Staefa Control-System v. St. Paul Fire & Marine
Decision Date | 18 March 1994 |
Docket Number | No. C-93-2224 MHP (ENE).,C-93-2224 MHP (ENE). |
Citation | 847 F. Supp. 1460 |
Court | U.S. District Court — Northern District of California |
Parties | STAEFA CONTROL-SYSTEM INC., a California Corporation, Plaintiff, v. ST. PAUL FIRE & MARINE INS. CO. and St. Paul Mercury Ins. Co., Minnesota Corporations, Defendants. |
COPYRIGHT MATERIAL OMITTED
Robert P. Dahlquist, Latham & Watkins, San Diego, CA, Paul A. Dezurick, Suzanne E. Curtis, Graham & James, San Francisco, CA, for plaintiff.
Peter A. Smalbach, Adams Duque & Hazeltine, Cathy L. Croshaw, Luce Forward Hamilton & Scripps, San Francisco, CA, for defendants.
This diversity action was brought by plaintiff, Staefa Control System, Inc. ("Staefa"), against defendants, St. Paul Fire & Marine Insurance Company and St. Paul Mercury Insurance Company (collectively "St. Paul"), seeking a declaratory judgment that St. Paul has a duty to defend and indemnify Staefa in an underlying tort action. In addition, Staefa alleges that St. Paul's failure to defend Staefa amounts to breach of insurance contract and breach of the implied covenant of good faith and fair dealing, and seeks both actual and punitive damages.
Now before the court are cross-motions for summary judgment. Having considered the parties' arguments and submissions, the court enters the following opinion.
This action arises out of third party claims brought against Staefa by Hudson I.C.S. ("Hudson") in a tort action filed in this district, Hudson v. Andrade, No. C-91-1772 TEH (N.D.Cal. filed June 10, 1991). Hudson brought numerous federal and state causes of action against Staefa and other defendants for damage to real property owned by Hudson adjacent to property owned by Staefa, which Hudson alleges was caused in part by pollution that migrated from Staefa's property. More specifically, Hudson alleges that volatile organic compounds disposed of and released by Staefa and other defendants migrated onto the Hudson property and contaminated soil and groundwater. Hudson also alleges that Staefa is jointly and severally liable with other defendants for all property damage at and clean-up of the Hudson site.
From the 1930s to the late 1970s, the Singer Company ("Singer") manufactured adding machines and cash registers on property adjacent to the Hudson property. In 1976, Singer sold part of its property to Universal Pneumatic Controls, Inc. ("UPC"), which used the property to assemble thermostats, air probes, and other pneumatic controls. In 1978, UPC merged into Staefa, which continued to manufacture pneumatic controls on the site until it closed the facility in 1987.
Staefa discovered the existence of groundwater contamination at its own property in late 1987 or early 1988 as a result of groundwater samples. In February 1988, Staefa notified the California Department of Health and Safety ("DHS"). Staefa subsequently retained a consultant to investigate the contamination. In a report made to DHS on October 3, 1988, the consultant concluded that the former Singer property was likely the source of the contamination, but that no evidence indicated that Staefa itself was responsible for the release of the pollutants.
Hudson filed its first complaint in the underlying action on June 10, 1991, which was superseded by a second amended complaint on March 10, 1992. In that complaint, Hudson alleged causes of action against Staefa and other defendants for declaratory relief and cost of recovery under the Comprehensive Environmental Response, Compensation, & Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., and the California Hazardous Substance Account Act ("HSAA"), Cal. Health & Safety Code §§ 25300 et seq., negligence, negligence per se, continuing trespass, ultrahazardous activity, indemnification, private nuisance, and public nuisance. A litany of cross-claims between defendants ensued.2 The gist of these claims is that Staefa and/or UPC disposed of and released chemicals on the site during operations there, and that Staefa is therefore the cause of the contamination of the Hudson property.
Between January 1, 1982 and July 16, 1986, Staefa was insured by St. Paul under three comprehensive general liability policies. From January 18, 1982 through January 1, 1983, Staefa was insured under policy # 695 NB 6198 ("Policy # 1"); from January 1, 1983 through April 16, 1986, Staefa was insured under policy # 695 NC 3082 ("Policy # 2"); from April 16, 1986 through July 16, 1986, Staefa was insured under policy # 695 NF 1374 ("Policy # 3").3
Declaration of Jack Sheely, Ex. A at 1, Policy # 1. Policy # 1 further provided that "we'll defend any suit brought against you for damages covered under this agreement, even if the suit is groundless or fraudulent." Id. at 2.
In a section captioned "Liabilities we won't cover, Total Exclusions," Policy # 1 contained the following pollution exclusion and sudden accident exception:
Pollution We won't cover liability claims for injury or damage caused by the continuous or intentional discharge or release of pollutants such as: Smoke. Vapors. Soot. Fumes. Acids. Alkalis. Toxic chemicals, liquids or gases. Or waste materials. But we will cover sudden accidents involving these pollutants.
Id. at 3. Finally, Policy # 1 contained the following liability broadening provision:
This section adds protection for you and your business against personal injury liability claims that result from certain offenses committed in the course of your business. Although personal injury is usually thought of as physical injury, it can also mean an invasion of someone's rights. This coverage protects you and other protected persons against claims for damages resulting from the personal injuries described below.
Id. at 6. One of the listed injuries, captioned "Wrongful entry," provided that "you're protected against claims for damages as a result of interference with a person's right to occupy his or her property undisturbed.
This includes an unjustified eviction or an unjustified entry onto the property." Id.
Id. Under a section captioned "Exclusions-Claims We Won't Cover," this policy contained the following pollution exclusion and sudden accident exception:
Policy # 2 also contained as part of its liability broadening provision the following language:
Id. at 3. Finally, the liability broadening provision in Policy # 2 provided that "all other terms of your policy remain the same." Id. at 8.
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