California Federal Court to Liability Insurers:  Your Deadline to Remove Might Expire Years Before You Are Even Haled into Court

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The setup may seem familiar: a policyholder is sued in state court, judgment is entered against the policyholder, and the victorious plaintiff (now judgment creditor) turns to the liability insurer for payment.

However, if the judgment creditor and the insurer disagree over the scope of coverage, litigation may venture into far less familiar territory.  And according to the recent decision in Southwestern Research, Inc. v. Travelers Casualty Insurance Company of America (“SRI v. Travelers”), No. CV 24-10941 FMO (KSX), 2025 WL 1937016 (C.D. Cal. July 15, 2025), insurers in such post-judgment proceedings risk forfeiting a federal forum if they fail to act quickly—possibly even before the judgment creditor has demanded payment from the insurer and before the insurer has been haled into court.

Assignment Orders

In many states, a judgment creditor is not automatically permitted to bring direct action against the judgment debtor’s insurer.  See 50 State Insurance and Bad Faith Quick Reference Guide, International Association of Defense Counsel (2014), https://www.iadclaw.org/‌‌‌‌‌‌assets/‌‌‌‌1/‌7/‌50_‌State_Insurance_Bad_Faith_Reference_Guide.pdf.  A judgment creditor in a no-direct-action state must first obtain an “assignment order” before bringing action against the insurer—a court order assigning to the judgment creditor the right to recover insurance proceeds from the judgment debtor’s liability insurer.

In California, judgment creditors generally are not required to obtain an assignment order before pursuing indemnity payments under the judgment debtor’s insurance policy.  See Cal. Ins. Code § 11580; Kiernan v. Zurich Cos., 150 F.3d 1120, 1123 (9th Cir. 1998).  However, many liability policies offer coverage above and beyond mere indemnity coverage.  Coverage for pre-judgment interest, post-judgment interest, and court costs is often provided under a “supplementary payments” provision.  Under California law, a judgment creditor cannot recover supplementary payments in a direct action without an assignment order.  See Clark v. California Ins. Guarantee Ass’n., 200 Cal. App. 4th 391, 398–99 (2011).

The dispute in SRI v. Travelers centered on one such supplementary payments provision.  To pursue direct proceedings against the insurer for payment of the supplementary payments available under the judgment debtor’s policy, the judgment creditor obtained an assignment order from the state court and served the insurer with a copy of the order a few weeks later.  See SRI v. Travelers, at *1.

An Independent Lawsuit Versus a Motion to Enforce a Writ of Execution

After obtaining any necessary assignment order, the next step for a judgment creditor is to present the insurance dispute for judicial resolution.  In California, like many other states, a judgment creditor has multiple available procedural avenues to obtain judicial resolution.  Two of the most common avenues under the California Code of Civil Procedure are a creditor’s suit (Section 708.210) and a motion to enforce a writ of execution (Section 701.010).

Although the less-complex creditor’s suit can be the path of least resistance for many judgment creditors, sophisticated judgment creditors will often opt to pursue their rights via a motion to enforce a writ of execution for two key reasons.  First, obtaining a hearing and decision on a motion to enforce can be far quicker than litigating an entire standalone suit against the insurer.  Second, as demonstrated by SRI v. Travelers, the judgment creditor can seriously impair the insurer’s ability to remove the dispute to federal court by seeking relief via a motion to enforce a writ of execution.

In California, a motion to enforce a writ of execution is preceded by, as the name implies, a writ of execution.  A writ of execution is a post-judgment court order directing the sheriff of a particular county to seize eligible property belonging to the judgment debtor to satisfy the outstanding judgment balance.  See Cal. Code Civ. Pro. § 699.510(a).  The judgment creditor transmits the writ of execution to the sheriff (and serves it on the insurer) alongside additional paperwork describing the property that the judgment creditor wishes the sheriff to seize (i.e., the amounts available under the insurance policy).  See §§ 699.530, 699.540, 700.010.  The insurer generally must respond in writing to the writ of execution within 10 days outlining the funds that it will or will not pay.  See § 701.030.

If the judgment creditor believes the insurer has failed to pay all amounts due under the policy, the judgment creditor may then file a motion to enforce the writ of execution.  See, e.g., Nat’l Fin. Lending, LLC v. Superior Ct., 222 Cal. App. 4th 262 (2013).

The motion to enforce the writ of execution is filed in state court under the same case number used in the underlying proceedings.  Thus, it is generally the same judge who presided over the underlying proceedings that will decide the motion to enforce.  The familiar forum and judge can be a significant advantage for the judgment creditor, and insurers may understandably seek removal to federal court.  However, by the time the motion to enforce has been filed, it may already be too late to remove to federal court according to SRI v. Travelers.

The Attempted Removal and Motion to Remand in SRI v. Travelers

In SRI v. Travelers, the insurer removed the garnishment proceedings to federal court within 30 days after the judgment creditor filed its motion to enforce the writ of execution.  See SRI v. Travelers, at *2.  The judgment creditor then filed a motion to remand.

The pivotal dispute between the parties in SRI v. Travelers centered on the timing of the insurer’s removal.  Federal law requires the insurer to file its notice of removal “within 30 days after the receipt by the [insurer], through service or otherwise, of a copy of the initial pleading.”  28 U.S.C. § 1446(b)(1).  “[I]f the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.”  28 U.S.C. § 1446(b)(3).

The judgment creditor in SRI v. Travelers argued that the “initial pleading” that commenced the garnishment proceedings was not the motion to enforce the writ of execution, nor even the writ of execution itself, but rather the assignment order issued more than a year earlier.  See SRI v. Travelers, at *3.

The insurer strenuously disagreed, arguing that an assignment of rights, standing alone, does not constitute the commencement of a civil action to enforce such rights.  Id. at *4.  The insurer noted that the assignment order did not impose any obligation for the insurer to respond—a hallmark trait of a “civil action.”  See Murphy Bros. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 347–48 (1999) (“An individual or entity named as a defendant is not obliged to engage in litigation unless notified of the action, and brought under a court’s authority, by formal process.  Accordingly, we hold that a named defendant’s time to remove is triggered by simultaneous service of the summons [(defined as an “authority-asserting measure stating the time within which the party served must appear and defend”)] and complaint . . . but not by mere receipt of the complaint . . . .”).

The District Court’s Decision

The district court sided with the judgment creditor over the insurer.  The district court reasoned that “the Assignment Order was binding on the [insurer] upon service” and “once served, an obligor can challenge an assignment order.”  SRI v. Travelers, at *3 (citations and quotation marks omitted).  The court therefore concluded that “the garnishment issue was removable upon service of the Assignment Order.”  Id.  Because the assignment order constituted the “initial pleading” in the garnishment proceedings (and because the insurer had received letters outlining the judgment creditor’s position on the amount in controversy), the district court found that the insurer’s removal was untimely and granted the motion to remand.  Id. at *4–5.

The potential “challenge” to the assignment order to which the district court referred is a motion to modify or set aside the assignment order under California Code of Civil Procedure § 708.560, which permits relief “upon a showing that there has been a material change in circumstances since the time of the previous hearing on the assignment order.”

It is apparent from the face of the district court’s order that the court was not confident in its own decision.  The court repeatedly emphasized that “doubt regarding the right of removal must be resolved in favor of remanding the action.”  See SRI v. Travelers, 2025 WL 1937016, at *2, *5.  Although it granted the motion to remand, the court denied the judgment creditor’s request for attorneys fees, holding that the insurer “did not lack an objectively reasonable basis for removal.”  Id. at *5 n.3.  Additionally, the court noted that the order was not only “not intended for publication” but also not “intended to be included in or submitted to any online service such as Westlaw or Lexis.”  Id. at *5. 

Recommendations for Insurers

The import of the district court’s order in SRI v. Travelers is stunning:  An insurer served with an assignment order must file a notice of removal within 30 days or forfeit its right to a federal forum.  The insurer must remove (i) even if the insurer has no bone to pick with the assignment order itself, (ii) even if the judgment creditor has never demanded payment from the insurer (so long as the insurer is aware of the amounts that the judgment creditor purports to be owed under the policy), and (iii) even though the assignment order does not create any obligation for the insurer to appear or defend.

It is unclear whether other district courts will adopt the same reasoning employed in SRI v. Travelers.  However, unless and until the case law develops further, insurers seeking to eliminate all doubts regarding the propriety of removal should consider removing upon receipt of the assignment order rather than waiting until the judgment creditor actually seeks to recover on any assigned claims.

Disclosure: Nicholas Boos and James Hockel of Maynard Nexsen’s San Francisco office represented the insurer in SRI v. Travelers.