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Foster-Gardner Inc. v. National Union Fire Insurance Co.8/3/1998
he letter initiates. In my view (and that of the various courts reaching decisions contrary to the majority's decision here), a PRP notification letter, which includes an administrative order backed by heavy sanctions, and the administrative remediation process that the letter initiates, in substance resemble a typical personal injury court proceeding initiated by complaint more closely than they do the typical personal injury claimant's prelitigation demand letter that an insured may ignore without legal consequences. In any event, the CGL policy language at issue here is ambiguous as to whether a PRP notification should be treated as a mere "claim" or as the initiation of a "suit," and under our rules of policy interpretation (see, e.g., AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822), this ambiguity should be resolved in favor of coverage.
Finally, the majority's decision is inconsistent with AIU Ins. Co. v. Superior Court, supra, 51 Cal.3d 807. There, this court held that when the government seeks to recover environmental pollution remediation costs in a civil suit, those costs are, in the words of the standard CGL policy, sums that the insured is "legally obligated" to pay as "damages." (Id. at p. 837.) It is inconsistent with generally accepted principles of insurance law to hold that even though the insurer must indemnify government remediation costs, it need not represent and defend the insured in the administrative process that largely determines the amount of these costs. In the same decision, this court also held that an insurer must indemnify the costs of complying with an injunction ordering remedial action. (Id. at p. 841.) It is illogical to hold that an insurer need not pay those costs when they result from compliance with an administrative order rather than from compliance with an injunction. As this court stated, "costs of compliance must be interpreted as `damages' in the environmental context, because to hold otherwise would make insurance coverage hinge on the `mere fortuity' of the way in which government agencies seek to enforce cleanup requirements, would unreasonably constrain the agencies' choice of cleanup mechanisms, and would introduce substantial inefficiency into the cleanup process." (Id. at pp. 840-841.) "Because an insured would reasonably expect equal coverage of the costs of equivalent or alternative remedies, the costs of injunctive relief under the statutes in question here are `damages' for CGL purposes." (Id. at pp. 841-842.) So too here, a reasonable insured would expect the insurer to pay cleanup costs whether the insured's obligation for those costs is determined administratively or judicially, and a reasonable insured would also expect the insurer to represent and defend its interests in the forum - whether administrative or judicial - in which its cleanup costs were determined. An insured would not expect that the existence of coverage for defense costs would "hinge on the `mere fortuity' of the way in which government agencies seek to enforce cleanup requirements." (Id. at pp. 840-841.)
For these reasons, I would hold that a PRP notification triggers the insurer's duty to defend under the standard CGL policy language at issue here.
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
[Editor's note: originally released as an unpublished opinion] Original Appeal Original Proceeding Review Granted XXX 56 Cal.App. 4th 204 Rehearing Granted
Opinion No. S063425
Court: Superior County: Los Angeles Judge: Edward M. Ross
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