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HIRSCHBERG v. LUMBERMENS MUT. CAS.

May 7, 1992

EDWARD HIRSCHBERG, et al., Plaintiffs,
v.
LUMBERMENS MUTUAL CASUALTY, et al., Defendants.


WALKER


The opinion of the court was delivered by: VAUGHN R. WALKER

ORDER GRANTING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT IN PART, AND DENYING IN PART.

On February 7, 1992, Plaintiffs brought a motion for partial summary judgment against defendant Lumbermens Mutual Casualty Company ("Lumbermens"), based on the second cause of action of plaintiffs' complaint. Plaintiffs claimed that Lumbermens had a duty to defend plaintiffs under Policy No. 3BN/MF 700 044-01 ("Policy"), and also sought a determination that Exclusion (f) of the Policy had been waived.

 I. FACTS.

 Plaintiff Hirschberg was the President of plaintiffs Innovative Foods, Inc. and Cryo-Maid, Inc. Cryo-Maid was acquired by E. Hirschberg Freeze-Drying, Inc. in 1980. In 1983, E. Hirschberg Freeze-Drying merged with its wholly owned subsidiary, Innovative Foods. Innovative Foods became the surviving entity.

 Plaintiffs allege that defendants issued comprehensive general liability insurance policies to plaintiffs during the sixteen years in which Cryo-Maid leased 1964 Williams Street. This motion, however, only concerns the duty to defend under the policy produced by defendants for the period August 1, 1984 to August 1, 1985.

 Plaintiffs learned of the alleged contamination at the WSA property and of a potential claim against them in August of 1989. While defendants allege that plaintiffs knew of the alleged contamination prior to this date, there is nothing in the record to support this contention. In December of 1989, plaintiffs, through their insurance broker, notified Lumbermens of the threatened claims. On January 6, 1990, plaintiffs formally tendered their claim for defense and indemnification to Lumbermens and provided Lumbermens with all of the correspondence between plaintiffs and WSA concerning WSA's claims.

 Lumbermens denied the January 6 tender in a letter dated March 2, 1990. In September of 1990, WSA filed the underlying suit, and served the complaint on plaintiffs. On September 26, 1990, plaintiffs again tendered the case to Kemper (defendants were companies affiliated with Kemper Group of Insurance Companies) with a copy of the underlying complaint. Lumbermens again denied the claim in letters dated November 6, 1990, February 8, 1991, and March 15, 1991.

 II. ANALYSIS.

 The duty to defend is much broader and distinct from the duty to indemnify. Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 54 Cal. Rptr. 104 , 419 P.2d 168 (1966). An insurer's duty to defend must be analyzed and determined on the basis of "any potential liability arising from facts available to the insurer from the complaint or other sources available to it at the time of the tender of the defense." CNA Casualty of California v. Seaboard Surety Co., 176 Cal. App. 3d 598, 222 Cal. Rptr. 276 (1986). The duty to defend must be assessed at the outset of the case, and not after liability is established. Id. at 607. As long as the underlying complaint contains language creating the potential of liability under an insurance policy, the duty to defend is implicated. Further, where "there is doubt as to whether the duty to defend exists, the doubt must resolved in favor of the insured." Id. at 607.

 The Policy states that Lumbermens "shall have the right and duty to defend any suit against the insured seeking damages on account of . . . property damage, even if any of the allegations of the suit are groundless, false or fraudulent. . . ." Property damage is defined as "physical injury to . . . tangible property which occurs during the period of insurance . . . including the loss of use thereof at any time resulting therefrom . . ."

 The underlying complaint alleges property damage during the Policy period. Paragraph 24 of the underlying complaint alleges that, between 1971 and 1988, the plaintiffs here operated and installed a freeze-drying system which used TCE and other chemicals. Paragraph 27 alleges that in installing and using the freeze-drying system, the plaintiffs caused toxic chemical contamination by allowing TCE and other chemicals "on, in, and beneath the Property and other property, including, but not limited to, the surface and subsurface soil and water."

 The underlying complaint alleges claims for damages on account of property damage, as contemplated by the Policy. WSA seeks compensatory damages under each of its 15 causes of action in an amount according to proof at trial, and also seeks damages in the form of reimbursement for the cost of cleaning up contamination. WSA also seeks claims for reimbursement of response costs under CERCLA. The California Supreme Court recently ruled that these response costs are in fact damages as that term is used in general comprehensive liability policies. AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807, 816-18, 274 Cal. Rptr. 820 , 799 P.2d 1253 .

 In Montrose Chemical Corporation of California v. Admiral Insurance Co., 3 Cal. App. 4th 1511 (1992), the California Court of Appeal held that the defendant did have a duty to defend. The court applied a "continuous injury trigger" theory and said that the timing of the cause of the property damage is immaterial as is the date of discovery. If damage is continuous throughout successive policy periods, coverage is triggered under the policies in effect for all periods. The court held that using the appropriate trigger theory, the duty to defend would be implicated because the underlying complaint alleged that damage occurred in 1956 and continued until the present time, and the policy was for a period during this period. Id. The present action is analogous in that there is an underlying complaint that alleges damage occuring sometime ...


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