Dart Industries v. Commercial Union Insurance
| Decision Date | 25 January 2000 |
| Citation | 92 Cal.Rptr.2d 174 |
| Court | California Court of Appeals Court of Appeals |
| Parties | (Cal.App. 2 Dist. 2000) DART INDUSTRIES, INC., Plaintiff and Respondent, v. COMMERCIAL UNION INSURANCE COMPANY, Defendant and Appellant. B129601 Filed |
APPEAL from a judgment of the Superior Court of Los Angeles County, Loren Miller, Judge. Reversed and remanded with directions.
Selman Breitman, Neil H. Selman, Jeffrey C. Segal and Lynette Klawon for Defendant and Appellant.
Luce, Forward, Hamilton & Scripps, James E. Fitzgerald; Jenner & Block and Stephanie A. Scharf for Plaintiff and Respondent.
CERTIFIED FOR PUBLICATION
This is a dispute between an insured (Dart Industries, Inc.) and its insurer (Commercial Union Insurance Company) about a policy that was in effect from 1946 to 1951. The policy, last seen in 1948, is missing. At trial, Dart claimed Commercial was obligated to defend and indemnify Dart in more than 1,500 product liability lawsuits. Commercial claimed (among other things) that Dart had failed to present sufficient proof of the terms and conditions of the missing policy. The trial court agreed with Dart. We agree with Commercial and explain that, although it is possible to prove the contents of a lost policy by secondary evidence, Dart did not do so in this case. Commercial is entitled to a judgment in its favor.
From the 1940's through the 1960's, Dart's predecessor distributed diethylstilbestrol (DES), an artificial hormone used to prevent miscarriages. Beginning in 1974, more than 1,500 lawsuits were filed against Dart, all claiming DES-related bodily injuries. Dart tendered the defense of the DES suits to the several companies that had insured it during the relevant years, including Commercial's predecessor. Commercial denied coverage and refused to provide a defense. In 1984, Dart filed this action against Commercial and others, seeking declaratory relief and damages for breach of contract.1
In 1989, Dart's motion for preference in trial setting was denied and the case was dismissed for failure to bring it to trial within five years. (Code Civ. Proc., 583.310, 583.360, subd. (a).) On Dart's appeal, we reversed. (Dart Industries, Inc. v. Commercial Union Ins. Co. (Feb. 28, 1992) B047651 [nonpub. opn.].) The case was then tried before Judge Newell Barrett, who entered a minute order in which he ruled in favor of Commercial on the ground that Dart had failed to prove the material terms of the lost policy. Dart requested a statement of decision and a draft was prepared, but Judge Barrett died before it was executed. On Dart's appeal, we reversed and remanded for a new trial. (Dart Industries, Inc. v. Commercial Union Ins. Co. (May 26, 1995) B083165 [nonpub. opn.].)
By stipulation, the new trial was by way of a submission to the court (Hon. Loren Miller) on the record of the first trial, with the evidence expressly limited to that which had been admitted by Judge Barrett. There were several critical issues, all detailed in new briefs submitted by both sides. The trial court decided all factual and legal issues in favor of Dart, finding in its statement of intended decision that, in the DES product liability cases, Commercial had a duty to pay 50 percent of Dart's defense costs, 50 percent of Dart's settlements, and 50 percent of any awards and judgments in favor of the claimants "for bodily injuries allegedly sustained by claimants as a result of the ingestion of . . . DES . . . during the 1946-1951 . . . policy period . . . ." Commercial requested a statement of decision. The trial court asked Dart's lawyers to prepare it. When a proposed statement was filed and served, Commercial objected on several grounds. The trial court nevertheless signed the statement of decision as submitted.
Commercial appealed and we reversed, finding the statement of decision wholly inadequate. (Dart Industries, Inc. v. Commercial Union Ins. Co. (June 27, 1997) B105886 [nonpub. opn.].) We remanded the cause to the trial court with directions to issue a new statement of decision addressing, among other things, the limits of liability for products liability claims (assuming the court found that the policy covered products liability claims), whether the missing policy was accident-based or occurrence-based, and the applicable trigger of coverage. (Id., typed opn. at pp. 15-19.)
Following remand, Dart submitted a new proposed statement of decision. Commercial objected, in detail. Dart responded with a 30-page revised proposed statement of decision. Commercial objected again. After a hearing, the trial court signed Dart's revised proposed statement of decision without making a single change. Not a nit was picked. Not a comma was moved. The statement of decision includes the following findings: "[Commercial] issued [Dart] a policy for a five-year term covering the period September 1, 1946 to September 1, 1951." The "Policy issued to [Dart] included coverage for product liability claims for bodily injuries occurring during the policy period." The "Policy provided coverage for exposure to a [Dart] drug during the Policy period even if injuries caused by that exposure were not discovered until after the policy ended." The "Policy provided occurrence based coverage." "Whether the . . . Policy had 'accident' or 'occurrence' coverage does not affect the DES claims." The "limits of coverage under the . . . Policy are $100,000 per person and $300,000 per occurrence." "In the context of product liability cases, . . . this would mean that if a product, such as DES, caused injury to the mother and subsequently to her two offspring (who allegedly sustained damage as the result of exposure to DES in utero) and all three of them later sued [Dart] for damages, the insurer's limits would be $100,000 per each of the three claimants up to a maximum limit of $300,000 for that lawsuit." The "Policy had a products aggregate with limits of $300,000 on a per year basis." The "Policy did not contain any deductible applicable to products liability coverage, or any coverage."
In the statement of decision and in the judgment, the trial court fixed Dart's damages at about $1.9 million for "local defense costs," about $260,000 for "indemnities," and about $550,000 for "national defense costs," for a total of about $2.7 million, plus prejudgment interest (through December 1992) of about $1.4 million. Commercial appeals.
Dart's proof of the policy's terms and conditions came from the testimony of Charles Pyne (a former employee of Dart's former insurance broker who last saw the missing policy in 1948) and Peter Fortuna (a former employee of Commercial who had handled Dart's account during the 1940's but who had no recollection at all of the language used in the policy), and from four one-page documents found in the broker's old records, plus a few scattered documents from two unrelated lawsuits. A 1970 letter from Dart's former insurance broker explained that the broker's old files had been discarded. Generously construed, Dart's evidence proves that Commercial issued a Comprehensive General Liability (CGL) policy to Dart in 1946. It was a "manuscript" policy (defined by Pyne as one "typed up . . . specifically" for the insured), "custom tailored" for Dart (it "might" have been attached to a "standard policy"). Pyne (who was not involved in negotiating, drafting or issuing the policy, who may or may not have read the policy's declaration page, and who admitted that he never read the policy itself) testified that it was an "occurrence" policy covering personal injury and product liability claims, with limits of $100,000 per person and $300,000 per accident or occurrence (but there is no evidence of the policy's language and no evidence to support Pyne's conclusory assertion that it was an "occurrence" policy).2 According to Pyne, there was a separate provision covering defense costs for which there was no monetary limit. There was no deductible. Although Pyne testified that Dart paid more than $1.3 million in premiums for the lost policy, he admitted that more than $1 million of that premium was for workers' compensation coverage.
That's all there is. There is no evidence at all concerning the words used in the policy. There is no evidence to show what sort of language was used by Commercial (in standard or manuscript policies or at all) at the time Dart's policy was issued (or at any time). There is no evidence to show what sort of language was used in the industry at the time Dart's policy was issued (or at any time). There is no evidence to show what standard provisions, if any, were required by statute at the time Dart's policy was issued, or what standardized provisions, if any, were usually incorporated into Commercial's CGL policies (in the 1940's or at any time). Although a "specimen policy" was offered into evidence by Commercial at the time of the first trial before Judge Barrett, that policy was not admitted into evidence. By stipulation, the only evidence before Judge Miller at the current trial was the evidence admitted by Judge Barrett at the first trial. Accordingly, the numerous references to the "specimen policy" in the statement of decision (drafted by Dart and accepted by Judge Miller) are legally irrelevant.3
To establish Commercial's duty to defend the DES claims, the burden was on Dart, the insured, to prove that the DES claims were potentially covered under the lost policy. (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 300.) Without foundational findings (supported by substantial evidence) that Commercial both owed and breached a duty to defend the DES claims, it was Dart's burden to prove Commercial's duty to indemnify by presenting evidence to establish that the DES claims were within the scope of the policy's basic coverage. (Aydin Corp. v. First State Ins. Co. (19...
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