Co. of San Diego v. Ace Prop. & Cas. 11/14/02 CA4/1

SUPREME COURT CASES

Laws-info.com » Cases » California » Court of Appeal » 2002 » Co. of San Diego v. Ace Prop. & Cas. 11/14/02 CA4/1

State: California

Court: 1st District Court of Appeal 1st District Court of Appeal

Docket No: D038707

Case Date: 12/02/2002

Preview:Filed 11/14/02; pub.order 12/2/02 (see end of opn.)

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

COUNTY OF SAN DIEGO, Cross-complainant and Appellant, v. ACE PROPERTY & CASUALTY INSURANCE COMPANY et al., Cross-defendants and Respondents.

D038707

(Super. Ct. No. GIC732418)

APPEAL from a judgment of the Superior Court of San Diego County, William R. Nevitt, Jr., Judge. Affirmed.

In this insurance coverage action, cross-complainant County of San Diego (the County) appeals a judgment entered against it after the trial court granted the summary adjudication and summary judgment motions of cross-defendant Ace Property & Casualty Insurance Company (ACE), formerly known as Cigna Property & Casualty Insurance Company, formerly known as Aetna Insurance Company. The County contends the trial court misinterpreted the nonstandard third party liability policy to not provide coverage for (1) expenses the County incurred in complying with an

administrative order to remediate groundwater contamination, or (2) settlements of nonlitigated claims for property damage and personal injury arising from the contamination. Specifically, the County asserts the court erred by applying Certain Underwriters at Lloyd's of London v. Superior Court (2001) 24 Cal.4th 945 (Powerine), in which our Supreme Court held the term damages in the insuring clause of a standard comprehensive general liability (CGL) policy is limited to sums ordered by a court. We affirm the judgment. FACTUAL AND PROCEDURAL BACKGROUND ACE issued a third party liability policy to the County that was effective between 1974 and 1977. The policy requires ACE to indemnify the County "for all sums which the insured is obligated to pay by reason of liability imposed by law or assumed under contract or agreement," arising from "damages" caused by personal injuries or the destruction or loss of use of tangible property. In 1969 the County began operating a solid waste facility known as the Ramona Landfill. The Ramona Landfill overlies potable groundwater, and in 1970 the Regional Water Quality Control Board (the Board) imposed operational requirements on the County. In March 1997 the Board issued a cleanup and abatement order (CAO 97-17) to the County, which required it to investigate, monitor and remediate groundwater contamination caused by the Ramona Landfill. The County waived a hearing before the Board to challenge imposition of CAO 97-17.

2

In June 1997 the owners of property (the Sossamans) near the Ramona Landfill complained to the County that groundwater contamination would affect the property's marketability and their physical and mental health. The Sossamans requested that the County purchase their property without the necessity of litigation. The County believed it more likely than not that the Sossamans' property was contaminated. It had the property appraised "and preliminary negotiations including the preparation of necessary transfer documentation was initiated." The Atkinsons, also property owners near the Ramona Landfill, filed a similar claim in 1997. In November 1997 the County settled the Sossamans' claims by paying them $318,000 for the acquisition of their property and relocation benefits. In December 1998 the County settled the Atkinsons' claims for $259,500. In May 1997 the County began seeking indemnification from ACE for costs of complying with CAO 97-17. In September 1997 the County began seeking indemnification from ACE for the Sossaman and Atkinson claims. ACE refused to indemnify the County, and thus it filed a cross-complaint against ACE in a declaratory relief action brought against the County by another of its insurers, Pacific Indemnity Company (Pacific).1 The first amended cross-complaint included causes of action for express indemnity, breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory relief.

1

Pacific obtained summary judgment in its favor and is not involved in this appeal. 3

In an affirmative defense to the cross-complaint, ACE alleged it had no indemnity duty because the term damages in the insuring clause of the policy is limited to sums imposed by a court of law. The County moved for summary adjudication on this affirmative defense. The court granted the motion, determining the "language of the policy suggests a reasonable interpretation that the County need not suffer a judgment before [ACE'S] duty to indemnify takes effect." ACE moved for reconsideration of the ruling on the County's motion for summary adjudication, based on Powerine, supra, 24 Cal.4th 945, in which the court held the term damages in the insuring clause of a standard CGL policy is restricted to sums imposed by a court of law. On the same ground, ACE also moved for summary adjudication of its duty to indemnify the County for its expenses of complying with CAO 97-17. On reconsideration, the court denied the County's motion for summary adjudication. The court granted ACE's motion for summary adjudication of its duty to indemnify the County for cleanup expenses. The County then moved for reconsideration of the court's order granting ACE's motion for summary adjudication. ACE moved for summary judgment regarding its duty to reimburse the County for the Sossaman and Atkinson settlements. The court reconsidered its ruling in favor of ACE, but on the merits denied the County any relief. The court granted ACE's motion and judgment was entered for it on July 20, 2001.

4

DISCUSSION I Standard of Review "The insurer is entitled to summary adjudication that no potential for indemnity exists . . . if the evidence establishes as a matter of law that there is no coverage. [Citation.] We apply a de novo standard of review to an order granting summary judgment when, on undisputed facts, the order is based on the interpretation or application of the terms of an insurance policy." (Smith Kandal Real Estate v. Continental Casualty Co. (1998) 67 Cal.App.4th 406, 414.) II Rules of Policy Interpretation "While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply. [Citation.]" (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) "The rules governing policy interpretation require us to look first to the language of the contract . . . to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it. [Citations.]" (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) "The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the 'mutual intention' of the parties. . . . 'Such an intent is to be inferred, if possible, solely from the written provisions of the contract. [Citation.] The "clear and explicit" meaning of these provisions, interpreted in their "ordinary and popular sense,"

5

unless "used by the parties in a technical sense or a special meaning is given to them by usage" [citation], controls judicial interpretation. [Citation.]' [Citations.]" (Ibid.) "Ambiguity exists when an insurance policy provision is susceptible to two or more constructions that are reasonable and not based on strained interpretations." (Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 737.) Standing alone, the absence of a definition in the policy for a term does not render it ambiguous. (Bay Cities Paving & Grading, Inc. v. Lawyers' Mutual Ins. Co. (1993) 5 Cal.4th 854, 866.) " '[L]anguage in a contract must be construed in the context of that instrument as a whole, and in the circumstances of that case, and cannot be found to be ambiguous in the abstract.' " (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265, italics omitted.) If "a term in an insurance policy has been judicially construed, it is not ambiguous and the judicial construction of the term should be read into the policy unless the parties express a contrary intent." (Bartlome v. State Farm Fire & Casualty Co. (1989) 208 Cal.App.3d 1235, 1239.) III Interpretation of the ACE Policy A Under ACE's policy, its indemnification duty extends to "all sums which [the County] is obligated to pay by reason of liability imposed by law or assumed under contract or agreement," for "damages . . . by reason of injury of any nature sustained by any person or persons," or for "damages because of injury to or destruction of tangible property." (Italics added.) The County contends the trial court erred by determining that 6

under Powerine, supra, 24 Cal.4th 945, the term damages in the insuring clause of the ACE policy is limited to sums ordered by a court.2 In Powerine, the court held a standard CGL policy that covered " 'all sums that the insured becomes legally obligated to pay as damages,' " limited the insurer's duty to indemnify the insured to "money ordered by a court." (Powerine, supra, 24 Cal.4th at p. 960.) Accordingly, the indemnity duty did not "extend to any [cleanup] expenses required by an administrative agency, like the Regional Water Boards, pursuant to an environmental statute, like the Porter-Cologne Act." (Id. at p. 974.) In Powerine the court focused on the correlation between the standard policy's duty of indemnification and duty to defend suits brought against the insured. The court reasoned that since the term suits is limited to civil court actions (Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 878-888), and the duty to defend is broader than the duty to indemnify, the duty to indemnify cannot include sums not ordered by a court in a suit. (Powerine, supra, 24 Cal.4th at p. 961.) The court explained "the provision imposing the duty to indemnify, which can arise only after damages are fixed in their amount, generally states that the insurer 'will pay all sums that the insured becomes legally obligated to pay as damages' for harm proved within coverage. [

Download Co. of San Diego v. Ace Prop. & Cas. 11/14/02 CA4/1.pdf