Defendant insurers sought review of a judgment from the Court of Appeal, Fourth Appellate District, Division Two (California), which reversed the trial court’s grant of summary judgment to the insurers in plaintiff insured’s suit seeking coverage for property damage liability imposed in a federal lawsuit as a result of discharges from a hazardous waste disposal facility.

California Business Lawyer & Corporate Lawyer, Inc. explains California Caci

Overview

Both groundwater contamination and two major overflow episodes occurred. During the second overflow episode, controlled discharges were made to prevent failure of a dam. The comprehensive general liability policies contained pollution exclusions, subject to an exception for sudden and accidental discharges. The court determined that the relevant set of polluting events was the escape of wastes, not the initial deposit of wastes. Triable factual issues existed as to the applicability of a watercourse pollution exclusion because the insurers did not establish that the first overflow was confined to a watercourse. Neither the insured’s failure to take effective measures to prevent the second overflow nor its controlled discharges precluded application of the sudden and accidental exception. The insured had the burden of proving that sudden and accidental discharges were a substantial cause of indivisible property damage, but it did not have to differentiate the property damage caused by such discharges from that caused by gradual leakage of wastes. The court disapproved Golden Eagle Refinery Co. v. Associated Internat. Ins. Co. (2001) 85 Cal.App.4th 1300, to the extent inconsistent.

Outcome

The court reversed the judgment of the court of appeal insofar as that court had directed the superior court to grant summary adjudication establishing that the second discharge was excluded by the qualified pollution exclusion. The court otherwise affirmed the judgment and remanded to the court of appeal for further proceedings.