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K.F. Dairies, Inc. & Affiliates v. Fireman's Fund Ins. Co.

ELR Citation: 31 ELR 20014
Nos. No. 97-55941, 224 F.3d 922/51 ERC 1441/(9th Cir., 08/25/2000)

The court, applying California law, holds that an insurer had a duty to defend an insured in an underlying Comprehensive Environmental, Compensation, and Liability Act groundwater contamination suit when the damage occurred during the policy period even though the insured did not purchase the contaminated property until after the policy period expired. The court first holds that under California insurance law, coverage is provided under a comprehensive general liability insurance policy if the damage occurred within the policy period, but the insured purchased the property after the policy period. The court then holds that in California, a three-step process is necessary to determine if the insurer must provide coverage. First, the clear and explicit meanings of the policy's terms must be examined. If a term is ambiguous, the court resolves the ambiguity by looking to the expectations of a reasonable insured. Finally, if the ambiguity still remains, it is construed against the party who caused the ambiguity to exist. Applying this three-step process to the policy at issue, the court holds that no ambiguity existed and that the express terms of the policy clearly indicate that damage to the claimant is the event that triggers coverage. There is no language in the policy stating that the insured's liability, as opposed to the damage that serves as the basis for that liability, must arise within the policy period, and an exclusion or limitation on policy coverage cannot be read into the insurance contract.

Counsel for Appellants
David R. Scheidemantle
Proskauer Rose
2049 Century Park E., Ste. 3200, Los Angeles CA 90067
(310) 557-2900

Counsel for Appellee
Melinda Ebelhar
Caron, McCormick, Constants & Goldberg
700 N. Central Ave., Ste. 500, Glendale CA 91203
unlisted

Before Pregerson, J., with Beezer, J., dissenting.