Travelers Cas. & Sur. Co. v. Superior Court

• Decision Date: 19 May 1998
• Docket Number: No. H017397,H017397
• Citation: 63 Cal.App.4th 1440,75 Cal.Rptr.2d 54
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 3831 TRAVELERS CASUALTY AND SURETY COMPANY, et al., v. The SUPERIOR COURT of Santa Clara County, Respondent; Lockheed Martin Corporation, Real Party in Interest.

Page 54

75 Cal.Rptr.2d 54

63 Cal.App.4th 1440, 98 Cal. Daily Op. Serv. 3831

TRAVELERS CASUALTY AND SURETY COMPANY, et al., v. The SUPERIOR COURT of Santa Clara County, Respondent Lockheed Martin Corporation, Real Party in Interest.

No. H017397.

Court of Appeal, Sixth District, California.

May 19, 1998.

Review Denied Sept. 16, 1998. ^*

Morrison & Foerster and David B. Babbe, Margot A. Metzner, Dana M. Rudnick; Sinnott, Dito, Moura & Puebla and Randolph P. Sinnott, Shane C. Youtz; Morris, Polich & Purdy, Los Angeles, and Steven M. Crane, Lee I. Petersil, Los Angeles, Richard H. Nakamura, for Petitioners.

Hancock Rothert & Bunshoft and James P. Barber, Eric J. Sinrod, and William J. Baron, San Francisco, Amici Curiae on behalf of Petitioners.

No appearance on behalf of Respondent.

Troop Meisinger Steuber & Pasich and David W. Steuber, Curtis D. Porterfield, Clyde M. Hettrick, Whitney E. Stein, and Richard A. Chapkis, Los Angeles, for Real Party in Interest.

PREMO, Acting Presiding Justice.

I. INTRODUCTION

This matter arises from the efforts of Lockheed Martin Corporation (Lockheed) to obtain insurance coverage for its multi-million dollar liability for clean up of environmental contamination at 13 sites in California and other states. One of those sites is the Operating Industries, Inc. (OII) landfill in California. Insurers Travelers Casualty and Surety Company and Continental Insurance Company sought summary adjudication of their duty to indemnify Lockheed with regard to the OII site. The trial court denied the insurers' motion for summary adjudication on grounds of the insurers' failure to provide complete copies of their insurance policies and their failure to establish that Lockheed's claim for indemnity was barred by the policies' pollution exclusion.

The insurers filed a petition for writ of mandate seeking review of the denial of their motion for summary adjudication, and we issued an alternative writ. We hold that the trial court erred when it denied the insurers' motion for summary adjudication, because the insurers submitted sufficient evidence of the relevant terms and conditions of their policies and because we conclude that Lockheed's claim for indemnity is barred by the pollution exclusion as a matter of law. We therefore issue a peremptory writ directing respondent court to vacate its order and to enter a new order granting the motion for summary adjudication.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The OII Site

The OII site is a 190-acre municipal landfill in Monterey Park, California. From 1948 until 1984, the landfill accepted disposal of hazardous waste. Lockheed utilized the OII landfill for disposal of hazardous waste from 1972 to 1983. Its liquid waste was transported to the OII site in 4,200 gallon capacity vacuum trucks. The liquid waste discharged by Lockheed into the landfill totaled over one million gallons of metal degreaser waste, paint sludge, alkaline solution, waste coolant, soapy water, oil, mud, percolate, and other known toxic substances.

Eventually, the OII landfill site came to the attention of state and federal agencies concerned with environmental contamination. The United States Environmental Protection Agency (EPA) determined that the OII site was contaminated by hazardous substances as defined by section 101(14) (42 U.S.C. § 9601(14)) of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 United States Code section 9601 et seq. The OII site was placed on both the California hazardous waste priority list and the national priority list of the United States' most contaminated sites.

The EPA found that the environmental contamination at the OII site included leachate seepage, landfill gas, noxious odors, and groundwater contamination. As part of its efforts to protect the public and the environment from the contaminated OII site, the EPA entered into consent decrees allocating the cost of site investigation and clean up to numerous potentially responsible parties, including Lockheed.

The first partial consent decree obligated the potentially responsible parties, including Lockheed, to pay more than $60 million to stabilize the OII landfill and to construct and operate a leachate collection system and treatment plant. Lockheed also entered into the third partial consent decree, which required payment of additional monies and participation in the design, construction, and maintenance of a gas collection and destruction system, a cover system, and a surface water management system. Lockheed estimates that it has spent nearly $1 million to date in complying with its obligations under the OII site consent decrees, and further estimates that it will incur an additional $4 million in compliance costs.

Lockheed has also been named as a defendant in a personal injury action filed in Los Angeles County Superior Court by residents of the area surrounding the OII site who claim illness and emotional distress caused by emissions from the site.

B. The Insurance Coverage Litigation

Lockheed identified several insurance companies as providers of general liability policies covering its potential multi-million dollar liability for environmental damages and personal injuries arising from the OII site. Among these insurance companies are Aetna Casualty and Surety Company (Aetna) (now Travelers Casualty and Surety Company), Continental Insurance Company as successor in interest to Harbor Insurance Company (Harbor), and Leslie Walpole Procter as the representative of various underwriters at Lloyd's of London (London Market Insurers). ¹

Specifically, Lockheed determined that it had been issued six general liability policies by Aetna which covered the OII site for the period of 1979 to 1985. Lockheed also identified six Harbor general liability policies as covering the OII site for the period of 1969 to 1978. Lockheed demanded that the insurance companies defend and indemnify it against the claims of the EPA and the personal injury plaintiffs, but each insurance company refused to do so.

London Market Insurers then filed a complaint for declaratory relief, seeking adjudication of its duty to defend and indemnify Lockheed with regard to claims arising from 13 contaminated sites in California and other states. Lockheed responded by filing a cross-complaint against London Market Insurers and numerous other insurance companies, seeking declaratory relief and alleging breach of contract and breach of the covenant of good faith and fair dealing by the insurance companies who had refused defense and indemnification. As to the OII site, Lockheed sought a declaration that Aetna and Continental, among others, owed a duty to indemnify Lockheed, and that the insurers had breached that contractual duty. ² In their answers to Lockheed's cross-complaint, the insurers raised the affirmative defense of the pollution exclusion.

C. The Insurers' Motion for Summary Adjudication of the Duty to Indemnify re OII Site Based on the Pollution Exclusion

Aetna moved for summary adjudication of its duty to indemnify Lockheed regarding the OII site. Specifically, Aetna sought adjudication of the sixth cause of action for declaratory relief/duty to indemnify, and the seventh cause of action for breach of contract/duty to indemnify, of the fifth amended cross-complaint. ³ Continental joined in the motion for summary adjudication. ⁴

In its motion, Aetna did not dispute that Lockheed's claim for indemnification fell within the policies' insuring agreement, which stated: "The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of [p] (1) bodily injury, malpractice or property damage to which this insurance applies caused by an occurrence, or [p] (2) personal injury to which this insurance applies."

Instead, Aetna argued that Lockheed's claim for indemnification of the OII site damages was barred by the affirmative defense of the pollution exclusion. The pollution exclusion in the Aetna policies used the following form: "This insurance does not apply: [p] ... Q. To bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water, but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental." ⁵ This form of the exclusion is sometimes called the "qualified pollution exclusion." (See, e.g., Bell Lumber and Pole Co. v. U.S. Fire Ins. Co. (8th Cir.1995) 60 F.3d 437, 440.)

Aetna argued that it was undisputed that Lockheed had deliberately dumped hazardous wastes into the OII landfill, and that the environmental contamination at the OII site was caused by this dumping. Accordingly, because the claims against Lockheed for property damage and personal injury arose from the intentional discharge of pollutants upon land, Aetna argued that coverage for those claims was barred by the plain language of the pollution exclusion.

Aetna also contended that it was entitled to summary adjudication because Lockheed could not meet its burden of proving that the OII claims came within the sudden and accidental exception to the pollution exclusion. Aetna argued that the intentional dumping of hazardous waste in the OII landfill could not constitute a "sudden and accidental" discharge of pollutants. Aetna also pointed to Lockheed's interrogatory responses, which stated that "[a]dditional occurrences such as faulty equipment, spills, floods, earthquakes, or fires may have constituted or resulted in releases at the OII site," arguing that these responses were merely speculative and did not constitute probative evidence of any sudden and accidental releases of pollution.

Lockheed opposed the motion for summary adjudication on several...