County Sanitation Dist. No. 2 of Los Angeles County v. Harbor Ins. Co.

• Decision Date: 20 August 1993
• Docket Number: No. B058008,B058008
• Citation: 17 Cal.App.4th 1622,22 Cal.Rptr.2d 90
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 17 Cal.App.4th 1622 17 Cal.App.4th 1622 COUNTY SANITATION DISTRICT NO. 2 OF LOS ANGELES COUNTY, Plaintiff and Appellant, v. HARBOR INSURANCE COMPANY, et al., Defendants and Respondents.

Page 90

22 Cal.Rptr.2d 90

Previously published at 17 Cal.App.4th 1622

17 Cal.App.4th 1622

COUNTY SANITATION DISTRICT NO. 2 OF LOS ANGELES COUNTY, Plaintiff and Appellant, v. HARBOR INSURANCE COMPANY, et al., Defendants and Respondents.

No. B058008.

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

Aug. 20, 1993.

Rehearing Granted Sept. 16, 1993.

Review Granted April 13, 1994.

Review Transferred to the Court of Appeal, Oct. 5, 1995.

Knapp, Marsh, Jones & Doran, Paul J. Beck and Daniel V. Hyde, Los Angeles, for plaintiff and appellant.

Parker, Stanbury, Babcock, Combs & Bergsten, Michael E. McCabe and Gary E. Kinnett, Los Angeles, for defendant and respondent American Bankers Ins. Co. of Florida. Sedgwick, Detert, Moran & Arnold, Richard B. Hall and N. David Lyons, Los Angeles, for defendant and respondent Cent. Nat. Ins. Co. of Omaha. Daniels, Baratta & Fine, Mark R. Israel, Los Angeles, for defendant and respondent California Ins. Guarantee Ass'n.

PEREZ, Associate Justice.

Appellant County Sanitation District No. 2 of Los Angeles County, (the District) sued several insurers for their failure to defend and indemnify the District against suits arising from the Abalone Cove landslide, asserting the insurers should pay the costs of defense and settlement. The court applied the "manifestation" trigger of insurance coverage and held some of the insurers were not liable; and that recovery from the California Insurance Guaranty Association (CIGA), which had taken over the one insurer which was liable, was limited by statute.

We conclude the court ruled appropriately in every respect and, consequently, affirm the judgment.

UNDERLYING FACTS:

1. The Horan Action

In August 1979, Lawrence and Patricia Horan, et al., (the Horan plaintiffs) filed suit against the District for damages their respective parcels of real property suffered as a result of the 1974 Abalone Cove landslide on the Palos Verdes Peninsula. In pertinent part, the complaint alleged that each of the Horan plaintiffs had complied with statutory requirements and filed timely claims with the District; the Abalone Cove landslide was part of "an ancient landslide mass that has not been active within the last 10,000 years prior to 1956;" the construction activity commenced by the District in 1956 precipitated activation of this landslide area; in 1974 a small slide took place on improved public property in the Abalone Cove Beach Area; no steps by the District were taken to stabilize this area; consequently the Horan plaintiffs' properties, located upslope from this area, had moved and continued to move, causing damage to the structures on their properties.

The District received the first claims from the Horan plaintiffs on March 26, 1979. The last claim was received on August 8, 1979. Each claim stated the damage occurred within one year prior to the filing of the claim.

On May 27, 1987, the County reached a $715,000 settlement with the Horan plaintiffs. All parties to the underlying action stipulated at trial to the reasonableness of the settlement amount.

2. The District's Action

The District filed its original and first amended complaint against six insurers, which had issued it general liability insurance policies from 1972 through 1981. ¹ In sum, the District alleged that the Abalone Cove landslide continuously occurred from 1974 to 1981; by the terms of the insurers' policies, each had agreed to defend and indemnify the District for the kind of damage caused to the Horan plaintiffs by the Abalone Cove landslide; these policies were in effect when the Abalone Cove landslide occurred; and with the approval of each of these insurers, on May 28, 1987, the District had reached a settlement of $715,000 with the Horan plaintiffs. The District further alleged that it had made a demand on these insurers, and each refused to pay, except CIGA, which paid $100,000 on behalf of Integrity; Central National, which loaned the sum of $107,500; and Puritan which loaned the sum of $7,500. In addition, the District alleged it had incurred $471,419.50 in litigation costs and expenses.

Respondent Central National cross-complained against the District, alleging it was entitled to repayment of its $107,500 loan to the District.

Before trial, the District settled with three insurers. The three remaining were: respondent American Bankers, which issued the District a primary general liability policy for the period November 30, 1974, to December 1975; respondent Central National, which issued three successive, primary general liability policies for the period December 17, 1975, to February 17, 1978; and respondent CIGA, the successor to insolvent Integrity, which issued the District three successive, primary general liability policies for the period February 17, 1978, to February 17, 1981. ²

Prior to trial, in response to motions for summary adjudication of issues and for summary judgment, the court ruled that "only those insurers whose coverage existed at the time of the manifestation of damage could be liable." The court defined "manifestation of damage" as "the time the damage was manifested in the property of the claimants ... manifested by cracks in the walls, houses falling down, things like that." The court ruled, therefore, that respondent Central National was liable for only the two Horan plaintiffs who experienced damage prior to expiration of Central's coverage and, as to the remaining claims, granted respondent American Bankers' motion for summary judgment.

On the basis of irrelevancy, the court did not permit the District to call an expert witness, who would have testified about the nature and effects of the 1974 Abalone Cove landslide.

Judgment was entered on February 20, 1991. In its statement of decision, filed the same date, the court, in pertinent part, ruled: the liability policies of respondents Central National and American Bankers were "occurrence" type policies; the central coverage issue involved was "time of occurrence" of "property damage;" the legal rule to be applied was the time of "manifestation" of such damage to the third person claimant; the only relevant manifested damage was that to the Horan plaintiffs' properties; the first "manifestation" of "property damage" to the Horan homes occurred after respondent Central National's coverage had expired on February 27, 1978, and while Integrity's coverage was in effect; the earliest possible manifestation of damage was one year from the filing of the first claim against the District, i.e., March 27, 1978; this date was after the expiration of the policies of respondents Central National and American Bankers; therefore, neither of these respondents had a duty to indemnify or defend. The court further ruled that respondent Central National was entitled to repayment of its $107,500 loan to the District; the policy of respondent CIGA (Integrity) was in effect and it had a duty to defend and indemnify; CIGA's obligation to pay defense costs was statutorily limited to the amounts expended after appointment of Integrity's liquidator; and CIGA's (Integrity's) indemnification obligation was limited by the policy terms to any amount over $500,000, i.e., $251,000; as CIGA had contributed $100,000 to the funding of the settlement, it was entitled to a credit or offset in that amount.

The District timely appealed.

DISCUSSION:

The District asserts the court committed legal error when it applied the "manifestation" trigger of liability to a third party liability claim based upon progressive continuing damage; committed prejudicial error when it disallowed the testimony of the District's expert witness; and committed legal error when it limited the liability of CIGA.

1. Trigger of Liability

Where the facts are undisputed, defining and interpreting terms of an insurance contract to determine when liability should attach is a question of law. As such, we are not bound by the trial court's interpretation; instead, we exercise our independent judgment to interpret the language of the insurance contract. (See Fireman's Fund Ins. Co. v. Aetna Casualty & Surety Co. (1990) 223 Cal.App.3d 1621, 1625, 273 Cal.Rptr. 431; Canterbury Termite Control, Inc. v. Structural Pest Control Bd. (1989) 207 Cal.App.3d 422, 426, 254 Cal.Rptr. 873.)

The District asserts, in a third party liability context where there is continuing, progressive property damage, the correct trigger of liability should be the "time of occurrence" of the event which caused the property damage; and, here, the "occurrence" which caused the property damage to the Horan plaintiffs was the Abalone Cove landslide, which occurred continuously from 1974 to 1978. We do not agree.

While there has been no definitive resolution of this issue by our Supreme Court, there is case law, described below, which supports application of the "manifestation" trigger in a third party liability claim context. We find the analysis and conclusions of these cases to be persuasive; consequently, we concur with the trial court's legal determination.

California Union Ins. Co. v. Landmark Ins. Co. (1983) 145 Cal.App.3d 462, 193 Cal.Rptr. 461, a third party liability case, discussed the problems arising in a progressive property damage case, specifically addressing the issue of which carrier should indemnify insureds for a loss that occurred over two separate policy periods. In California Union, the insureds installed a swimming pool during one insurer's policy period. The pipes to the pool, and possibly the pool itself, began to leak during that insurer's policy period and repairs, which the parties believed would correct the problem, were made. However, the leaks continued during the term of the successive insurer, and subsequent damage occurred. After a thorough discussion of several out-of-state and California cases, the California Union court held a situation involving continuous, progressive and deteriorating damage over a period of time was "one...