A-H Plating, Inc. v. American National Fire Ins. Co.

• Decision Date: 28 August 1997
• Docket Number: A-H,No. B104163,B104163
• Citation: 57 Cal.App.4th 427,67 Cal.Rptr.2d 113
• Court: California Court of Appeals Court of Appeals
• Parties: , 97 Cal. Daily Op. Serv. 7041, 97 Daily Journal D.A.R. 11,310 PLATING, INC., Plaintiff and Appellant, v. AMERICAN NATIONAL FIRE INSURANCE COMPANY, Defendant and Respondent.

Page 113

67 Cal.Rptr.2d 113

57 Cal.App.4th 427, 97 Cal. Daily Op. Serv. 7041,

97 Daily Journal D.A.R. 11,310

A-H PLATING, INC., Plaintiff and Appellant, v. AMERICAN NATIONAL FIRE INSURANCE COMPANY, Defendant and Respondent.

No. B104163.

Court of Appeal, Second District, Division 1, California.

Aug. 28, 1997.

Certified for Partial Publication ^*

Rosin & Elperin and William Elperin, Los Angeles, for Plaintiff and Appellant.

Murchison & Cumming, Edmund G. Farrell III and James S. Williams, Los Angeles, for Defendant and Respondent.

MASTERSON, Associate Justice.

Defendant American National Fire Insurance Company ("American National") insured plaintiff A-H Plating, Inc. under a commercial general liability policy. Third parties brought claims against A-H Plating, alleging that it was partly responsible for contaminating local groundwater. A-H Plating requested a defense and indemnity from American National, which rejected the request.

A-H Plating then filed this action for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory relief. American National moved for summary judgment. The trial court granted the motion on the ground that the policy's "pollution exclusion" precluded coverage. We reverse.

BACKGROUND

In 1979, A-H Plating commenced electroplating operations at 1837 Victory Place, Burbank, California. It specializes in hard chrome, nickel and cadmium plating, and product engineering and design, primarily for the aerospace industry.

From September 12, 1983, through September 12, 1986, American National insured A-H Plating under a commercial general liability policy. "Coverage D" of the policy required American National "[t]o pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of property damage caused by an occurrence." ¹ American National further agreed "to defend any suit against the insured seeking damages on account of such ... property damage, even if any of the allegations of the suit are groundless, false or fraudulent...." The policy excluded coverage for damage to property caused by the discharge or release of contaminants or pollutants, unless the discharge or release was "sudden and accidental." ² The policy also excluded damage to property owned, occupied, or rented by the insured, used by the insured, or in the care, custody, or control of the insured.

In February 1991, the United States filed suit against Lockheed Corporation ("Lockheed"), alleging that it had released hazardous substances into the soil and groundwater in an area known as the "Burbank Operable Unit Site" (United States v. Lockheed Co. (U.S.Dist.Ct., C.D.Cal., 1991, No. 91-4527-MRP)). ³ Lockheed settled that case by agreeing to undertake an extensive extraction and treatment program to remediate the contaminated groundwater.

In April 1994, Lockheed filed an action in federal court under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. § 9601 et seq.) to recover the cost of remediating the groundwater at the Burbank site (Lockheed Corporation v. Crane Company et al. (U.S.Dist.Ct., C.D.Cal., 1994, No. 94-2717-KN)). Lockheed alleged that approximately 107 individuals and entities, including A-H Plating, had contributed to the pollution of the groundwater. By way of its complaint, Lockheed sought to recover all or part of the cost of cleaning up the site.

In a letter dated April 12, 1994, A-H Plating informed American National of the Lockheed action and requested financial and legal assistance in defending the matter. American National retained an investigator to assist it in determining various coverage issues. On July 20, 1994, the investigator interviewed Peter Waschak, the president of A-H Plating since July 1991, and Charles De Cuir, the president from 1979 to 1987.

By letter dated November 21, 1994, American National denied A-H Plating's claim under the policy based on the pollution exclusion. The letter stated in part: "Based upon the information provided to date, we have not seen any evidence of a sudden and accidental release resulting in property damage during the relevant policy period. [p] The available facts indicate that the contamination, if any, occurred over time and was the result of 'ordinary and/or intentional business practices'...."

In response, A-H Plating filed this action, alleging causes of action for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory relief. ⁴ The complaint alleged that A-H Plating had notified American National of the Lockheed action as well as similar claims by other parties, all of which sought contribution for the cost of remediating the groundwater at the Burbank site. ⁵ A-H Plating alleged that American National had failed to properly investigate the third party claims and had wrongfully refused to defend and settle them.

In February 1996, American National filed a motion for summary judgment or, in the alternative, for summary adjudication of issues, arguing that (1) it had no duty to provide a defense or indemnity under the policy because coverage was barred by the pollution exclusion and the "owned property" exclusion and (2) the absence of coverage rendered A-H Plating's breach of covenant claim and request for punitive damages without merit. After full briefing and oral argument, the trial court granted the motion on the ground that A-H Plating "ha[d] not provided facts which showed a potential for coverage under an exception to the pollution exclusion." The trial court reasoned that "[g]radual discharge or release of material is not the sudden release envisioned in the policy." Judgment was entered accordingly. A-H Plating filed a timely notice of appeal.

DISCUSSION

Summary judgment is appropriate if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).)

"A defendant seeking summary judgment has met the burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action cannot be established [or that there is a complete defense to that cause of action].... Once the defendant's burden is met, the burden shifts to the plaintiff to show that a triable issue of fact exists as to that cause of action.... In reviewing the propriety of a summary judgment, the appellate court independently reviews the record that was before the trial court.... We must determine whether the facts as shown by the parties give rise to a triable issue of material fact.... In making this determination, the moving party's affidavits are strictly construed while those of the opposing party are liberally construed." (Hanooka v. Pivko (1994) 22 Cal.App.4th 1553, 1558, 28 Cal.Rptr.2d 70, citations omitted; see also Code Civ. Proc., § 437c, subd. (o )(2).) We accept as undisputed facts only those portions of the moving party's evidence that are not contradicted by the opposing party's evidence. (Kelleher v. Empresa Hondurena de Vapores, S.A. (1976) 57 Cal.App.3d 52, 56, 129 Cal.Rptr. 32.) In other words, the facts alleged in the evidence of the party opposing summary judgment and the reasonable inferences therefrom must be accepted as true. (See Zeilman v. County of Kern (1985) 168 Cal.App.3d 1174, 1179, fn. 3, 214 Cal.Rptr. 746; Neinstein v. Los Angeles Dodgers, Inc. (1986) 185 Cal.App.3d 176, 179, 229 Cal.Rptr. 612.)

A. Duty to Defend

" '[A] liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity.... "[T]he carrier must defend a suit which potentially seeks damages within the coverage of the policy." ... Implicit in this rule is the principle that the duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages ultimately are awarded....' ...

" 'The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy....' ... '[F]or an insurer, the existence of a duty to defend turns not upon the ultimate adjudication of coverage under its policy of insurance, but upon those facts known by the insurer at the inception of a third party lawsuit.... Hence, the duty "may exist even where coverage is in doubt and ultimately does not develop." ...' ...

"The defense duty is a continuing one, arising on tender of defense and lasting until the underlying lawsuit is concluded ..., or until it has been shown that there is no potential for coverage.... Imposition of an immediate duty to defend is necessary to afford the insured what it is entitled to: the full protection of a defense on its behalf....

"The insured's desire to secure the right to call on the insurer's superior resources for the defense of third party claims is, in all likelihood, typically as significant a motive for the purchase of insurance as is the wish to obtain indemnity for possible liability. As a consequence, California courts have been consistently solicitous of insureds' expectations on this score....

"...

" '... [W]here extrinsic evidence establishes that the ultimate question of coverage can be determined as a matter of law on undisputed facts, we see no reason to prevent an insurer from seeking summary adjudication that no potential for liability exists and thus that it has no duty to defend.... We see the critical distinction as not whether extrinsic evidence may be considered, but whether such evidence presents undisputed facts which conclusively eliminate a potential for liability.' ...

"...

"... Any doubt as to whether the facts establish the existence of the...