Pacific Indemnity Co. v. Bellefonte Insurance Co.

No. D031786 (95 Cal. 2d 911) (Cal. Ct. App. May 24, 2000)

ELR Digest

The court affirms in part and reverses in part a lower court judgment determining that an insurer of the San Diego Bay Port District had a duty to defend the district from a citizen suit alleging that the district breached the public trust doctrine by failing to protect the bay, its animals, and its vegetation from contamination. When the suit originated, the district tendered the defense to two of its insurers. One insurer accepted, but the other rejected the offer. The accepting insurer eventually prevailed at trial and sued the rejecting insurer for reimbursement of defense costs. The rejecting insurer claimed that the policies' owned property exclusion clause, which excluded coverage for property entrusted to the district for storage or safekeeping, barred coverage because the bay was entrusted to the district.

The court first holds that the owned property exclusion does not bar coverage under the rejecting insurer's policies and, thus, the rejecting insurer had a duty to defend the district. The plain meaning of the owned property exclusion indicates that the policy phrase entrusted to the insurer for safekeeping applies to personal property subject to bailment or similar arrangement. Even if the phrase did apply to public trust property, the storage or safekeeping language indicates that coverage is barred only where the insured's task is holding property for its return to the owner in an unaltered condition. The state did not entrust the bay to the district for mere safekeeping, but for, among other reasons, the promotion of commerce, navigation, fisheries, and recreation. The court next holds that an excess only clause in the rejecting insurer's policy did not transform the policy into an excess policy, thereby eliminating any duty to defend. The rejecting insurer's policies were not umbrella policies, the district had no other insurance for the 11 years that the rejecting insurer covered it, and the rejecting insurer's policies required it to defend and indemnify the district immediately upon a covered event. The court also holds that equitable contribution principles require proration of the defense costs.

The full text of this decision is available from ELR (17 pp., ELR Order No. L-237).

Counsel for Plaintiff
Janelle F. Garchie
Lewis, D'Amato, Brisbois & Bisgaard
221 N. Figueroa St., Los Angeles CA 90012
(213) 250-1800

Counsel for Defendant
James A. McFall
Neil, Dymott, Perkins, Brown & Frank
1010 Second Ave., San Diego CA 92101
(619) 238-1712

[30 ELR 20658]

[OPINION OMITTED BY PUBLISHER IN ORIGINAL SOURCE]