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Foster-Gardner Inc. v. National Union Fire Insurance Co.8/3/1998
ction may be able to limit or even eliminate a carrier's indemnity obligations by vigorously defending against claims of alleged damage."
Of course, because we conclude the insurers here did not contract and receive premiums to defend anything but a civil lawsuit, requiring them to defend the Order would result in an unintended windfall for Foster-Gardner. Moreover, it is indeed arguable that an insured's early intervention in a dispute outside the civil action context may reduce any indemnity for which the insurer is ultimately held liable. That does not alter the scope of the insurer's duty to defend. Thus, even if Foster-Gardner is correct that its insurers will ultimately be obligated to indemnify costs incurred as a result of the Order, this merely means that the insurers have an inherent incentive to participate in those proceedings where the costs are ascertained. Under the language of the policy, however, this is a judgment call left solely to the insurer ("the company . . . may make such investigation and settlement of any claim . . . as it deems expedient"). (See Stein v. International Ins. Co., supra, 217 Cal.App.3d at p. 615; Harleysville Mutual Ins. Co. v. Sussex Co., supra, 831 F. Supp. at p. 1132 [The "insurer may well have an interest in providing a defense early in the administrative proceeding as it may ultimately be called upon to indemnify the insured for liability resulting from that proceeding."].) In any event, as the Court of Appeal in Fireman's Fund pointed out, "this anomaly is more imagined than real since insurance companies routinely pay `claims' that have not ripened into `suits' and which therefore have not triggered a defense obligation."
Foster-Gardner further argues, "The Conclusion that coercive administrative actions are `suits' flows naturally from this Court's holding in AIU, that costs incurred to comply with an injunction mandating cleanup or to reimburse a government agency for cleanup expenses under CERCLA and the State Superfund Act constitute `damages' under a CGL policy. [Citation.] No logical basis exists under California rules of policy interpretation to determine that the term `damages' under a CGL policy is broad enough to include equitable remedies pursued by government entities, yet that the term `suit' cannot be read in a similar manner to include the adversarial administrative proceedings in which such damages are sought."
In AIU, as set forth above, we acknowledged, "The costs of injunctive relief . . . do not readily satisfy the statutory or dictionary definitions of `damages.' Because such costs are paid to employees or independent contractors rather than aggrieved parties, they do not directly `compensate' aggrieved persons for `loss' or `detriment.' " (AIU, supra, 51 Cal.3d at p. 838.) We concluded, however, that it was unlikely "that the parties to CGL policies intended to cover reimbursement of response costs but not the costs of injunctive relief, at least where the latter costs are incurred -- generally at a lower total cost -- for exactly the same purposes addressed through governmental expenditure of response costs." (Ibid.) In this respect, we noted that unlike traditional injunctive relief, which is only available when legal remedies such as monetary compensation are inadequate, "injunctive relief may be available [under CERCLA], even though legal or restitutive remedies are adequate." (Id. at pp. 838, 840.) In addition, the mere fact that the agencies sought an injunction did not indicate an absence of cognizable property damage or personal injury. Moreover, "in its remedial aspects, the injunction results in exactly the type of expenditures involved in reimbursement of response costs, whether or not the agencies have an
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