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Armstrong World Industries Inc. v. Aetna Casualty & Surety Co.11/15/1993
This appeal raises a number of complex questions concerning insurance coverage for claims of asbestos-related bodily injuries and property damage. In the proceedings below, separate declaratory relief actions and related cross-actions involving three asbestos manufacturers--Armstrong World Industries, Inc., Fibreboard Corporation, and GAF Corporation--and their various insurance carriers were coordinated and tried in six separate phases over a five-year period.
On appeal, the parties submitted briefs on three major issue groups, and our opinion follows that organization. In Issue Group I we discuss the issues pertaining to a lost insurance policy. In Issue Group II we discuss the issues concerning the bodily injury claims: trigger and scope of coverage; the application of the phrase "neither expected nor intended"; the liability of premerger insurers; the effect of the Wellington Agreement. In Issue Group III, we discuss the issues surrounding the property damage claims: coverage for property damage; trigger and scope of coverage; the duties to defend and indemnify; the "drop-down" obligation of an INA- Armstrong excess policy.
After this appeal was submitted for decision, we granted a motion of certain parties to sever issues unique to them in order to facilitate a pending settlement. Accordingly, we have deferred decision upon issues pertaining to a lost Fibreboard-Pacific Indemnity insurance policy; the number of occurrences; the effect of the Fibreboard-Continental manuscript policy; and the application of the pollution exclusion clause.
GUIDING PRINCIPLES
At the outset, we set forth the principles guiding our review. Interpretation of an insurance policy is primarily a judicial function. When the
trial court's interpretation did not depend upon conflicting extrinsic evidence, the reviewing court makes its own independent determination of the policy's meaning. (Masonite Corp. v. Great American Surplus Lines Ins. Co (1990) 224 Cal. App. 3d 912, 916 [274 Cal. Rptr. 206].)
In interpreting an insurance contract, the court's fundamental goal is to give effect to the mutual intention of the parties. Such intent is inferred, if possible, solely from the written provisions of the contract. (AIU Ins. Co. v. Superior Court (1990) 51 Cal. 3d 807, 821- 822 [274 Cal. Rptr. 820, 799 P.2d 1253].) "If contractual language is clear and explicit, it governs." (Bank of the West v. Superior Court (1992) 2 Cal. 4th 1254, 1264 [10 Cal. Rptr. 2d 538, 833 P.2d 545].) Words in an insurance policy are to be interpreted as a layperson would interpret them, in their " 'ordinary and popular sense.' " (AIU, supra, 51 Cal. 3d at p. 822; Reserve Insurance Co. v. Pisciotta (1982) 30 Cal. 3d 800, 807 [180 Cal. Rptr. 628, 640 P.2d 764].) A policy should not be read as it might be analyzed by an attorney or an insurance expert. (Delgado v. Heritage Life Ins. Co. (1984) 157 Cal. App. 3d 262, 271 [203 Cal. Rptr. 672].) This is so even if the policyholder is a sophisticated insured. (AIU, supra, 51 Cal. 3d at p. 823.)
If particular policy language is ambiguous, it is to be resolved by interpreting the ambiguous provisions in accordance with the insured's objectively reasonable expectations. (Bank of the West v. Superior Court, supra, 2 Cal. 4th at pp. 1264-1265.) Only if application of this rule does not resolve the ambiguity
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