In Fox Paine & Co., LLC v. Twin City Fire Ins. Co., the California Supreme Court held that insureds may bring claims for declaratory relief or tortious breach of the implied covenant of good faith and fair dealing against excess insurers, even if the underlying coverage has not been exhausted.

FPC, an investment firm, held a $50 million follow-form coverage tower — a $10 million primary policy and four $10 million excess layers. A deteriorating relationship between FPC’s cofounders, Fox and Paine, produced years of litigation between them.

FPC’s insurance broker tendered notice of that litigation on behalf of FPC and all other insureds. A partner at a separate fund Paine had launched later wrote the primary carrier, representing that the tender letter had been submitted on behalf of Paine only. The excess carriers knew of that letter and said nothing to Fox.