Lloyd's of London v. Superior Court

• Decision Date: 01 February 2001
• Docket Number: No. S084057.,S084057.
• Citation: 24 Cal.4th 945,16 P.3d 94,103 Cal.Rptr.2d 672
• Court: California Supreme Court
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; Powerine Oil Company, Inc., et al., Real Parties in Interest.

103 Cal.Rptr.2d 672

24 Cal.4th 945

16 P.3d 94

CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent;

Powerine Oil Company, Inc., et al., Real Parties in Interest.

No. S084057.

Supreme Court of California.

February 1, 2001.

Rehearing Denied April 18, 2001.¹

Hancock, Rothert & Bunshoft, Patrick A. Cathcart, Los Angeles, William J. Baron, San Francisco, Jennifer D. McKee, Laura A. Pace, Robert J. Zapf and Jo-Ann Horn Maynard, Los Angeles, for Petitioners.

Sinnott, Dito, Moura & Puebla, Randolph P. Sinnott, Los Angeles; Wiley, Rein & Fielding, Laura A. Foggan, Daniel E. Troy, N. Christopher Hardee, Wash., DC, John Dunfee; Bien & Summers and Elliot L. Bien, San Francisco, for Insurance Environmental Litigation Association as Amicus Curiae on behalf of Petitioners.

Charlston, Revich & Williams, Ira Revich, Los Angeles, and Nicholas R. Andrea

for The Home Insurance Company as Amicus Curiae on behalf of Petitioners.

O'Melveny & Myers, Richard B. Goetz and Lawrence M. Hadley for Century Indemnity Company as Amicus Curiae on behalf of Petitioners.

Greines, Martin, Stein & Richland and Irving H. Greines, Beverly Hills, for Truck Insurance Exchange as Amicus Curiae on behalf of Petitioners.

No appearance for Respondent.

Isola, Bowers, David R. Isola and Aaron L. Bowers, Acampo, for Real Party in Interest Powerine Oil Company.

Heller, Ehrman, White & McAuliffe, Robert S. Venning, David B. Goodwin and Esta L. Brand, San Francisco, for Real Party in Interest Powerine Oil Company and for Pacific Gas and Electric Company and Granite Management Corporation as Amici Curiae on behalf of Real Parties in Interest.

Nossaman, Gunther, Knox & Elliott, Scott P. DeVries and Elaine M. O'Neil, San Francisco, for Aerojet-General Corporation and Dover Diversified Industries, Inc., as Amici Curiae on behalf of Real Party in Interest Powerine Oil Company.

Zevnik, Horton, Guibord, McGovern, Palmer & Fognani, Mitchel Y. Horton and David S. Cox, Los Angeles, for ITT Industries, Inc., Pneumo Abex Corporation, Sunoco, Inc., and Pepsi Cola General Bottlers, Inc., as Amici Curiae on behalf of Real Party in Interest Powerine Oil Company.

Latham & Watkins, David L. Mulliken, Dorn G. Bishop, William C. Tayler, San Diego, and Jill N. Willis for Montrose Chemical Corporation of California, Navistar International Transportation Corp., Fluor Daniel, Inc., AstraZeneca, The Boeing Company, International Truck & Engine Corporation, Masco Tech, Maxwell Technologies, Inc., and Rohr, Inc., doing business as BF Goodrich Aerostructures Group as Amici Curiae on behalf of Real Party in Interest Powerine Oil Company.

Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistant Attorney General, Craig C. Thompson, Acting Assistant Attorney General and Timothy R. Patterson, Deputy Attorney General for the People of the State of California ex rel. Attorney General Bill Lockyer as Amicus Curiae on behalf of Real Party in Interest Powerine Oil Company.

Troop Steuber Pasich Reddick & Tobey, Kirk A. Pasich and Catherine L. Rivard, Los Angeles, as Amici Curiae on behalf of Real Party in Interest Powerine Oil Company.

David L. Alexander, Oakland; Farella, Braun & Martel, Deborah S. Balati and Pamela H. Davis, San Francisco, for City of Oakland and Board of Port Commissioners as Amici Curiae on behalf of Real Party in Interest Powerine Oil Company.

Brobeck, Phleger & Harrison, Donald W. Brown, Thomas M. Peterson and Laura J. Remington, San Francisco, for Aydin Corporation, Coltec Industries, Inc., Exxon Mobil Corporation, Fibreboard Corporation, Imperial Oil Limited, McKesson HBOC, Inc., Mascotech, Inc., Shell Oil Company and Tosco Corporation as Amici Curiae on behalf of Real Party in Interest Powerine Oil Company.

Adelson, Hess & Kelly, Randy M. Hess, Duane W. Shewaga, Campbell, and Michelle L. Fogliani for California Trustee's Association as Amicus Curiae on behalf of Real Party in Interest Powerine Oil Company.

Anderson Kill & Olick, Edward J. Stein, William G. Passannante and M. Christina Ricarte, New York, N.Y., for The Glidden Company as Amicus Curiae on behalf of Real Party in Interest Powerine Oil Company.

Stanzler Funderburk & Castelllon, Jordan S. Stanzler and Dennis G. Rolstad, San Francisco, for Weir Floway, Inc., as Amicus Curiae on behalf of Real Party in Interest Powerine Oil Company. Munger, Tolles & Olson, Cary B. Lerman, Los Angeles; Spriggs & Hollingsworth and Marc S. Mayerson, Wash., D.C., for Aventis Cropscience USA, Inc., as Amicus Curiae on behalf of Real Party in Interest Powerine Oil Company.

Irell & Manella, Los Angeles, and Thomas W. Johnson, Jr., Newport Beach, as Amici Curiae on behalf of Real Party in Interest Powerine Oil Company.

MOSK, J.

We granted review to resolve an important issue arising under the standard comprehensive general liability insurance policy.

In one provision, the standard policy imposes on the insurer a duty to defend the insured—in typical language, it generally states that the insurer has a "duty to defend" the insured "in any suit seeking damages" for harm alleged within coverage.

In another provision, the standard policy imposes on the insurer a duty to indemnify the insured—again in typical language, it generally states that the insurer "will pay all sums that the insured becomes legally obligated to pay as damages" for harm proved within coverage.

In Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 77 Cal.Rptr.2d 107, 959 P.2d 265 (hereafter sometimes Foster-Gardner), we addressed the question, which was of first impression in the State of California, whether the insurer's duty to defend the insured in a "suit seeking damages" was limited to a civil action prosecuted in a court. We answered in the affirmative. We went on to conclude that the duty did not extend to a proceeding conducted before an administrative agency pursuant to an environmental statute.

In this cause, we address the question, also of first impression in this state, whether the insurer's duty to indemnify the insured for "all sums that the insured becomes legally obligated to pay as damages" is limited to money ordered by a court. We shall answer in the affirmative. We shall go on to conclude that the duty does not extend to any expenses required by an administrative agency pursuant to an environmental statute.

I

This cause arises from a petition for writ of mandate filed in the Court of Appeal for the Second Appellate District, and subsequently assigned to Division Three thereof. The petitioners are Certain Underwriters at Lloyd's, London, and Certain London Market Insurance Companies, hereafter collectively the London Insurers; the respondent is the Superior Court of Los Angeles County; and the real parties in interest are entities including Powerine Oil Company, Inc.

The petition for writ of mandate, as the Court of Appeal would later state, was submitted against this background:

"Powerine was engaged in the oil refining business for approximately 60 years. Through its predecessor, Rothschild Oil [Company], it commenced oil refining operations in Santa Fe Springs, California, in the mid 1930's. Over the years it expanded those operations and by the late 1970's Powerine's business occupied over 100 acres and employed over 500 people. In addition, Powerine also engaged in oil and petroleum-related exploration, production, terminaling and transportation operations throughout the western states. However, in approximately 1985, a soft petroleum market resulted in a significant financial reversal, eventually forcing Powerine into bankruptcy. Ultimately, it divested itself of all of its operations except for its refinery in Santa Fe Springs. Even so, that refinery [was] only ... periodically operated between 1986-1995. Since the latter date, it has not been operated at all, and only a skeleton crew of employees has remained, primarily for environmental compliance and equipment maintenance purposes." Read in conjunction with all of its supporting papers, the petition for writ of mandate contains allegations, subsequently admitted or at least not denied, to the following effect:

Highlands Insurance Company filed a complaint and thereby initiated a civil action in the Superior Court of Los Angeles County for declaratory relief against Powerine, among others. In pertinent part, it alleged, in substance, that it had issued Powerine various comprehensive general liability insurance policies; the United States Environmental Protection Agency (EPA) had instituted a proceeding against Powerine pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) (42 U.S.C. § 9601 et seq.) for the cleanup of a contaminated site in Monterey Park, the so-called Operating Industries, Inc., Superfund Site, and for the abatement of the contamination's effects; Powerine demanded that Highlands defend and indemnify it in the pending proceeding; Highlands undertook to defend Powerine under a reservation of rights, and continued to do so. Highlands prayed for a declaration that it did not owe Powerine any duty to defend or any duty to indemnify in the pending proceeding.

Powerine filed a cross-complaint and thereby initiated a cross-action essentially for damages and declaratory relief against the London Insurers, among others. In the operative cross-complaint, which is the second amended one, Powerine alleged, in pertinent part and in substance, that the London Insurers had issued it various insurance policies, including policy No. LAB 2579, a comprehensive general liability insurance policy for a term from May 1, 1958, to May 1, 1961; the EPA had instituted a proceeding against Powerine pursuant to CERCLA for the cleanup of the contaminated Operating Industries, Inc., Superfund Site in Monterey Park, and for the abatement of the contamination's effects, and had required it, and would continue to require...