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Foster-Gardner Inc. v. National Union Fire Insurance Co.8/3/1998
riate when the coverage question turns on facts to be litigated in the underlying action."] As Pacific asserts, the very notion that an insured may be prejudiced is predicated on the existence of an underlying lawsuit wherein the parties can assemble information through discovery and possess the power to subpoena information in the coverage action. Absent an underlying lawsuit, there is no such danger.
Indeed, relying, as Foster-Gardner suggests, on the "coerciveness" of a particular notice or Order would introduce a significant element of uncertainty into an insurer's ascertainment of its duty to defend. When and under what circumstances would an Order or other pre-complaint notice or proceeding be considered a "suit"? Would the dollar amount of the insured's potential liability determine "coerciveness?" Who determines what is coercive and what is not? To answer these questions, courts would have to rewrite unambiguous policy language on a case-by-case basis under the guise of interpretation.
Nor would there be any basis for limiting this expanded "suit" definition to environmental agency notices.
(See 2 Croskey et al., Cal. Practice Guide:
Insurance Litigation, supra, 7:1856-7:1859, pp. 7G-21-7G-22 [noting that Court of Appeal's in this case arguably would mean an insurer has an obligation to defend employment discrimination administrative proceedings].) Businesses are frequently required to comply with the regulations of and respond to inquiries by the state or federal Occupational Safety and Health Administration (OSHA), the Immigration and Naturalization Service (INS), the health department, and the Internal Revenue Service (IRS) prior to the time any complaint is filed. One can imagine that the average business owner might find compliance with an IRS audit or other regulations and inquiries coercive and expensive. That does not mean that these inquiries are transformed into "suit " their insurers are obligated to defend. As amicus curiae Insurance Environmental Litigation Association asserts, Foster-Gardner's position would create "a broad legal-services arrangement under which insurers would step into any dispute that conceivably might ripen into litigation."
Although we reject the proposition that the Order triggered a duty to defend, we fully recognize the seriousness of such an Order. Currently, judicial review of any issues concerning the adequacy of any response action taken or ordered by the DTSC is limited to the administrative record, and Foster-Gardner's available defenses are few. By enacting the HSAA, the Legislature has given extraordinary power to the DTSC, and any company that received an Order would be justified in treating it seriously. Such Orders "may even represent a unique legal creation, with no true parallel in any other area of administrative law. But the fact that the [Legislature] chooses to create a new and more powerful type of claim does not justify our deviating from the plain language of the contracts." (Ray Industries, Inc. v. Liberty Mutual Ins. Co., supra, 974 F.2d at p. 764.)
Rather, by specifying that only a "suit," and not a "claim" triggers the duty to defend, insurers have drawn an unambiguous line to define and limit their contractual obligation. This delineation encourages stability and efficiency in the insurance system. In exchange for a higher premium, the policies might have obligated the insurer to defend any "demand" against the insurer, or to provide a defense whenever the insured is subject to government compulsion or investigation. They did not. (AIU, supra, 51 Cal.3d at p. 837, fn. 15 [The HSAA "expressly permits responsible parties to enter into agreements to `insure, hold harmless,
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