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Reese v. Travelers Ins. Co.

ELR Citation: 28 ELR 20233
Nos. 96-16507, 129 F.3d 1056/(9th Cir., 11/12/1997)

The court holds that owned property and pollution exclusion clauses in comprehensive general liability policies do not preclude an insurance company's duty to defend a metals operation in an environmental contamination suit. The court first holds that because the complaint alleges groundwater contamination, which the insurance company concedes is covered property damage not excluded by the owned property exclusion, the insurance company has a duty to defend the metals operation in the underlying action. To allow the insurance company to avoid its duty to defend the metals operation based on its allegation, even if true, that it cannot ultimately be held liable to the landowner allows it to avoid the contractual duty it assumed to defend the metals operation against even groundless, false, or fraudulent suits. The court next holds that the insurance company failed to meet its burden of establishing conclusively that the metals operation was not potentially liable. The complaint does not specify whether the metals operation acted negligently or intentionally caused the pollution, and the California Supreme Court has made it clear that the fact that a corporation's regular business practice involved the disposal of toxic wastes does not eliminate the possibility that at least some of the property damage might have resulted from accidental causes.

Counsel for Plaintiff
Russell G. VanRozeboom
Wild, Carter & Tipton
246 W. Shaw Ave., Fresno CA 93755
(209) 224-2131

Counsel for Defendant
John L. Williams
Sonnenschein, Nath & Rosenthal
685 Market St., 10th Fl., San Francisco CA 94105
(415) 882-5000

Before Boochever and Reinhardt, JJ.