Court: Indiana Court of Appeals; December 5, 2012; Indiana; State Appellate Court
Thomson, Inc. seeks indemnification from Continental Casualty Co. for remediation costs associated with three contaminated film-processing sites acquired from Technicolor, Inc. Continental, which provided insurance to Technicolor from 1969 to 1974, contends its liability is confined to losses from court litigation, while Thomson argues that the umbrella policy covers losses from administrative orders. The trial court sided with Continental, ruling that under California law, the umbrella policy only covers damages resulting from litigation, not administrative actions.
The background indicates that Technicolor operated several film-processing facilities, where contamination was subsequently identified. Thomson, having acquired Technicolor in 2001, was mandated by local authorities in 2009 to remediate the contamination, incurring substantial costs. The umbrella policy issued by Continental during its coverage period provides indemnification for occurrences not covered by underlying insurance, including legal liabilities from personal and property damages. However, Continental is not obligated to defend or pay claims once its liability limits are exceeded. The appellate court affirmed the trial court's decision, reinforcing the limitation of coverage to litigation-related losses.
'Ultimate net loss' refers to the total damages paid by the insured for which they are legally liable, after accounting for recoveries. This definition also encompasses costs related to investigation, adjustment, appraisal, appeal, and defense associated with covered damages.
Procedurally, Thomson initiated a lawsuit on July 17, 2008, in Marion County Superior Court against several insurance companies for coverage related to the remediation of specific environmental sites, adding Continental on September 28, 2009. Thomson sought partial summary judgment on March 30, 2011, for coverage under the Umbrella Policy's Coverage B. Continental countered on August 1, 2011, arguing that California law excluded coverage for costs incurred in response to administrative environmental directives. The trial court ruled in favor of Continental on December 23, 2011, granting their summary judgment and denying Thomson's.
The appellate review of the summary judgment follows the same standard as the trial court, requiring no genuine issue of material fact and entitlement to judgment as a matter of law. Both parties agreed California insurance law applies and acknowledged that the remediation was conducted under local agency directives. Thomson conceded there was no coverage under earlier primary liability policies but contended that coverage exists under the Umbrella Policy, specifically pointing to Coverage B and the definition of 'ultimate net loss.'
Under California law, insurance contracts are interpreted like other contracts, focusing on the mutual intent of the parties as derived from the contract language. Clear and explicit provisions take precedence. A provision is ambiguous only if it allows for reasonable alternative interpretations. Context is crucial, and ambiguities, if present, are generally construed against the insurer to safeguard the insured’s expectations of coverage.
Under California insurance law concerning commercial general liability (CGL) policies, 'damages' are defined as losses resulting from a 'suit,' typically signifying courtroom litigation. The duty to defend such a suit under pre-1986 CGL policies is confined to civil actions initiated by a complaint and excludes claims from administrative agency proceedings. Similarly, the duty to indemnify is limited to amounts ordered by a court, excluding expenses related to administrative actions.
In the case of CDM Investors v. Travelers Cas. Sur. Co., the California Court of Appeal determined that the coverage clause limiting indemnity to 'damages' did not extend beyond this definition. The Umbrella Policy in question similarly restricts coverage to 'damages,' indicating no obligation for indemnification for environmental remediation costs associated with specific sites. The language defining 'ultimate net loss' in the Umbrella Policy explicitly limits it to 'damages,' contrasting with prior cases where broader terms, including 'expenses,' were used to extend coverage.
Thomson's argument that the Umbrella Policy expands the definition of 'damages' is rejected, as the court aligns with the precedent set in CDM Investors, affirming that the Umbrella Policy does not cover remediation costs. Consequently, the trial court's judgment is upheld, confirming that Continental Insurance has no obligation to indemnify Thomson for the specified sites. Thomson's reliance on Powerine Oil Co. v. Superior Court is found to be misplaced, as the clauses in that case included terms that explicitly broadened coverage beyond 'damages,' which is not the case here. Thus, the court concludes there is no coverage under the Umbrella Policy.
