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Foster-Gardner Inc. v. National Union Fire Insurance Co.8/3/1998
. Co., supra, 887 F.2d at p. 1206 ["common sense argues that for Travelers to proffer a defense now is better for it, Avondale, and the public interest in a prompt cleanup of the hazardous waste"]; Michigan Millers Mut. Ins. Co. v. Bronson Plating Co., supra, 519 N.W.2d at p. 872 [" rom a policy perspective, . . . the position urged by [the insurers] would only increase the litigiousness of this already extensively litigated area of the law. Limiting an insurer's duty to defend to an actual court proceeding preceded by a complaint would merely encourage PRPs to decline `voluntary' involvement in site cleanups, waiting instead for an actual lawsuit to be brought in order to receive insurance coverage. This would have the effect of substantially protracting the cleanup of contaminated sites."].)
4. AIU
In AIU, supra, 51 Cal.3d 807, the United States and local administrative agencies filed suits against FMC Corporation (FMC), seeking relief for alleged violations of state and federal environmental laws, including CERCLA and the HSAA. (Id. at p. 815.) FMC in turn sought declaratory relief against its insurers determining that any costs it might become obligated to pay as a result of the injunctive relief and/or reimbursement ordered in the third party suits were covered under its CGL policies. (Id. at p. 816.)
The insurance policies at issue provided coverage to FMC for all sums FMC became legally obligated to pay as "damages" (under two policy forms) or "ultimate net loss" (under a third) because of property damage. (AIU, supra, 51 Cal.3d at p. 814.) We determined whether (i) any adverse orders issued in those suits would "legally obligate" FMC to pay such costs, (ii) the costs would constitute "damages" or "ultimate net loss," and (iii) such costs would be incurred because of "property damage." (Id. at p. 818.) We noted that " nly if all three conditions [were] fulfilled [would] the insurers' duty to provide coverage arise under the policies." (Ibid.)
The first requirement for coverage was that FMC be legally obligated to pay the costs at issue. We stated, "Because it is clear that, if FMC is held liable in the third party suits, it will be `obligated' to pay for whatever relief the courts order, the only remaining question is whether that obligation may be considered `legal' under applicable rules of interpretation." (AIU, supra, 51 Cal.3d at p. 824.) We declined to interpret the phrase "legally obligated" as providing coverage for only those actions traditionally brought in law and not in equity. (Id. at pp. 824-825.) We observed that because the distinction between law and equity in California had generally been abolished, "even a legally sophisticated policyholder might not anticipate that the term `legally obligated' precludes coverage of equitably compelled expenses." (Id. at p. 825.) "Thus, as a matter of plain meaning, the term `legally obligated' cover injunctive relief and recovery of response costs." (Ibid.) Moreover, even if the phrase raised doubts about whether a law-equity distinction was intended, it would be unreasonable to conclude that it unambiguously incorporated this sophisticated distinction into the policies. Any such ambiguity was resolved in favor of coverage. (Ibid.) "Whether the term `legally obligated' is ambiguous or not, therefore, we conclude that it encompasses the types of relief sought in the third party suits." (Ibid.)
We next determined whether FMC's prospective legal obligation in the third party suits was to pay "damages." (AIU, supra, 51 Cal.3d at p. 825.) In so doing, we rejected the construction of the term "damages" as " `any sum expended under sanction of law' " or "sums paid to third persons as a result of `legal
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