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McMillin Scripps North Partnership v. Royal Insurance Co.11/1/1993
COURT OF APPEAL OF CALIFORNIA, FOURTH APPELLATE DISTRICT, DIVISION ONE
No. D014527
1993.CA.41322
Filed: November 1, 1993.
MCMILLIN SCRIPPS NORTH PARTNERSHIP, PLAINTIFF AND APPELLANT,
v.
ROYAL INSURANCE COMPANY OF AMERICA, DEFENDANT AND RESPONDENT.
Super. Ct. No. 622869. 19 Cal. App. 4th 1215, 23 Cal. Rptr. 243.
The Court
Order MODIFYING OPINION AND DENYING PETITION FOR REHEARING
[No Change in Judgment]
THE COURT:
The majority opinion filed September 30, 1993, is modified as follows:
Page 4, line 6: delete that because
Page 4, line 7: leaking should read leak
Page 4, line 8: after 1986 delete the comma and insert and therefore
Page 5, line 8: deunderscore second set of italics
Page 5, lines 10-11: delete which occur during the policy period
Page 5, lines 11-12: delete during the policy period
Page 11, line 13: delete footnote number 2 and footnote 2 text
The separate Concurring and Dissenting opinion in this case, filed September 30, 1993 is recast as a Dissenting opinion and modified to read as follows:
WIENER, J., Dissenting.
In 1988 Royal issued McMillin a commercial property insurance policy which, among other things. provided coverage for damage caused by the discharge of pollutants if the discharge resulted from any of a varied list of specific factors including fire, vandalism, falling objects or water damage. McMillin does not dispute that the reports furnished to Royal established that the leak which caused the contamination occurred in or before 1986. Instead it argues that no fuel spillage was detected in 1986 and the loss only manifested itself in 1988 when odors were first noticed. (See generally Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal. 3d 674, 274 Cal. Rptr. 387, 798 P.2d 1230.) It correctly asserts that as of January 1990, the exact cause of the leak had not been established and that Royal's investigation had not reasonably ruled out the possibility of a covered loss. (See generally Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal. 3d 395, 406, 257 Cal. Rptr. 292, 770 P.2d 704 [burden is on the insurer to prove a claim is excluded].)
In the context of the foregoing, the majority acknowledges that an insurer has a statutory obligation to investigate an insured's claim where the facts suggest a reasonable possibility of coverage under the policy. This obligation, however, is ephemeral in light of the majority's Conclusion. They hold that even where an insurer ignores this obligation, it will not be liable for its failure unless the investigation the insured is forced to conduct on its own ultimately demonstrates a covered loss. The result is a rule which will allow insurance companies to deny insureds the financial and emotional security they reasonably believe they are purchasing when they buy an insurance policy.
In deciding this issue of first impression, the majority conclude a duty on the part of an insurer to investigate a potential claim cannot be implied from the language of this policy and should not be implied generally as a matter of law. They are incorrect on both counts.
A
The majority say there is no "language in th
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