Aerojet-General Corp. v. Superior Court

• Decision Date: 19 April 1989
• Docket Number: No. A042785,AEROJET-GENERAL,A042785
• Citation: 257 Cal.Rptr. 621,209 Cal.App.3d 973
• Parties: Previously published at 209 Cal.App.3d 973 209 Cal.App.3d 973, 211 Cal.App.3d 216 CORP., et al., Petitioners, v. SAN MATEO COUNTY SUPERIOR COURT, Respondent, CHESHIRE AND COMPANIES, etc., et al., Real Parties in Interest.
• Court: California Court of Appeals Court of Appeals

Page 621

257 Cal.Rptr. 621

Previously published at 209 Cal.App.3d 973

209 Cal.App.3d 973, 211 Cal.App.3d 216

AEROJET-GENERAL CORP., et al., Petitioners, v. SAN MATEO COUNTY SUPERIOR COURT, Respondent CHESHIRE AND COMPANIES, etc., et al., Real Parties in Interest.

No. A042785.

Court of Appeal, First District, Division 5, California.

April 19, 1989.

Opinion on Denial of Rehearing May 18, 1989.

See 258 Cal.Rptr. 684.

Moses Lasky, John E. Munter, Scott P. DeVries, Lasky, Haas, Cohler & Munter, P.C., San Francisco, William L. Berry, Jr., Vice-President/General Counsel, Aerojet-General Corp., Sacramento, for petitioners Aerojet-General Corp., et al.

John K. Van de Kamp, Atty. Gen., Andrea S. Ordin, Chief Asst. Atty. Gen., Theodora Berger, Asst. Atty. Gen., Timothy R. Patterson, Deputy Atty. Gen., San Diego, amicus curiae in support of petitioners Aerojet-General Corp., et al.

No appearance for respondent Superior Court.

Barry L. Bunshoft, Richard L. Seabolt, Andrew K. Gordon, Bonnie L. O'Niell, Brian A. Kelly, Hancock, Rothert & Bunshoft, San Francisco, Steven M. Crane, Morris, Polich & Purdy, Los Angeles, for real party Cheshire & Companies, etc., et al.

HANING, Associate Justice.

This extraordinary writ proceeding arises from a declaratory relief action brought against environmental polluters by their insurers. Petitioners Aerojet-General Corporation and Cordova Chemical Company seek a writ of mandate to set aside an order granting real party insurance companies' summary adjudication of the issue that no portion of environmental cleanup and restoration costs, imposed upon petitioners by the state and federal governments, constitute damages within the meaning of petitioners' Comprehensive General Liability policies. We issued an order to show cause in lieu of an alternative writ, and heard oral argument. We issue a peremptory writ of mandate.

I.

Since the early 1950's petitioners have operated a research and development facility near Sacramento, California, where they developed rocket engines, rocket components, and related products for the country's aerospace and defense programs. Petitioners' operations involved the use of various toxic chemicals. In 1979 government regulatory agencies discovered that toxic chemicals had entered the soil and groundwater beneath petitioners' facility, and had leached into the groundwater of neighboring properties and into the American River.

On December 26, 1979, the State of California filed a "Complaint for Injunction[,] Abatement, and Other Equitable and Civil Monetary Relief" against petitioners in Sacramento County Superior Court. The state alleged that petitioners' discharge of toxic chemical wastes had polluted state-owned waters, both groundwater and the American River, causing "impairment and destruction" of a "natural resource of this State." ¹ In addition to civil penalties and an injunction to prevent further discharge of hazardous substances into state waters, the state's lawsuit sought to compel cleanup of the pollution. The state alleged that protection of the water resource required the removal of hazardous wastes from the groundwater to the extent possible, and removal of such wastes which had yet to reach groundwater from petitioners' disposal sites. Accordingly, the state's complaint included a cause of action for "Recovery of Expenditures for Cleanup, Abatement and Remedial Work" under Water Code section 13304. The state alleged it had "spent, and [was] continuing to spend, substantial sums for performance of cleanup, abatement and remedial work," and prayed for reimbursement from petitioners for the amounts expended.

On January 15, 1986, the United States Department of Justice, at the request of the Environmental Protection Agency, brought suit against petitioners in the United States District Court for the Eastern District of California. The action was brought pursuant to sections 106(a) and 107 of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. §§ 9606(a), 9607), and other federal statutes. The federal complaint alleged that hazardous chemicals and pollutants had migrated from petitioners' facility to the soil, then to the groundwater and ultimately to the American River, a navigable waterway of the United States. The United States claimed both present and future damage to the environment, and sought injunctive relief to abate an "imminent and substantial endangerment to public health, welfare or [the] environment."

The complaint also alleged that the United States, in order to combat the effects of petitioners' pollution, had incurred and was incurring "response costs" as defined by CERCLA (see 42 U.S.C. § 9601(25), for which petitioners were liable (42 U.S.C. § 9607). CERCLA defines the costs of "response" to include costs of removal of hazardous substances from the environment and the costs of other remedial work. (42 U.S.C. § 9601(25).) ² CERCLA provides that any person or business entity responsible for a release or threatened release of hazardous substances "shall be liable for ... [p ] all costs of removal of remedial action incurred by the United States Government or a State...." (42 U.S.C. § 9607(a)(4)(A).) The same day the federal complaint was filed, the State of California filed a similar CERCLA complaint in the Eastern District. The state's complaint generally tracks the federal pleading and likewise alleged the state had incurred "response costs" as defined by CERCLA.

Under the CERCLA statutory scheme, the government may postpone litigation of liability and obtain an injunction to compel a polluter to clean up its pollution, or the government may conduct the cleanup itself and then sue the polluter for reimbursement. (42 U.S.C. §§ 9606, 9607; see United States v. Bliss (E.D.Mo.1987) 667 F.Supp. 1298.) As a third alternative, CERCLA provides that the federal government may designate the targeted polluter as a "potentially responsible part[y]" and, to foster settlement of a CERCLA action, may permit the polluter to cleanup or otherwise respond to environmental pollution. Such an agreement is generally embodied in a consent decree. (42 U.S.C. § 9622(a), (b), (d); see generally Note, "Superfund Settlements: The Failed Promise of the 1986 Amendments," 74 Virginia L.Rev. 123 (1988).)

Although we are not provided with precise information, it is not disputed that petitioners have responded to the government lawsuits by engaging in cleanup activities designed to correct and mitigate environmental damage and facilitate a settlement of the actions. Petitioners claim to have expended "tens of millions of dollars" on clean-up, removal of chemicals from the groundwater, and activity designed to prevent chemicals already in the soil from migrating into the groundwater. We are informed that the state and federal governments and petitioners have entered into a consent decree concerning response costs, which is still subject to public comment (see 42 U.S.C. § 9622(d)(2)(B)), and is not included in the record. The CERCLA consent decree evidently incorporates not only the state and federal CERCLA actions, but also the state action seeking analogous cleanup costs under Water Code section 13304.

Petitioners seek to recoup their response costs from their liability insurers. During the period of their Sacramento operations petitioners have carried Comprehensive General Liability (CGL) insurance purchased from real parties in interest. The parties agree that the operative coverage provision of virtually all the policies is essentially identical: the insurer agreed "[t]o pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or loss, destruction or loss of use of property." (Emphasis added.) The policies do not specifically define "damages." Petitioners tendered defense of the government actions to real parties, who refused to defend and denied coverage.

To seek resolution of the coverage question, two of real party insurers brought the instant declaratory relief action against petitioners and remaining real parties. The action sought a declaration that the insurers had no duty to indemnify petitioners under the policy language. Real parties then moved for summary adjudication of two issues: (1) that the government actions against petitioners "assert only claims for equitable relief," and (2) that the policy language quoted above "limit[s] the insurers' obligations to legal claims for 'damages' asserted against the insured, [and the insurers] have no obligation with respect to claims for equitable relief asserted against the insured[.]"

No extrinsic evidence touching upon the parties' interpretation of the term "damages," or any other portion of the coverage clause, was admitted in support of the motion or as evidence of an undisputed material fact. Rather, the motion argued that as a matter of law "damages" as used in the policy must be interpreted in a strictly technical sense to mean damages awarded in an action at law, but not to response costs in CERCLA litigation.

The trial court granted real parties' motion for summary adjudication of both issues, i.e., that the government claims sought equitable relief and that the policy language did not afford coverage for equitable relief, but only for a traditional award of damages in an action at law. The trial court thus ruled as a matter of law that no portion of environmental cleanup costs are "damages" within the meaning of the policies. ³

This timely petition followed.

II.

Petitioners contend the policies cover CERCLA response costs because the layperson buying such insurance would reasonably expect that an agreement "[t]o pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or loss, destruction or loss of use of property" includes any monetary outlay incurred under compulsion of law. Real parties,...