The California Court of Appeal recently affirmed a trial court’s ruling that multiple pollution-related activities did not fall within the terms of various CGL insuring agreements. (Lockheed Corporation v. Continental Insurance Company (2005) 134 Cal.App.4th 187)
Facts
The EPA and California’s Water Quality Control Board ordered Lockheed Corporation to investigate and remediate soil and ground water contamination at multiple sites in California. Moreover, several private parties sued Lockheed for contamination damages.
Lockheed had several nonstandard CGL “manuscript” policies, some of which did not include a “pollution” exclusion. Lockheed tendered the claims to its CGL insurers and filed a breach of contract and bad faith action against those insurers for failing to fully defend and indemnify Lockheed. After numerous years of coverage litigation, the trial court entered judgment in favor of the CGL insurers, and Lockheed appealed.
Holding
The California Court of Appeal affirmed the trial court’s ruling and there was no coverage under the manuscript CGL policies.
First, the court held that the CGL insurers had no duty to defend any administrative proceeding which had not ripened into a lawsuit, because any such proceeding did not qualify as an “action,” as that term was used in the manuscript policies.
Second, the court reasoned that under the “accident” trigger of coverage utilized in the insuring agreement in the manuscript CGL policies, Lockheed had the burden of establishing that the pollution damage was caused by a sudden and unexpected event “identifiable in time and place.” The court found Lockheed was not able to carry its burden of proof on this issue.
Third, the court also determined that the pollution claims were not separately covered under the CGL policies’ “personal injury” coverage because that coverage applied “to injuries other than injuries to property.”
Finally, the court determined that Lockheed had failed to submit sufficient evidence to support a prima facie case for coverage for pollution liability at one of the loss locations. Therefore, pursuant to Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, the trial court was justified in excluding any evidence submitted by Lockheed concerning its losses for that location.
Comment
At first glance, this case might seem to have only minimal practical application, since it involves the interpretation of manuscript policies issued years ago. However, this case provides practical guidance regarding how an insurer, under the Cottle decision, can obtain an order excluding evidence to support the insured’s indemnity reimbursement claim if the insured is unable to establish a prima facie claim for indemnity coverage prior to the start of the coverage trial.