157 , 629 P.2d 1369 ].) Thus, there is no wholesale defamation exemption for anything that might be labeled an opinion. If a statement of opinion implies a knowledge of facts which may lead to a defamatory conclusion, the implied facts must themselves be true. Even if the publisher of the opinion states the facts upon which he or she bases this opinion, if those facts are either incorrect or incomplete, or if the person’s assessment of them is erroneous, the statement of opinion may still imply a false assertion of fact. Simply couching such statements in terms of opinion does not dispel these implications, and such statements may be actionable. In such a case, the dispositive question is whether a reasonable factfinder could conclude the published statements imply an assertion of defamatory fact. If so, the defendant must prove the fact is true. (Milkovich v. Lorain Journal Co. (1990) 497 U.S. 1 , 18-20 [ 110 S.Ct. 26952705 -2707, 111 L.Ed.2d 1 ]; Okun v. Superior Court, supra, 29 Cal.3d at pp. 451-452; Copp v. Paxton (1996) 45 Cal.App.4th 829 , 837 [ 52 Cal.Rptr.2d 831 ]; Moyer v. Amador Valley J. Union High School Dist. (1990) 225 Cal.App.3d 720 , 724 [ 275 Cal.Rptr. 494 ].)

Construction of the Exclusion Language in Light of Defamation Law

In light of these broad general principles of defamation, we conclude that as used in the subject exclusion the word “material” means any provably false and defamatory idea, claim, charge, assertion, contention, accusation, or allegation of fact, that is stated either orally or in writing. As seen, it is not

construction of the subject language is generally supported by decisional law from the courts of several other jurisdictions. These authorities are not concerned with the application of first-publication language in a specifically defamation context. Nevertheless, they clearly indicate that the first-publication exclusion language at issue is intended to and in fact bars coverage of an insured’s continuous or repeated publication of substantially the same offending material previously published at a point of time before a policy incepts, while not barring coverage of offensive publications made during the policy period which differ in substance from those published before commencement of coverage. (Applied Bolting Technology Products, Inc. v. USF & G (E.D.Pa. 1996) 942 F.Supp. 1029 , 1036-1037 [first-publication exclusion barred coverage of offending advertisement first published before coverage began, notwithstanding claim the advertisement caused a variety of different injuries before and during the coverage period]; Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co. (E.D.Mich. 1995) 878 F.Supp. 1034 , 1042-1043, revd. as to a different defendant on different grounds (6th Cir. 1996) 99 F.3d 795 [first publication of offending advertising material preceded effective date of insurance; held, first publication exclusion barred coverage of injury from subsequent publications of advertising material on the same product]; John Deere Ins. Co. v. Shamrock Industries, Inc. (D.Minn. 1988) 696 F.Supp. 434 , 440-441, affd. (8th Cir. 1991) 929 F.2d 413 [first publication of offensive advertising material occurred prior to coverage; exclusion applied to relieve insurer from responsibility to defend or indemnify, even though more wrongful advertising was published after the policy incepted].)

Application to the Facts of This Case

Having determined the meaning of the word “material” in the Policy’s first-publication exclusion, we turn to the question of how this language must be applied under the facts of this case, and specifically whether the trial court was correct in concluding that the exclusion barred any potential coverage for the defamation claims in the underlying lawsuits. Ringler argues the Weil and Legal Evaluations actions potentially included claims that Ringler personnel made “separate and different defamatory or disparaging remarks” about the Weil and Legal Evaluations plaintiffs at various times up through 1995; and that respondents have “failed conclusively to ‘eliminate the possibility’ of separate, different defamatory utterances first occurring during its [P]olicy periodf;] . . . failed to prove Ringler only republished a prior slander, during [respondents’] [P]olicy period”; and failed to prove there was no potential liability on their part for dissimilar or substantially different defamatory publications about the plaintiffs made by

Ringler after the inception of the Policy period. There are several problems with Ringler’s argument.

First, despite Ringler’s best efforts to blur the issue, an insurer’s duty to defend must be analyzed on the basis of the sources and evidence actually available to it at the time of the tender of defense. (CNA Casualty of California v. Seaboard Surety Co. (1986) 176 Cal.App.3d 598 , 605 [ 222 Cal.Rptr. 276 ].) In this case, Ringler’s own attorneys actually directed respondents not to communicate with the Weil and Legal Evaluations plaintiffs’ counsel about the number, nature and timing of defamatory statements allegedly made by Ringler personnel. An insured may not speculate about hypothetical, unpled third party claims in order to manufacture coverage, especially where the insured has made it more difficult for the insurer to investigate the claims for which coverage is sought. (Hurley Construction Co. v. State Farm Fire & Casualty Co. (1992) 10 Cal.App.4th 533 , 538 [ 12 Cal.Rptr.2d 629 ].) Speculation about what additional allegations the Weil and Legal Evaluations plaintiffs may have made in addition to those set out in their pleadings or revealed through depositions and discovery cannot be used to create a duty to defend or indemnify, where the actual evidence supports the application of an exclusion. (Ibid.; Span, Inc. v. Associated Internat. Ins. Co. (1991) 227 Cal.App.3d 463 , 482 [ 277 Cal.Rptr. 828 ].)

Second, it is undisputed that the underlying actions alleged an ongoing conspiracy to defame the Weil and Legal Evaluations plaintiffs, commencing no later than the mid-1980’s and continuing into the 1990’s. Respondents do not challenge the possibility that separate libels and slanders may have been made after 1990. They simply point out that there is no positive evidence any such alleged defamatory publications were actually made after the inception of the Policy; and, more importantly, there is no evidence whatsoever any such hypothetical defamations differed in substance from the extremely broad and generalized defamations alleged to have been published in the mid-1980’s.

Finally, the undisputed evidence in the record demonstrates an exhaustive effort by respondents and Ringler to determine all the facts and allegations in the Weil and Legal Evaluations actions, as pertinent to the first-publication exclusion. Out of this entire undisputed record Ringler cannot point to a single fact negating the application of the first-publication exclusion to the defamatory publications alleged in the Weil and Legal Evaluations actions. To the contrary, the actual record shows that all the alleged defamations occurred before the inception of the Policy period, or at most were restatements of the same trade disparagements that had already been repeated for years. Moreover, the record is devoid of any specific alleged defamatory

from defending a claim once it is able to demonstrate, by reference to undisputed facts, that the claim cannot be covered. (Montrose I, supra, 6 Cal.4th at pp. 295-297; Saylin v. California Ins. Guarantee Assn., supra, 179 Cal.App.3d at pp. 263-264.)

Under the undisputed record and the terms of the Policy in this case, respondents owed Ringler no duty to defend, even under the broad standards applicable to determining that duty. Neither the Legal Evaluations nor the Weil complaint alleged defamations published after the inception of the Policy on June 4, 1990, that were different in substance from the defamatory material alleged to have been published throughout the previous decade. Nor did the extensive investigations of both Ringler and respondents uncover any such defamations. Thus, there were no claims of injury, actual or potential, that could survive the express terms of the first-publication exclusion in the Policy. There was consequently no duty to defend, and respondents were justified in denying coverage entirely. The defense respondents actually did give to Ringler amounted to a windfall to it and its other insurers.

Moreover, even if we harbored a reasonable doubt that respondents might have had a duty to defend because of some conceivably arguable possibility or potential of coverage (Montrose I, supra, 6 Cal.4th at p. 300; Gray v. Zurich Insurance Co., supra, 65 Cal.2d at p. 276, fn. 15; CNA Casualty of California v. Seaboard Surety Co., supra, 176 Cal.App.3d at p. 605), California law would still not permit Ringler to recover damages for breach of the duty to defend. The basic measure of damages for such a breach “is that amount which will compensate the insured for the harm or loss caused by the breach of the duty to defend, i.e., the cost incurred in defense of the underlying suit.” (Amato v. Mercury Casualty Co. (1993) 18 Cal.App.4th 1784 , 1794 [ 23 Cal.Rptr.2d 73 ] (Amato I).) Exceptions to this rule—as where the insured suffers liability in excess of the policy limits or is defaulted because of inability to defend itself—are inapplicable here. (Amato v. Mercury Casualty Co. (1997) 53 Cal.App.4th 825 , 834 [ 61 Cal.Rptr.2d 909 ] (Amato II) [insured was compelled to defend itself, could not do so, and suffered default as a result]; Finkelstein v. 20th Century Ins. Co. (1992) 11 Cal.App.4th 926 , 928 [ 14 Cal.Rptr.2d 305 ] [insured subjected to liability in excess of policy limits].) Ringler suffered no liability in excess of the Policy limits; nor was it compelled or unable to defend itself. Instead, as Ringler implicitly acknowledges, it was fully protected from having to pay any costs of its own defense by other insurers who were on the risk when Ringler allegedly first slandered the plaintiffs in Weil and Legal Evaluations.

Thus, even were we to agree with Ringler’s contention that respondents breached a duty to defend, respondents would still not be liable to Ringler

for damages arising from breach of that duty as a matter of law. Ringler was adequately protected by other insurers, and respondents’ withdrawal from its defense did not enhance its defense liability or increase the costs it incurred in defense of the underlying lawsuits. (Johansen v. California State Auto. Assn. Inter-Ins. Bureau (1975) 15 Cal.3d 9 , 19 [ 123 Cal.Rptr. 288 , 538 P.2d 744 ]; Amato I, supra, 18 Cal.App.4th at p. 1794.)

Waiver of Right to Withdraw from Defense or Assert Exclusion

Next, Ringler asserts that by agreeing to defend the underlying lawsuits and failing adequately or promptly to reserve their rights, respondent insurers waived any right they may otherwise have had to withdraw from Ringler’s defense or dispute their obligation to indemnify its claims. Essentially, Ringler maintains that respondents’ payment of Ringler’s defense costs for over two years before reserving its rights and then withdrawing from the defense constitutes an “admission” of coverage and a consequent “waiver” of any right either to “unilaterally withdraw” from Ringler’s defense, or to contest either the duty to defend or the obligation to indemnify. This contention is completely meritless.

Waiver requires the intentional relinquishment of a known right upon knowledge of the facts. The burden is on the party claiming a waiver of right to prove it by clear and convincing evidence that does not leave the matter to speculation. As a general rule, doubtful cases will be decided against the existence of a waiver. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 31; City of Ukiah v. Fones (1962) 64 Cal.2d 104 , 107-108 [ 48 Cal.Rptr. 865 , 410 P.2d 369 ]; DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.App.4th 54 , 60 [ 35 Cal.Rptr.2d 515 ].) Waiver may be express, based on the words of the waiving party; or implied, based on conduct indicating an intent to relinquish the right. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 31; Brookview Condominium Owners' Assn. v. Heltzer Enterprises-Brookview (1990) 218 Cal.App.3d 502 , 512-513 [ 267 Cal.Rptr. 76 ].)

In the insurance context, California courts have applied the general rule that waiver requires the insurer to intentionally relinquish its right to deny coverage, and a denial of coverage on one ground does not, absent clear and convincing evidence to suggest otherwise, impliedly waive grounds not stated in the denial. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 31; State Farm Fire & Casualty Co. v. Jioras (1994) 24 Cal.App.4th 1619 , 1627-1628, fn. 7 [ 29 Cal.Rptr.2d 840 ] [“Waiver exists when the insurer intentionally relinquishes its right to rely on an exclusion.

[Citation.] Waiver depends solely on the intent of the waiving party, and is not established merely by evidence the insurer failed to specify the exclusion in a letter reserving rights”]; Velasquez v. Truck Ins. Exchange (1991) 1 Cal.App.4th 712 , 722 [ 5 Cal.Rptr.2d 1 ] [“Whether a waiver has occurred depends solely on the intention of the waiving party. [Citation.] An intention to waive a limitations provision is not evinced by the failure to raise that point in a letter denying a claim”].) Thus, an insured’s subjective understanding of its insurer’s conduct is insufficient to establish-waiver, absent some evidence of actual intent. (Velasquez v. Truck Ins. Exchange, supra, 1 Cal.App.4th at p. 722.) For this reason, the courts have repeatedly held that an insurer does not waive or relinquish any coverage defenses it fails to assert at the time of its acceptance of a tender of defense, even when it does not make any express and full reservation of rights for a substantial period of time after the defense has been accepted. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at pp. 31-34 [insurer does not automatically waive coverage defenses by failing to raise or assert them from the outset; failure to raise specific defenses for seven years not inconsistent with an intent to enforce the terms of the policy]; American Motorists Ins. Co. v. Allied-Sysco Food Services, Inc. (1993) 19 Cal.App.4th 1342 , 1350 [ 24 Cal.Rptr.2d 106 ], overruled on other grounds in Buss v. Superior Court (1997) 16 Cal.4th 35 , 50 [ 65 Cal.Rptr.2d 366 , 939 P.2d 766 ] [insurer did not waive coverage defense despite nine-month delay in sending reservation-of-rights letter after acceptance of defense]; National Union Fire Ins. Co. v. Siliconix Inc. (N.D.Cal. 1989) 726 F.Supp. 264 , 270 [insurer did not waive coverage defense despite 15-month delay in reserving its rights after accepting tender of defense].)

Thus, it is insufficient for Ringler to rely on the fact respondents participated in its defense for approximately two years before formally reserving their rights to assert defenses to coverage. The statement of the court in State Farm Fire & Casualty Co. v. Jioras is applicable here: “Under appellants’ view, if the insurer did not reserve its rights the insured would automatically receive coverage without showing either reliance (for estoppel) or intentional relinquishment (for waiver). [This] is not the law in California.” (24 Cal.App.4th at p. 1628, fn. 8.) In short, there is no evidence respondents ever made any intentional relinquishment of their coverage defenses at any point, despite initially accepting Ringler’s tender of defense and funding that defense for two years. There is therefore no evidentiary basis for any claim of waiver in this case. (Id. at pp. 1627-1628 & fns. 7, 8.) Rather than a waiver of its rights to assert the first-publication exclusion,

Contrary to Ringler’s contention, there is no particular requirement that an insurer ask the permission of a trial court before withdrawing from a defense, once the insurer has determined that no potential for indemnification liability exists. Although—in order to avoid any possibility of liability for bad faith—it may be prudent for an insurer to obtain a declaratory judgment that it has no defense duty before unilaterally withdrawing from a defense, it is not required to do so. (Montrose I, supra, 6 Cal.4th at pp. 301-304; Tamrac, Inc. v. California Ins. Guarantee Assn. (1998) 63 Cal.App.4th 751 , 757-758 [ 74 Cal.Rptr.2d 338 ]; Travelers Indem. of Ill. v. Ins. Co. of N. America (S.D.Cal. 1995) 886 F.Supp. 1520 , 1526.) The cases cited by Ringler stand for the proposition that where a duty to defend appears on the face of a complaint, it may only be terminated prospectively, and not retrospectively. (Buss v. Superior Court, supra, 16 Cal.4th at p. 46; Fireman's Fund Ins. Co. v. Chasson (1962) 207 Cal.App.2d 801 , 807 [ 24 Cal.Rptr. 726 ]; Travelers Indem. of Ill. v. Ins. Co. of N. America, supra, 886 F.Supp. at p. 1526.) Ringler appears to confuse this principle—which was clearly not violated in this case—with an imagined duty to obtain a declaratory judgment in all cases before withdrawing a defense. No such obligation exists.

Here, as the trial court determined, there never was a duty to defend. The fact respondents initially accepted Ringler’s tender of defense and then continued to contribute to Ringler’s defense costs while at the same time investigating whether coverage actually existed does not mean there ever was a potential for coverage under the factual circumstances of the case. Although it took time for discovery to reveal that there were in fact no claims made in this case that were not barred from coverage by the first-publication exclusion, this passage of time did not lock respondents into continuing to defend Ringler once that discovery was completed. In the final analysis, investigation of the claims made in the Weil and Legal Evaluations actions through this discovery process revealed that there never was a potential for coverage and, hence, never a duty to defend from the outset. (Tamrac, Inc. v. California Ins. Guarantee Assn., supra, 63 Cal.App.4th at pp. 757-758.)

In short, contrary to Ringler’s arguments, an insurer which mistakenly accepts a tender of defense is not subsequently required to obtain a declaratory judgment before it can withdraw, on pain of suffering liability for defense and settlement expenses not actually covered under the terms of its insurance policy. Because it could cost as much for an insurer to prosecute a declaratory relief action on the question of coverage as to pursue the underlying litigation to completion, adoption of such a rule would as a practical matter lock virtually all liability insurers into a duty to defend regardless of the actual terms of their policies. The law does not require this.

Disposition

The judgment is affirmed.

Parrilli, J., and Walker, J., concurred.

A petition for a rehearing was denied June 22, 2000.