Powerine Oil v. Super. Ct. 12/23/02 CA2/3

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State: California

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

Docket No: B156216

Case Date: 12/23/2002

Preview:Filed 12/23/02

CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE POWERINE OIL COMPANY, INC., Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent, CENTRAL NATIONAL INSURANCE COMPANY, etc., et al., Real Parties in Interest. B156216 (Super. Ct. No. VC025771)

ORIGINAL PROCEEDINGS in mandate. Daniel S. Pratt, Judge. Petition granted. Heller, Ehrman, White & McAuliffe, David B. Goodwin and Esta L. Brand; Isola & Bowers, David R. Isola and Aaron L. Bowers for Petitioner. No appearance for Respondent. O'Melveny & Myers, Richard B. Goetz, Martin S. Checov, Carlos E. Needham and Eric Y. Kizirian; Berman & Aiwasian and Ray Tamaddon for Real Party in Interest Central National Insurance Company of Omaha.

Hancock, Rothert & Bunshoft, William J. Baron, and Kathryn C. Ashton, and Patrick A. Cathcart for London Market Insurers as Amicus Curiae on behalf of Real Party in Interest. Wiley, Rein & Fielding, Laura A. Foggan and John C. Yang; Sinnott, Dito, Moura & Puebla, Randolph P. Sinnott and John J. Moura for Complex Insurance Claims Litigation Association as Amicus Curiae on behalf of Real Party in Interest. ________________________

INTRODUCTION In this writ proceeding, we hold the indemnification language in nine excess/umbrella liability policies obligates the insurer Central National Insurance Company of Omaha (Central National) to indemnify its insured Powerine Oil Company, Inc. (Powerine) for expenses Powerine incurs in responding to two orders issued by the California Regional Water Quality Control Board (the Water Quality Board) to clean up and abate contamination originating from Powerine's subsidiary. In reaching our decision, we distinguish the language of the instant excess/umbrella policies from that contained in the standard comprehensive general liability (CGL) policies, which latter policies were the subject of prior decisions of our Supreme Court: Certain Underwriters at Lloyd's of London v. Superior Court (Powerine Oil Company) (2001) 24 Cal.4th 945 (hereinafter Powerine I), and Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857 (hereinafter Foster-Gardner).

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This proceeding comes on the heels of the earlier writ proceeding in the same case (Powerine I) in which the Supreme Court held that "damages" in the indemnification wording of the standard CGL policy means only money ordered by a court, and not the cost to comply with administrative agency environmental orders. In granting summary adjudication below, the trial court perceived itself constrained by Powerine I to construe the Central National excess/umbrella insurance policies as denying coverage to Powerine for sums Powerine spends pursuant to the cleanup and abatement orders issued by the Water Quality Boards. Distinguishing the language of its excess/umbrella policies under consideration here from that before the Court in Powerine I, Powerine seeks a writ of mandate directing the trial court to vacate its order granting summary adjudication in favor of real party in interest, cross-defendant Central National. We hold the specific indemnification language in the Central National excess/umbrella policies here is broader in scope than that contained in the CGL policies in Powerine I and FosterGardner and includes the costs Powerine expends in responding to administrative agencies' cleanup and abatement orders. Accordingly, we grant the petition and issue the writ. FACTUAL AND PROCEDURAL BACKGROUND The parties have stipulated to the following facts: Powerine, through its various owners, has been engaged in oil refinery operations in Southern California periodically since the mid-1930's. As a result of its operations, Powerine faces

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certain governmentally-imposed environmental liabilities arising from alleged soil and groundwater contamination at various locations. Two regional offices of the Water Quality Board issued two orders to Powerine to clean up and abate alleged pollution at 10 locations. These cleanup and abatement orders were not issued as a result of litigation or as part of an injunction. Cleanup and abatement order 97-118 issued by the Los Angeles region of the Water Quality Board, we are told, followed intensive negotiations and a series of compromises between Powerine and the Water Quality Board concerning the scope of the order and the nature and extent of investigative activities to be undertaken thereunder. Nonetheless, as of the date of these proceedings, Powerine had not incurred any expenses pursuant to the orders. Powerine notified its many insurers of the orders, giving rise to a declaratory relief action against it. (Highlands Insurance Company v. Powerine, etc., et al., L.A.S.C. case No. VC025771.) Powerine cross-complained against numerous insurers, including real-party-in-interest Central National,1 alleging the insurers had a contractual duty to defend and indemnify Powerine for various

Other real parties in interest are Century Indemnity Company, ACE Property and Casualty Insurance Company, Pacific Employers Insurance Company, and Central National. Powerine claims Real Parties in Interest are inter-related insurance companies, all falling under the name ACE USA group of insurance companies, successor to CIGNA Property and Casualty Insurance Company. By the time Central National filed its motion for summary judgment, the only cross-defendants remaining in the case were the ACE-related entities, which includes Central National.

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claims and losses arising from the environmental orders issued by the Water Quality Boards, and requesting, inter alia, declaratory relief and damages for breach of contract and of the covenant of good faith and fair dealing. The lawsuit before us involves nine excess/umbrella liability policies Central National issued to Powerine, commencing in 1973.2 The last of the policies expired in February 1983. The meaning of the indemnification provision in these nine policies is the subject of this proceeding.3 The pertinent coverage language in these nine Central National excess/umbrella policies reads in relevant part: "The Company hereby agrees . . . to indemnify the Insured for all sums which the Insured shall be obligated to pay by reason of the liability . . . imposed upon the Insured by law . . . for damages, direct or consequential and expenses, all as more fully defined by the term

The first four Central National policies, CNU 12-20-39, CNU 12-26-82, CNU 12-30-08, CNU 12-56-25, issued commencing in 1973, provide limits of $9,950,000 above underlying primary CGL policies with limits of $50,000. The remaining five Central National policies, CNU 12-79-39, CNU 03-31-78, CNU 03-49-44, CNU 00-40-80, CNU 00-81-61, each provides $9,500,000 in indemnity limits above a $50,000 self-insured retention and a primary policy with limits of $450,000. Hereinafter, we will refer to all nine policies under consideration as the Central National policies. The language under scrutiny is identical throughout the nine policies. The parties attached portions of these policies as an exhibit. The remaining terms and conditions of the nine Central National policies were not included as part of the stipulation of facts submitted to the trial court in connection with Central National's motion for summary adjudication.
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`ultimate net loss' on account of: . . . property damage . . . caused by or arising out of each occurrence happening anywhere in the world." (Italics added.) "Ultimate net loss" is defined as "the total sum which the Insured, or any company as his insurer, or both, become obligated to pay by reason of . . . property damage . . . either through adjudication or compromise . . . and for litigation, settlement, adjustment and investigation of claims and suits which, are paid as a consequence of any occurrence covered hereunder . . . ." (Italics added.) While the lawsuit was pending, the Supreme Court decided FosterGardner. Thereafter, a writ proceeding in this action brought by the primary insurers culminated in the Supreme Court's Powerine I decision holding the word "damages," in the indemnification language of the standard CGL policies, means only those sums ordered by a court of law. After Powerine I was decided, Central National moved for summary adjudication, which resulted in the judgment giving rise to this writ proceeding. In its motion, Central National sought an order that pursuant to Powerine I in particular, and also Foster-Gardner, it has no duty to indemnify Powerine under its excess/umbrella policies for any sums spent by Powerine pursuant to the Water Quality Boards' cleanup and abatement orders because no "damages" within the meaning of those policies had been ordered by a court. Premised on the stipulation of material facts,4 the motion addressed a matter of law only.
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See footnote 3, supra.

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The trial court granted Central National's summary adjudication motion. Pursuant to Powerine I, the trial court ruled Central National has no duty to indemnify Powerine under its various policies for sums Powerine spends pursuant to the cleanup and abatement orders issued by the Water Quality Board. The trial court explained the Central National policies' definition of coverage for "damages" did not include cleanup and abatement expenses ordered outside the context of a lawsuit. The trial court rejected Powerine's argument based on the difference in purpose between its excess/umbrella policies and the CGL policies in Powerine I. The court explained it could not apply a meaning to "damages" which changes depending on the type of policy in effect. The instant proceeding ensued. CONTENTIONS Powerine contends Powerine I and Foster-Gardner are not controlling because (1) the language of the Central National policies is broader than that considered in Powerine I; and (2) the policy at issue here is not a standard CGL policy, but an excess/umbrella policy. DISCUSSION 1. Standard of review. "[S]ummary judgment [is] granted [when] there is no triable issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc.,

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