Staefa Control-System Inc. v. St. Paul Fire & Marine Ins.

Citations: 875 F. Supp. 656; 95 Daily Journal DAR 1737; 1994 U.S. Dist. LEXIS 19442; 1994 WL 741166Docket: C-93-2224 MHP (ENE)

Court: District Court, N.D. California; December 28, 1994; Federal District Court

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The court, in the case of Staefa Control-System Inc. v. St. Paul Fire and Marine Ins. Co. (875 F.Supp. 656, 1994), addressed a motion for reconsideration filed by St. Paul regarding a prior ruling that it had a duty to defend Staefa under three insurance policies. Initially, on March 18, 1994, the court granted Staefa summary judgment affirming this duty. St. Paul sought reconsideration, asserting that the court erred in its decision regarding the third policy. The court analyzed the timeliness of St. Paul's motion under Federal Rule of Civil Procedure 60(b), concluding that despite being filed three months after the original judgment, the delay was not excessive. Factors considered included the interest in finality and potential prejudice to both parties. Ultimately, the court found that granting St. Paul's motion would only relieve it of the duty to defend under the third policy, while Staefa would still be protected under the other two policies, resulting in minimal prejudice to Staefa.

The court determined that if it dismissed St. Paul's motion based solely on timeliness, St. Paul would unjustly be required to defend and potentially indemnify Staefa under a policy that excludes such coverage. The court found minimal interest in finality as granting a motion to reconsider would not significantly alter the parties' positions, since St. Paul would continue its defense of Staefa regardless of the motion's outcome. Evaluating these factors alongside the merits of St. Paul's motion, the court concluded that the motion was timely filed.

In addressing the merits, Staefa argued that the pollution exclusion in Policy 3 did not explicitly bar coverage for pollution-related liabilities tied to personal injury, such as nuisance and trespass claims. The court agreed, stating that the term 'property damage' in Policy 3 is ambiguous and could be interpreted in multiple ways. While St. Paul suggested that the exclusion prevented coverage for any property damage, the court posited that it might only exclude claims affecting the right to possess the property, not claims related to the right to use it.

The court emphasized that insurance exclusions must be interpreted narrowly and in favor of the insured, leading to the conclusion that the pollution exclusion in Policy 3 does not eliminate coverage for Staefa concerning the trespass and nuisance claims. However, St. Paul contended that the explicit definition of 'property damage' in Policy 3 included loss of use claims, which should exclude coverage for trespass and nuisance. The court acknowledged an error in its prior interpretation, stating that the inclusion of 'loss of use' in the definition indeed indicates that such claims are excluded from coverage.

Consequently, the court ordered that St. Paul's motion to reconsider be granted, affirming that St. Paul has no duty to defend Staefa in the underlying action under Policy 3 and amending its previous opinion accordingly. Additionally, it dismissed Staefa's argument regarding the pollution exclusion's inclusion in Policy 3, as Staefa had previously stipulated that it was part of the policy.