172 F.3d 702 (9th Cir. 1999), 97-17034, Lakeside Non-Ferrous Metals, Inc. v. Hanover Ins. Co.

Docket Nº:97-17034.
Citation:172 F.3d 702
Party Name:1999 Daily Journal D.A.R. 3255 LAKESIDE NON-FERROUS METALS, INC., Plaintiff-Appellant, v. HANOVER INSURANCE COMPANY; New Hampshire Insurance Company; Scottsdale Insurance Company, Defendants-Appellees.
Case Date:April 05, 1999
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 702

172 F.3d 702 (9th Cir. 1999)

1999 Daily Journal D.A.R. 3255

LAKESIDE NON-FERROUS METALS, INC., Plaintiff-Appellant,

v.

HANOVER INSURANCE COMPANY; New Hampshire Insurance Company;

Scottsdale Insurance Company, Defendants-Appellees.

No. 97-17034.

United States Court of Appeals, Ninth Circuit

April 5, 1999

Argued and Submitted Feb. 12, 1999.

Page 703

Andrew Cohn, Berkeley, California, for the plaintiff-appellant.

Ashley M. Bale, Larson ú King LLP, San Francisco, California, for the defendants-appellees.

Appeal from the United States District Court for the Northern District of California; Maxine M. Chesney, District Judge, Presiding. D.C. No. CV-97-02720 MMC.

Before: FLETCHER and TASHIMA, Circuit Judges; FITZGERALD, 1 District Judge.

FLETCHER, Circuit Judge:

Plaintiff-appellant Lakeside Non-Ferrous Metals, Inc. ("Lakeside") appeals the district court's order dismissing its claim seeking insurance coverage for its pollution of the Port of Oakland's land along the Oakland estuary. Lakeside leases the land from the Port for metal recycling, battery salvage, and chemical storage. After the Port of Oakland sued Lakeside and other tenants for contaminating the Port's land and surrounding waters, Lakeside filed an action to compel its insurers to defend the claim. 2 The insurers refused coverage, claiming that the "pollution exclusion" contained in Lakeside's insurance policy excluded coverage for property damage arising out of actual or threatened discharge of pollutants. The district court, applying California law in this diversity action, dismissed the case for failure to state a claim. Lakeside timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm.

Page 704

We review de novo the district court's dismissal for failure to state a claim upon which relief can be granted. Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir.1998). A dismissal for failure to state a claim is appropriate where it appears, beyond a doubt, that the plaintiff can prove no set of facts that would entitle it to relief. Johnson v. Knowles, 113 F.3d 1114, 1117 (9th Cir.), cert. denied, --- U.S. ----, 118 S.Ct. 559, 139 L.Ed.2d 401 (1997); Fed.R.Civ.P. 12(b)(6). We also review de novo whether the contract is ambiguous. Titan v. Aetna Casualty and Surety Co., 22 Cal.App.4th 457, 469, 27 Cal.Rptr.2d 476 (1994). "Whether a clause is ambiguous and whether an insured has an objectively reasonable expectation of coverage in light of the insuring language are questions of law." Id. California law governs our review of this case. See Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1556 (9th Cir.1991).

Lakeside contends that Scottsdale is obligated to defend against the Port's nuisance and trespass claims. We look to the underlying complaint and the terms of the insured's coverage to determine the insurer's obligation to defend. Legarra v. Federated Mut. Ins. Co., 35 Cal.App.4th 1472, 1479, 42 Cal.Rptr.2d 101 (1995). Under California law, a liability insurer owes a broad duty to defend its insured, and that duty is broader than its duty to indemnify. Staefa Control-System, Inc. v. St. Paul Fire & Marine Ins. Co., 847 F.Supp. 1460, 1466 (N.D.Cal.1994); Martin Marietta Corp. v. Insurance Co. of North America, 40 Cal.App.4th 1113, 1122, 47 Cal.Rptr.2d 670 (1995) ("We generally interpret the coverage clauses of insurance policies broadly."). To prevail, the insured must prove that the underlying claim may fall within the policy coverage, whereas the insurer must prove that the underlying claim cannot fall within policy coverage. Legarra, 35...

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