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Keggi v. Nothbrook Property12/5/2000
REVERSED AND REMANDED
Caroline Saunders Keggi appeals from the trial court's judgment in favor of Northbrook Property and Casualty Insurance Company (Northbrook) and TIG Insurance Company (TIG). Keggi sought a declaratory judgment that policies issued by the two insurance companies covered Keggi's injuries arising from drinking bacteria- contaminated water served by the insurers' policyholder, Desert Mountain Properties (Desert Mountain). The trial court concluded that the pollution exclusion clauses barred coverage for Keggi's alleged injury . The trial court further concluded that Keggi lacked standing to pursue her claim against TIG. For the following reasons, we reverse the trial court's judgment and remand for further proceedings.
FACTS
Keggi was a professional golfer who, on occasion, lived and trained at her parents' home in a mixed-use development in north Scottsdale, Arizona, known as Desert Mountain. Desert Mountain included homes, golf courses, and clubhouses. These facilities were served by a water distribution system that originally was owned, operated, and maintained by the Carefree Ranch Water Company, and later was purchased by Desert Mountain.
In late February 1993, the City of Scottsdale detected both total and fecal coliform bacteria in the water system at Desert Mountain. The source of the bacteria remains unknown. Before receiving notice of the contamination Keggi became seriously ill. Keggi had consumed contaminated water from the taps at her parents' home and from the Desert Mountain facilities.
Keggi sued Desert Mountain and others for her injuries, asserting claims for negligence, strict liability, and breach of the implied warranties of merchantability and fitness. She alleged that Desert Mountain negligently operated and maintained the water system and that it was strictly liable for serving her contaminated water. She claimed damages for medical expenses, loss of earnings, and loss of earning capacity.
Northbrook provided commercial general liability (CGL) and umbrella insurance coverage for Desert Mountain. TIG provided Desert Mountain's excess liability coverage. Desert Mountain tendered defense of the Keggi lawsuit to Northbrook and TIG, but both insurers denied coverage and refused to defend. Northbrook disclaimed coverage based on the pollution exclusion clause. TIG refused to cover or defend the lawsuit until the limits on the underlying Northbrook policies were exhausted. Desert Mountain filed a declaratory judgment action against Northbrook and TIG, alleging breach of contract and insurance bad faith claims.
In July 1997, Desert Mountain and Keggi entered into a Damron agreement. Desert Mountain stipulated to a $1.2 million dollar judgment against it and assigned its rights against Northbrook to Keggi. Keggi agreed not to execute the judgment against Desert Mountain. Keggi was granted leave to intervene in the lawsuit filed by Desert Mountain against Northbrook and TIG. After cross motions for summary judgment, the trial court granted summary judgment to Northbrook and TIG, ruling that the pollution exclusion clauses in each of the insurance policies precluded coverage for Keggi's claims. The trial court also ruled that Keggi lacked standing to bring her claims against TIG because she had failed to obtain an assignment of Desert Mountain's claims against TIG. We have jurisdiction pursuant to Arizona Revised Statutes Annotated (A.R.S.) ยง 12-2101(B).
We granted leave for the Insurance Environmental Litigation Association and Washington County Fair, Inc. to file amicus curiae briefs.
DISCUSSION
A. Standing
T
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