Stonewall Ins. Co. v. City of Palos Verdes Estates

• Decision Date: 19 June 1996
• Docket Number: B045183,Nos. B023805,s. B023805
• Citation: 54 Cal.Rptr.2d 176,46 Cal.App.4th 1810
• Court: California Court of Appeals Court of Appeals
• Parties: , 96 Cal. Daily Op. Serv. 4520, 96 Daily Journal D.A.R. 7284 STONEWALL INSURANCE COMPANY, Plaintiff, Cross-defendant and Appellant, v. CITY OF PALOS VERDES ESTATES, Defendant, Cross-defendant and Appellant; Admiral Insurance Company et al., Defendants, Cross-complainants and Appellants; Canadian Indemnity Company, Defendant, Cross-complainant and Respondent; Fireman's Fund Insurance Company et al., Defendants, Cross-defendants and Respondents. CITY OF PALOS VERDES ESTATES, Plaintiff, Cross-defendant and Appellant, v. STONEWALL INSURANCE COMPANY, Defendant, Cross-defendant and Appellant; Puritan Insurance Company, Defendant, Cross-complainant and Appellant; Fireman's Fund Insurance Company et al., Defendants, Cross-defendants and Respondents.

Page 176

54 Cal.Rptr.2d 176

46 Cal.App.4th 1810, 96 Cal. Daily Op. Serv. 4520,

96 Daily Journal D.A.R. 7284

STONEWALL INSURANCE COMPANY, Plaintiff, Cross-defendant and Appellant, v. CITY OF PALOS VERDES ESTATES, Defendant, Cross-defendant and Appellant;

Admiral Insurance Company et al., Defendants, Cross-complainants and Appellants;

Canadian Indemnity Company, Defendant, Cross-complainant and Respondent;

Fireman's Fund Insurance Company et al., Defendants, Cross-defendants and Respondents.

CITY OF PALOS VERDES ESTATES, Plaintiff, Cross-defendant and Appellant, v. STONEWALL INSURANCE COMPANY, Defendant, Cross-defendant and Appellant;

Puritan Insurance Company, Defendant, Cross-complainant and Appellant;

Fireman's Fund Insurance Company et al., Defendants, Cross-defendants and Respondents.

Nos. B023805, B045183.

Court of Appeal, Second District, Division 7, California.

June 19, 1996.

Rehearing Denied July 12, 1996.

As Modified July 19, 1996.

Review Denied Oct. 23, 1996.

Wilson, Kenna & Borys and Robert L. Wilson, Los Angeles, for Plaintiff, Cross-defendant and Appellant in No. C439984 and for Defendant, Cross-defendant and Appellant in No. SWC66204.

Wise, Wiezorek, Timmons & Wise, George E. Wise, Michael J. Pearce, Long Beach, Kane, Ballmer & Berkman, Stephanie Scher, Los Angeles, Burke, Williams & Sorensen, Douglas C. Holland, Salinas, Brian C. Pierik, Camarillo, for Defendant, Cross-defendant and Appellant in No. C439984 and for Plaintiff Cross-defendant and Appellant in No. SWC66204.

Horvitz & Levy, Mitchell C. Tilner, Peter Abrahams, Encino, Hillsinger & Costanzo, John H. Walsh, San Diego, Provizer, Lichtenstein, Pearlman & Phillips, Noel F. Beck, Southfield, MI, Bell & Weissman and Garland O. Bell, Jr., Pasadena, for Defendants, Cross-complainants and Appellants in No. C439984.

Cotkin, Collins & Franscell, Joan M. Dolinski and Lori S. Blitstien, Los Angeles, for Defendant, Cross-complainant and Respondent in No. C439984.

Nelsen, Tang, Thompson, Pegue, Thornton & Spurling, Santa Monica, Knapp, Petersen & Clarke and K. Stephen Tang, Glendale, for Defendant, Cross-complainant and Appellant in No. SWC66204.

Black, Compean, Hall & Lenneman, Robert H. Black, Michael D. Compean, Clausen & Campbell, Los Angeles, Sonnenschein Nath & Rosenthal, Paul E.B. Glad, Thomas Holden, Kaufman & Logan, Jeffrey Kaufman, San Francisco, Haight, Brown & Bonesteel, Harold Hansen Brown, Gary C. Ottoson, Roy G. Weatherup, Michael J. Leahy, J.R. Seashore, Denis J. Moriarty, Jules Solomon Zeman, Caitlin Doyle Berfield, Santa Monica, Roper & Folino, John B. Larson, Joseph L. Stark, Los Angeles, Keesal, Young & Logan, Robert D. Feighner, E. Scott Douglas, Long Beach, Sedgwick, Detert, Moran & Arnold, Scott M. Kolod, San Diego, O'Melveny & Myers, John G. Niles, Los Angeles, and Martin S. Checov, San Francisco, for Defendants, Cross-defendants and Respondents in Nos. C439984 and SWC66204.

GOLD, Associate Justice. ^*

I. APPELLATE BACKGROUND

This Division filed its decision in the within cause on May 15, 1992 and modified it on June 11, 1992 on denial of rehearing. Said decision suggested that in light of the then recent granting of review by the California Supreme Court of Montrose Chemical Corp. v. Admiral Insurance Company (1992) 3 Cal.App.4th 1511, 5 Cal.Rptr.2d 358 (review granted May 21, 1992), grant of review of this case by the Supreme Court would contribute to certainty of California law.

On August 27, 1992, the Supreme Court did grant review of this case.

On July 3, 1995, the Supreme Court filed its decision in the Montrose Case: Montrose Chemical Corporation of California v. Admiral Insurance Company (1995) 10 Cal.4th 645, 42 Cal.Rptr.2d 324, 913 P.2d 878. The Supreme Court's decision in the Montrose case is hereinafter referred to as "Montrose."

This case is again before this Court by virtue of an Order of the Supreme Court filed October 19, 1995. By that Order, the Supreme Court transferred the cause to this Court with directions to vacate our prior decision herein and to reconsider the cause in light of Montrose.

II. THE PROCEEDINGS BELOW

A. The Underlying Action (the Papworth case)

In an underlying action, Michael T. Papworth ("Papworth") sued the City of Palos Verdes Estates ("the City"), claiming that as a consequence of a continuous and repeated course of conduct of the City from 1971 to 1981 (namely, improper design and maintenance of a City storm drain adjoining property purchased by Papworth in August of 1971), Papworth's property was damaged and ultimately became worthless. Papworth's complaint sounded in negligence, nuisance and inverse condemnation.

The jury awarded Papworth $1,188,791.57 as damages for negligence and nuisance and $1,881,946.70 as damages for inverse condemnation. Judgment was entered for $1,881,946.70. Pending appeal, the underlying action was settled by payment of $1,600,000 together with a stipulation (confirmed in an order of court) vacating the judgment "for all purposes." Of the $1,600,000 settlement, $350,000 was paid by the City, $300,000 by The Jefferson Insurance Company of New York ("Jefferson") and $950,000 by Stonewall Insurance Company ("Stonewall"). Other insurers of the City refused to contribute toward the settlement.

B. The Two Cases on Appeal

The appeals that are the subject of the within decision arise in the two cases that followed settlement of the underlying action.

The City suit: In the first of these two cases (Los Angeles County Superior Court Case No. SWC 66204, hereinafter referred to as the City suit), the City sued all insurers who had issued primary or excess liability policies to it from 1971 through 1983. In the City suit the City sought (i) on a breach of contract theory, to recover the $350,000 it paid to settle the Papworth claim, less a $1,000 deductible; and (ii) damages against certain of its insurers for bad faith failure to settle the Papworth claim.

The Stonewall suit: In the second case (Los Angeles County Superior Court Case No. C 439 984, hereinafter referred to as the Stonewall suit), Stonewall sued the City and the other insurers who issued liability insurance to the City during the period of exposure to damage resulting from the City's conduct, seeking a return of the $950,000 Stonewall paid toward the settlement of the underlying action, claiming that it was not liable for any of that sum. Its complaint and the cross-complaints filed by the other insurers also seek a declaration of the relative liability of each of the insurers and apportionment of that liability among the insurers.

The trial court initially consolidated the two cases. Ultimately it bifurcated the proceedings and deferred action on what it denominated as "Phase II" (the City's bad faith claims) until after determination of "Phase I" (all of the other issues). We deal herein with appeals from a summary judgment order in favor of one insurer (Canadian Indemnity Company, hereinafter Canadian) and purported appeals from certain of the trial court's subsequent judgments in Phase I. Phase II has not yet been tried.

After the consolidated cases had been bifurcated, the trial court heard Canadian's motion for summary judgment and on November 19, 1986 signed an order granting that motion.

The trial of Phase I thereafter ensued. Following opening statements, the trial court granted nonsuit motions of Central National Insurance Company of Omaha ("Central National") and Employers Reinsurance Corporation ("Employers"). The trial court also granted a motion of Covenant Mutual Insurance Company ("Covenant") for judgment pursuant to Code of Civil Procedure Section 631.8. Separate judgments in favor of Covenant and Employers were filed on September 28, 1988. A separate judgment in favor of Central National was filed on June 12, 1989. At the end of the City's case-in-chief, the trial court granted the motions of Fireman's Fund Insurance Companies ("Fireman's") and Central Mutual Insurance Company ("Central Mutual") for judgment pursuant to Code of Civil Procedure Section 631.8 on the ground that their policies covered only periods prior to September 2, 1976 and that claims for damage occurring prior to September 2, 1976 were barred by Government Code Section 911.2.

Upon the completion of the trial of Phase I, the trial court held that the City's liability was covered by insurance except for $53,000 in deductibles and self-insured retention; and it imposed that liability jointly and severally upon Jefferson and Admiral Insurance Company ("Admiral"). Jefferson and Admiral had issued policies the trial court deemed primary for the period from November 1, 1975 to July 1, 1980. Stonewall was exonerated from liability and adjudged entitled to recover from Jefferson and Admiral the $950,000 it had paid. The trial court reasoned that as an excess carrier, Stonewall had no obligation to indemnify the City because primary carriers Jefferson and Admiral in the aggregate had coverage in amounts sufficient to fully indemnify the City. All other excess carriers were similarly exonerated. Primary carriers who had issued policies covering periods after February 1, 1980 were exonerated because of the trial court's conclusion that a stipulation in the Papworth case fixing February 1, 1980 as the date of taking for inverse condemnation purposes also had the effect of fixing the date when the Papworth property was a total loss. On August 16, 1989, judgment (hereinafter sometimes referred to as the Phase I judgment) was entered accordingly.

III. SUMMARY OF OUR CONCLUSIONS

The following is a summary of our conclusions concerning the Phase I judgment and the summary judgment in favor of Canadian:

1. This case presents the issue of what event or events activate or "trigger" the obligations of the respective insurers to indemnify the City. We conclude that the "continuing injury" trigger of coverage applied in Montrose should also be applied in this case--that is, that there was a "continuing...