Montrose Chemical Corp. of California v. Superior Court (Canadian Universal Ins. Co., Inc.)
| Decision Date | 21 July 1992 |
| Docket Number | No. B062993,B062993 |
| Citation | 13 Cal.App.4th 1201,10 Cal.Rptr.2d 687 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Previously published at 13 Cal.App.4th 1201, 18 Cal.App.4th 1386, 8 Cal.App.4th 260 13 Cal.App.4th 1201, 18 Cal.App.4th 1386, 8 Cal.App.4th 260 MONTROSE CHEMICAL CORPORATION OF CALIFORNIA, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent. CANADIAN UNIVERSAL INSURANCE COMPANY, INC., et al., Real Parties in Interest. |
Latham & Watkins, David L. Mulliken, Richard A. Conn, Jr., Kristine L. Wilkes, Daniel E. Butcher, Donna J. Williams, and Michael G. Romey, San Diego, for petitioner.
No appearance for respondent.
Coudert Brothers, Douglas L. Hallett, William M. Samoska, Manfried H. Stucki, Los Angeles, Boornazian, Jensen & Garthe, Charles I. Eisner, Alan E. Swerdlow, Oakland, O'Melveny & Myers, Ralph W. Dau, H. Douglas Galt, Mindlin, Tigerman & Holtzman, Michael Holtzman, Los Angeles, Drinker, Biddle & Reath, John Chesney, Richard T. Buchanan, Jeffrey A. Pott, Philadelphia, Pa., Wilson, Kenna & Borys, Lawrence Borys, Jeffrey Burt, Los Angeles, Buchalter, Nemer, Fields & Younger, Marcus M. Kaufman, Adrienne F. Millican, and Cheryl A. Orr, Newport Beach, for real parties in interest.
*
Petitioner, Montrose Chemical Corporation of California, seeks a writ of mandate to overturn respondent court's order denying Montrose's motion for summary adjudication that its insurance carriers are obligated to defend it in an environmental lawsuit.
Montrose, a defunct chemical company, manufactured dichloro-diphenyl-trichloroethane (DDT) for use in pesticides from 1947 until 1982. Montrose had been covered since 1960 by comprehensive general liability [CGL] insurance policies purchased from seven different carriers [hereinafter "carriers"]. 1
Each carrier agreed to "pay on behalf of [Montrose] all sums which [Montrose] shall become legally obligated to pay as damages because of ... PROPERTY DAMAGE TO WHICH THIS INSURANCE applies, caused by an occurrence...."
"Property damage," was defined as "injury to or destruction of tangible property which results during the policy period." 2
"Occurrence" was defined as "an accident, including continuous or repeated exposure to conditions which results in ... property damage neither expected nor intended from the standpoint of the insured...."
The policies also imposed upon the carriers a "duty to defend any suit against On June 18, 1990, the United States and the State of California filed suit in federal court against Montrose and the Los Angeles County Sanitation District (County), seeking reimbursement for costs incurred pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, 42 U.S.C. § 9607.) (See United States v. Montrose Chemical Corporation of California (U.S.Dist.Ct.C.D.Cal., 1990, No. CV 90-3122-AAH (JRx)).) The complaint alleged that Montrose released hazardous substances, including the insecticide DDT, into the environment from a 13-acre manufacturing site located in Torrance, California. 3 Damages were also sought for injury to, destruction of, or loss of natural resources resulting from releases of hazardous substances into the environment in and around the San Pedro Channel, the Palos Verdes Shelf, the Los Angeles-Long Beach Harbors and the environs of Santa Catalina Island and the Channel Islands. The complaint asserted that Montrose was liable for various forms of property damage, including damage to land, water, and wildlife, and that such property damage began in 1947 and continued to occur through the present. The complaint did not specify whether the acts complained of were intentional, negligent, or a combination of both.
[Montrose] seeking damages on account of such ... property damage, even if any of the allegations of the suit are groundless, false or fraudulent...."
The County cross-complained against Montrose, alleging that Montrose's operations at the Torrance facility resulted in property damage over a lengthy period of time. The cross-complaint alleged that Montrose was strictly liable for any property damage under CERCLA, and additionally alleged Montrose's liability based on common law negligence.
Montrose tendered defense of the federal action and cross-complaint to its seven CGL carriers. Five rejected the tender of defense. Two agreed to defend, subject to a reservation of rights. 4 On July 6, 1990, Montrose sued all seven carriers, seeking a declaration that each had a duty both to defend and to indemnify in the federal action and the County's cross-complaint.
The carriers denied that they had a duty to defend, and each asserted a number of affirmative defenses, including the exclusions contained within the various policies.
On September 20, 1991, Montrose sought summary adjudication of the insurers' duty to defend. 5 Montrose argued that under Gray v. Zurich Insurance Co. (1966) 65 Cal.2d. 263, 54 Cal.Rptr. 104, 419 P.2d 168, it was entitled as a matter of law to have its carriers defend the underlying CERCLA suit, since the allegations of the complaint, along with the terms of the CGL policies, created a potential for liability, thus triggering a duty to defend. The carriers argued that Montrose's showing was insufficient to entitle it to summary adjudication, and that extrinsic facts presented to the court created a triable issue of fact regarding whether a potential for liability existed, thus defeating Montrose's right to summary adjudication of the carriers' duty to defend.
The superior court denied Montrose's motion on two grounds. First, it found that Montrose had failed to make a prima facie As a second, independent ground for denying the motion, the court found that the carriers had adduced extrinsic evidence creating a "triable issue of fact" as to whether the CERCLA complaint alleged acts within the policies' coverage. The court reasoned that because such evidence, if credited, "could support the inference that the alleged contamination occurred by reason of Montrose's deliberate business management practices, rather than as a result of an accident or occurrence," summary adjudication was inappropriate.
showing that the CERCLA action created a potential for coverage. Specifically, the court held that Montrose could not rely solely upon the factual allegations of the underlying complaint to show potential coverage (and thus a duty to defend), because "those factual allegations are completely neutral regarding whether the alleged contamination was caused by an occurrence or by Montrose's [18 Cal.App.4th 1393] deliberate and normal business practices." The court concluded that absent an affirmative evidentiary showing by Montrose that the contamination alleged in the CERCLA complaint "resulted from an accident or occurrence," Montrose had failed to show a "potential for coverage."
Montrose then instituted this writ proceeding, reiterating its claim that summary adjudication was appropriate because the allegations of the complaint, taken with the terms of the CGL policies, create the potential that the complained of contamination resulted from conduct covered by the policies. It further contends that the carriers may not rely on extrinsic evidence to defeat a duty to defend once a potential for liability has been shown.
In opposing the instant petition, the carriers assert that the trial court properly applied the rules governing summary adjudication and correctly denied the motion because there are material issues of fact in dispute concerning whether Montrose's alleged conduct implicates the terms of the CGL policies and whether certain policy exclusions apply.
For over a quarter of a century, California courts have acknowledged the broad duty of an insurer to defend its insured against claims which create a potential for indemnity. (Gray v. Zurich Insurance Co., supra, 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168; see also Eichler Homes, Inc. v. Underwriters at Lloyd's, London (1965) 238 Cal.App.2d 532, 538, 47 Cal.Rptr. 843.) In the words of the Gray court, "the carrier must defend a suit which potentially seeks damages within the coverage of the policy." (Original italics.) (Gray v. Zurich Insurance Co., supra, 65 Cal.2d at p. 275, 54 Cal.Rptr. 104, 419 P.2d 168.) The determination of potential liability must be made at the time of tender. (CNA Casualty of California v. Seaboard Surety Co. (1986) 176 Cal.App.3d 598, 605, 222 Cal.Rptr. 276.) (Saylin v. California Ins. Guarantee Assn. (1986) 179 Cal.App.3d 256, 263, 224 Cal.Rptr. 493; see also Signal Companies, Inc. v. Harbor Ins. Co. (1980) 27 Cal.3d 359, 367, 165 Cal.Rptr. 799, 612 P.2d 889.)
Traditionally, courts have looked first to the complaint and to the terms of the insurance policy to determine the potential for coverage and thus the insurer's duty to defend. (Gray v. Zurich Insurance Co., supra, 65 Cal.2d at p. 276, 54 Cal.Rptr. 104, 419 P.2d 168; see also Hogan v. Midland National Ins. Co. (1970) 3 Cal.3d 553, 563, 91 Cal.Rptr. 153, 476 P.2d 825; St. Paul Fire & Marine Ins. Co. v. Superior Court (1984) 161 Cal.App.3d 1199, 208 Cal.Rptr. 5.) The Gray court made clear, however, that an insurer's duty to defend may be triggered not only by the potential for liability created by the underlying complaint and the policy terms, but by extrinsic facts apprising the insurer of its potential for liability. (Gray v. Zurich...
To continue reading
Request your trial
-
Montrose Chemical Corp. of California v. American Motorists Ins. Co.
...summary judgment burden of proof issue is currently pending before the California Supreme Court in Montrose Chemical Corp. v. Superior Court (1992) 8 Cal.App.4th 260, 10 Cal.Rptr.2d 687, review granted on October 16, 1992 The trial court granted Stauffer's motion in full, declaring the insu......
-
Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co.
...17 Cal.Rptr.2d 210, 846 P.2d 792), but the court apparently has that issue pending before it. (Montrose Chemical Corp. v. Superior Court (1992) 18 Cal.App. 4th 1386, 10 Cal.Rptr.2d 687 review granted Oct. 16, 1992 (S024390).)54 First, the INA policy states that "the insured desires the comp......
-
American States Ins. Co. v. Crawley Const., Inc.
...in Horace Mann, 1993 Cal. LEXIS at * 12, but has since granted review in a case involving this very question, Montrose Chem. Corp. v. Superior Court, 10 Cal.Rptr.2d 687 (Ct.App.), review granted, 12 Cal.Rptr.2d 681 (1992).Because we unfortunately do not have the benefit of the California Su......
-
Montrose Chemical Corp. of California v. Los Angeles County Superior Court (Canadian Pacific Ins. Co.)
...COMPANY, et al., Real Parties in Interest. No. S024390. Supreme Court of California, In Bank. Oct. 16, 1992. Prior report: Cal.App., 10 Cal.Rptr.2d 687. Petitions for review PANELLI, KENNARD, ARABIAN, BAXTER and GEORGE, JJ., concur. ...