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Foster-Gardner Inc. v. National Union Fire Insurance Co.8/3/1998
its duty to defend." (Id. at p. 61.)
"The duty to defend arises when the insured tenders defense of the third party lawsuit to the insurer." (2 Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, 7:604, p. 7B-22.) Prior to the filing of a complaint, there is nothing for the insured to tender defense of, and hence no duty to defend arises. It follows therefore that site investigation expenses incurred prior to the instigation of a lawsuit against the insured are not defense costs the insurer must incur. That is because the insurer does not yet have a duty to defend the insured.
Foster-Gardner also asserts that "The potential liability under the [Order] would be overwhelming to most sophisticated business institutions. To small, family owned businesses such as Foster-Gardner, such potential liability is nearly incomprehensible." We are cognizant of the significant economic consequences that may flow from the Order. "Still, that is not sufficient reason for a court to create new coverage and impose risks not assumed or paid for by the contracting parties." (Michigan Millers Mut. Ins. v. Bronson Plat., supra, 519 N.W.2d at p. 881 (dis. opn. of Griffin, J.).) Indeed, we are also cognizant that judicially created insurance coverage leaves "ordinary insureds to bear the expense of increased premiums necessitated by the erroneous expansion of their insurers' potential liabilities." (Garvey v. State Farm Fire & Cas. Co. (1989) 48 Cal.3d 395, 408.)
Finally, Foster-Gardner relies on Taranow v. Brokstein (1982) 135 Cal.App.3d 662, in which the court held that the word "suit" included arbitration proceedings. In Taranow, however, the partnership contract at issue required all controversies and claims arising out of the agreement to be arbitrated. (Id. at p. 664.) It also provided for attorney fees " ` hould any partner be forced to bring suit to enforce the terms of this partnership agreement.' " (Ibid.) The court therefore reasonably concluded that for the attorney fee provision to have any effect, the term "suit" would have to be interpreted to include arbitration proceedings. (Id. at pp. 667-668.) That is not the situation here. Interpreting "suit" to include only actions commenced by the filing of a complaint does not render the insurer's promise to defend meaningless. Moreover, post-1985 policies generally include arbitration proceedings in the definition of "suit." (See ante, fn. 3.)
As noted, cases in other jurisdictions have relied in part on certain policy considerations in determining that environmental agency activity is the "functional equivalent" of a "suit." (Aetna Cas. & Sur. Co., Inc. v. Pintlar Corp., supra, 948 F.2d at p. 1517; Michigan Millers Mut. Ins. Co. v. Bronson Plating Co., supra, 519 N.W.2d at p. 872.) In particular, these cases have expressed the concern that a contrary conclusion would increase litigation by encouraging insureds (who want the insurer to cover defense costs) to fail to respond to an administrative order or other inquiries, and let the agency sue them for reimbursement of cleanup costs.
We disagree. Our Conclusion that a "suit" is a court proceeding initiated by the filing of a complaint creates a "bright-line rule that, by clearly delineating the scope of risk, reduces the need for future litigation. Indeed, it is the position taken by [these other jurisdictions] that will open the flood gates of litigation by inviting, and requiring, a case-by-case determination whether each new and different letter presenting the claim of an administrative agency is to be deemed the `functional equivalent of a suit brought in a court of law.' " (Michigan Millers Mut. Ins. v. Bronson Plat., supra, 519 N.W.2d at p. 881
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