Bechtel Petroleum v. Continental Ins. Co.
| Decision Date | 28 February 2002 |
| Docket Number | No. B140133.,B140133. |
| Court | California Court of Appeals Court of Appeals |
| Parties | BECHTEL PETROLEUM OPERATIONS, INC., Plaintiff and Appellant, v. CONTINENTAL INSURANCE COMPANY et al. Defendants and Respondents. |
Schaffer, Lax, McNaughton & Chen and John H. Horwitz, Los Angeles, for Plaintiff and Appellant.
Sehr Cortner McNaboe Colliau & Jordan, San Francisco, and W. Heather Sourial, Los Angeles, for Defendant and Respondent Continental Insurance Company.
Sinnott, Dito, Moura & Puebla and Randolph P. Sinnott, Los Angeles; Wiley Rein & Fielding and Theodore A. Howard, Santa Ana, for Defendant and Respondent Steadfast Insurance Company.
Morris, Polich & Purdy, Jeffrey S. Barron, David Vendler, and Lee I. Petersil, Los Angeles, for Defendant and Respondent Royal Insurance Company of America.
This is an appeal from the trial court's grant of summary judgment to several insurers. The court concluded the insurers had no duty to defend an insured, Bechtel Petroleum Operations, Inc., against lawsuits brought by employees of Bechtel's subcontractors. The lawsuits sought damages for injuries caused by years of exposure to toxic substances at a work site, and included claims Bechtel fraudulently concealed the existence, nature or extent of the toxic substances by failing to inform its subcontractors their workers would be exposed to conditions that were unsanitary, hazardous or dangerous to their health. The court found no potential for coverage under the general liability policies at issue, based upon absolute pollution exclusions in the policies, and refused to consider extrinsic evidence submitted to the insurers long after they had rejected Bechtel's tender of defense. The court also concluded there was no duty to defend based on the additional insured endorsements and employee exclusions in two of the policies.
After Bechtel filed notices of appeal and its opening brief, Royal Insurance Company of America filed a motion to dismiss the appeal. Royal argues, based on post-judgment statements by Bechtel's counsel, that Bechtel's defense in the underlying lawsuits was paid for by its own insurer and Bechtel therefore is not an aggrieved party and has no standing to appeal.
We conclude that:
(1) Royal's motion to dismiss is without merit.
(2) The insurers had no duty to defend Bechtel, because the absolute pollution exclusions in the insurance policies operate to exclude coverage for bodily injuries allegedly caused by toxic substances, which are "pollutants" within the meaning of the policies.
(3) Bechtel's submission of extrinsic evidence, purporting to show underlying plaintiffs sought recovery for injuries from non-toxic causes, does not raise a possibility of coverage under the policies.
(4) Bechtel's argument that the pollution exclusion does not apply because the work site was not "occupied" by the named insured, as required under the terms of several of the exclusions, is without merit.
The trial court's grant of summary judgment to the insurers is therefore affirmed.1
Appellant Bechtel Petroleum Operations, Inc. was a general contractor engaged in the production, storage and distribution of oil and gas at a 78 square mile site known as the Naval Petroleum Reserve in Kern County, California. Bechtel hired a number of subcontractors, including Bob Morton Construction Company, Gilliam & Sons, Inc. and Westside Oilfield Construction, Inc., to perform soil moving, drilling, excavation and other work at the Reserve. In 1995 and 1996, numerous plaintiffs who had worked at the Reserve as employees of the subcontractors filed six different lawsuits against Bechtel.2 The lawsuits alleged the employees suffered bodily injuries as a result of years of exposure to toxic substances at the Reserve. The complaints included allegations that Bechtel allowed the discharge of toxic substances "into and/or onto the air, land, soils and general environment of the Reserve, and that chemicals and heavy metals, known to cause cancer and reproductive toxicity, were used, produced and found at the Reserve, including hazardous concentrations of lead and arsenic.3 The complaints asserted causes of action for negligence, fraud by concealment, and violation of Health and Safety Code section 25249.6.4
Bechtel tendered the complaints to its subcontractors' insurance carriers, whose policies named Bechtel as an additional insured. The insurers rejected the tender, denying they owed any duty to defend Bechtel in the underlying actions, principally due to absolute pollution exclusions in their policies of insurance.
In September 1997, Bechtel filed this lawsuit against Steadfast Insurance Company, Royal Insurance Company of America, Continental Insurance Company, and The Home Insurance Company.5 Bechtel sought a declaration the insurers had a duty to defend Bechtel in the underlying lawsuits and Bechtel was entitled to reimbursement of defense costs, and asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.
Steadfast and Continental brought motions for summary judgment, asserting the absolute pollution exclusion clauses in their insurance contracts barred coverage for the underlying claims. Royal joined in Continental's motion.6 The policy exclusions differed in some respects, but generally excluded from coverage any liability for bodily injury arising out of the discharge, dispersal, release or escape of "pollutants" from any premises occupied by the insured. "Pollutants" were generally defined as any solid, liquid, gaseous or thermal irritant or contaminant.7
Bechtel's response to the Steadfast and Continental summary judgment motions argued that (a) pollution exclusions do not apply to non-environmental bodily injury claims, and (b) the underlying lawsuits alleged injuries caused by acts or omissions other than exposure to toxic substances, thus raising a potential for coverage. Bechtel also asserted that facts extrinsic to the underlying complaints revealed a possibility of coverage. These extrinsic facts consisted of verified questionnaires from underlying plaintiffs, their responses to Bechtel's contention interrogatories, an expert declaration, and a declaration from the attorney for the underlying plaintiffs. The extrinsic facts, provided to the insurers a year after this suit was filed or only after the insurers moved for summary judgment, consisted of assertions plaintiffs were injured by toxic exposure and harmful or unsanitary working conditions. Bechtel argued these assertions were strong extrinsic evidence the underlying plaintiffs were seeking recovery from Bechtel for injuries from causes unrelated to exposure to pollutants, and thus were potentially covered by the insurers' policies.
The trial court refused to consider the extrinsic evidence offered by Bechtel, concluding the insurers were entitled to make their decisions on potential coverage based on information available to them at the time of tender, citing Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1117, 44 Cal.Rptr.2d 272 [].8
The court concluded that all the theories of liability alleged in the underlying complaints arose out of exposure to toxic chemicals and pollutants and were therefore barred by the pollution exclusions. A minute order granting Steadfast's motion for summary adjudication was entered on August 26, 1999, and the Continental and Royal motions for summary judgment were granted by minute order entered on November 4, 1999.9
Judgments were entered in favor of the insurers, and Bechtel filed a timely notice of appeal.10 After Bechtel's opening brief was filed, Royal moved to dismiss the appeal, to take additional evidence, and to request judicial notice, and Continental joined in Royal's motions. Royal and Continental claimed, based on recent statements by counsel for Bechtel in a related case, that Bechtel's defense was provided by its own insurer and therefore Bechtel had no standing to bring this suit. Rulings on those motions were deferred.11
After Bechtel's opening brief was filed, Royal filed a motion to dismiss the appeal. Royal argues that Bechtel has no standing to pursue its appeal—and had no standing to sue in the first place—because Bechtel was fully defended in the underlying actions by its own insurer, Industrial Indemnity Company. Royal states Bechtel's lawyer, in conversations and opposition papers in connection with a related case, has admitted Bechtel's defense fees were paid by Industrial.12 Royal concludes that Bechtel therefore has no legally cognizable claim against Royal or any other insurer, citing as authority Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1295, 77 Cal.Rptr.2d 296 [].13
We conclude Royal is mistaken. First, while it is undisputed that Industrial Indemnity paid Bechtel's defense fees in the first instance, Royal has not established Bechtel has no liability for those fees. Bechtel's declaration in opposition to Royal's motion to dismiss states that under various agreements with Industrial Indemnity "Bechtel is obligated to...
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