Certain Underwriters at Lloyd's London v. Conagra Grocery Prods. Co.

• Decision Date: 19 April 2022
• Docket Number: A160548
• Citation: 77 Cal.App.5th 729,292 Cal.Rptr.3d 712
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S LONDON et al., Plaintiffs and Respondents, v. CONAGRA GROCERY PRODUCTS COMPANY et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

77 Cal.App.5th 729

292 Cal.Rptr.3d 712

CERTAIN UNDERWRITERS AT LLOYD'S LONDON et al., Plaintiffs and Respondents,

v.CONAGRA GROCERY PRODUCTS COMPANY et al., Defendants and Appellants.

A160548

Court of Appeal, First District, Division 2, California.

Filed April 19, 2022

Reed Smith, Raymond A. Cardozo, David E. Weiss, T. Connor O'Carroll, San Francisco, for Appellant ConAgra Grocery Products Company.

Zuckerman Spaeder, Carl S. Kravitz (Pro Hac Vice), Caroline E. Reynolds (Pro Hac Vice), Washington, DC, Alicia Shelton (Pro Hac Vice), Baltimore, MD, Nicolaides Fink Thorpe Michaelides, Sara M. Thorpe, Ethan H. Seibert, San Francisco, for Respondents Certain Underwriters at Lloyd's London; Winterthur Swiss Insurance Company; The Northern Assurance Co. of America; Yasuda Fire & Sullivan Marine Insurance Company.

Hinshaw & Culbertson, John E. DeLascio (Pro Hac Vice), Scott M. Seaman (Pro Hac Vice), Chicago, IL, Robert G. Levy, San Francisco, for Respondent Affiliated FM Insurance Co.

Selvin Wraith Halman, Gary R. Selvin, Oakland, Chaffetz Lindsey, Charles J. Scibetta (Pro Hac Vice), Ted Debonis (Pro Hac Vice), New York, NY, for Respondents AIU Insurance Co.; American Home Assurance Company; Granite State Insurance Co.; The Insurance Company of the State of Pennsylvania; Lexington Insurance Co.; National Union Fire Insurance Co. of Pittsburgh, Pennsylvania.

Skarzynski Marick & Black, James H. Kallianis, Jr., Chicago, IL, Sinnott, Puebla, Campagne & Curet, Debra R. Puebla, Robert A. Sanders, Los Angeles, for Respondents American Guarantee & Liability Insurance Co.; American Zurich Insurance Co.; Zurich Reinsurance Co. Ltd.; Zurich Insurance Co.

Clyde & Company US, Bruce D. Celebrezze, San Francisco, Dean J. McElroy, W. Andrew Miller, Paul R. Koepff (Pro Hac Vice), New York, NY, Ryan Westerfield (Pro Hac Vice), Florham Park, NJ, Peter J. Whalen, San Francisco, O'Melveny & Myers, Jonathan Hacker (Pro Hac Vice), Washington, DC, for Respondents Arrowood Indemnity Company; Century Indemnity Company; Pacific Employers Insurance Co.; Westchester Fire Insurance Co.; Westchester Surplus Lines Insurance Company.

Foran Glennon Palandech Ponzi & Edward P. Murphy, Walnut Creek, for Respondents Ancon Insurance Company; Rudloff Brittany Insurance Company; CAN Reinsurance Company; Dominion Insurance Company; Terra Nova Insurance Company; Harper Insurance; La Union Atlantique; St. Katherine Insurance Company.

Dorsey & Whitney, Faisal M. Zubairi, for Respondent Employers Insurance Company of Wausau.

Crowell & Moring, Mark D. Plevin, San Francisco, Laura A. Foggan (Pro Hac Vice), Washington, DC, for Respondents Everest Reinsurance Company; Fairmont Premier Insurance Co.; Crum & Forster Insurance Co.; United States Fire Insurance Co.

Tressler, Mary McPherson, Irvine, for Respondents Fireman's Fund Insurance Co.; Allianz Underwriters Insurance Company.

Kendall Brill & Kelly, Alan Jay Weil, Los Angeles, Shauna E. Woods, for Respondents First State Insurance Co.; Hartford Fire Insurance Co.; New England Insurance Co.; Twin City Fire Insurance Co.

Duane Morris, William J. Baron, Philip R. Matthews, San Francisco, for Respondents Great American E&S Insurance Company; Safety National Casualty Corporation.

Craig & Winkelman, Bruce H. Winkelman, Berkeley, for Respondents Munich Reinsurance America, Inc.; Executive Risk Indemnity.

Wolkin Curran, Brandt L. Wolkin, San Francisco, Jennifer Elowsky, for Respondent Old Republic Insurance Co.

CNA Coverage Litigation Group, Edward J. Tafe, San Francisco, Dentons US, M. Keith Moskowitz (Pro Hac Vice), Kristen C. Rodriguez (Pro Hac Vice), Shannon Y. Shin (Pro Hac Vice), Chicago, IL, for Respondents The Continental Insurance Co.; National Fire Insurance Co. of Hartford; Columbia Casualty Co.; Continental Casualty Co.

Simpson Thacher & Bartlett, Stephen P. Blake, Palo Alto, Bryce L. Friedman (Pro Hac Vice), Susannah S. Geltman (Pro Hac Vice), New York, NY, for Respondents Travelers Casualty and Surety Company; St. Paul Surplus Lines Insurance Company.

Kline, J.^*

This insurance coverage case arises from an underlying representative public nuisance action in which a number of former manufacturers of lead paint were ordered to pay $1.15 billion into a fund to be used to abate the public nuisance created by interior residential lead paint in 10 California jurisdictions. The question presented is whether the trial court correctly determined that ConAgra Grocery Products Company (ConAgra), as successor to paint manufacturer W.P. Fuller & Co. (Fuller), was not entitled to indemnity from its insurers for its payment to the abatement fund due to Insurance Code section 533, which provides that insurers are not liable for losses caused by a willful act of the insured.

BACKGROUND

This case began in 2000, when the County of Santa Clara, subsequently joined by multiple other counties and governmental entities, filed a class action complaint against a number of lead paint manufacturers. ( County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 299, 40 Cal.Rptr.3d 313 ( Santa Clara I ).) After several amendments of the complaint, the trial court sustained demurrers to causes of action for public nuisance, one a claim by the class plaintiffs seeking damages and the other a representative action on behalf of the People of the State of California seeking abatement. ( Id. at pp. 299–301, 40 Cal.Rptr.3d 313.) The court later granted the defendants’ motion for summary judgment on other causes of action and entered a judgment of dismissal. ( Id. at pp. 301–303, 40 Cal.Rptr.3d 313.)

On appeal, the Sixth District Court of Appeal held the trial court erred in sustaining the demurrer to the cause of action for representative public nuisance and granting summary judgment on three others. ( Santa Clara I , supra , 137 Cal.App.4th at p. 333, 40 Cal.Rptr.3d 313.) As to the cause of action for representative public nuisance, the court explained that liability was "premised on defendants’ promotion of lead paint for interior use with knowledge of the hazard that such use would create." ( Id. at p. 309, 40 Cal.Rptr.3d 313.) "Because this type of nuisance action does not seek damages but rather abatement, a plaintiff may obtain relief before the hazard causes any physical injury or physical damage to property." ( Ibid . )

On remand, on March 16, 2011, the plaintiffs¹ filed a fourth amended complaint alleging a single cause of action for representative public nuisance on behalf of the People. The complaint alleged that the presence of lead in paint and coatings in and around homes and buildings in California has created a massive public health crisis and that defendants created and/or assisted in the creation of this nuisance by, among other things, promoting lead for interior and exterior use despite having known for nearly a century that such use of lead was hazardous to human beings. Following a trial in 2013, the trial court found ConAgra and two other companies (NL Industries, Inc. and the Sherwin-Williams Company) jointly and severally liable and ordered establishment of a fund dedicated to abatement of lead paint in pre-1978 homes in the 10 jurisdictions represented in the case.² The court's lengthy and detailed statement of decision (113 pages) and proposed judgment were filed on January 7, 2014. On March 26, 2014, the trial court issued an amended statement of decision ( People v. Atlantic Richfield Co. (Super. Ct., Santa Clara County, 2014, No. 100CV78865), 2014 WL 1385823 [amended statement of dec.]) and amended judgment ( People v. Atlantic Richfield Co. (Super. Ct., Santa Clara County, 2014, No. 100CV78865), 2014 WL 1385821 [amended judg.]) requiring the three companies to pay $1.15 billion into the abatement fund.

ConAgra and the other two companies appealed. The Sixth District Court of Appeal rejected most of the challenges to the judgment, but reversed for recalculation of the abatement fund to exclude the cost of remediating lead hazards in post-1950 housing, as there was no evidence the companies affirmatively promoted lead paint for interior use after 1950 and insufficient evidence of a causal connection between the companies’ earlier promotions and interior lead paint in homes built after 1950. ( People v. ConAgra Grocery Products Co. (2017) 17 Cal.App.5th 51, 227 Cal.Rptr.3d 499 ( Santa Clara II ).) The California Supreme Court denied review and the United States Supreme Court denied certiorari. ( Ibid. , review den. Feb. 14, 2018, cert. denied (2018) ––– U.S. ––––, 139 S.Ct. 377, 202 L.Ed.2d 288.)

On remand, the trial court recalculated the amount to be paid into the abatement fund to $409 million. After an offset for payment by another lead paint manufacturer no longer in the case, the total amount to be paid into the fund was reduced to $401,122,482.

On July 10, 2019, the parties executed a settlement agreement under which ConAgra, NL Industries, Inc. and Sherwin-Williams Company each agreed to pay $101,666,666 in full satisfaction of any and all claims.

Meanwhile, just after the trial court filed its initial statement of decision in January 2014, Certain Underwriters at Lloyd's London and other insurers had filed a first amended complaint for declaratory relief, seeking a determination that they had no coverage obligation to ConAgra with respect to or arising from this case under policies issued to ConAgra and/or its predecessor companies. The declaratory relief action was stayed on April 2, 2014, and the stay was lifted as of March 13, 2019. On March 22, 2019, ConAgra filed its answer, seeking dismissal of the first amended complaint and judgment in ConAgra's favor, and a cross-complaint for declaratory relief, seeking a determination that it was entitled to coverage under specified primary and excess liability insurance policies.³

On July 19, 2019, the insurers moved for summary judgment or, in the alternative, summary adjudication. The insurers argued they had no duty to provide coverage for four reasons: (1) ...