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Certain Underwriters at Lloyd's, London v. Superior Court of Los Angeles County

ELR Citation: 31 ELR 20453
Nos. No. S084057, 16 P.3d 94/(Cal., 02/01/2001)

The court holds that an insurer's duty to indemnify an insured under a standard comprehensive general liability (CGL) insurance policy does not extend to fines imposed on the insured by state administrative agencies for groundwater contamination cleanup and abatement at one of the insured's sites, but is limited to money ordered by a court. The court first holds that the insurer's duty to indemnify the insured for "all sums that the insured becomes legally obligated to pay as damages" under the standard CGL insurance policy is limited to money ordered by the court. In Foster-Gardner, Inc. v. National Union Fire Insurance Co., 18 Cal. 4th 857, 29 ELR 20357 (1998), the California Supreme Court held that an insurer's duty to defend an insured in a suit seeking damages was limited to a civil action prosecuted in a court and did not extend to a proceeding before an administrative agency pursuant to an environmental statute. Because the duty to defend is broader than the duty to indemnify and the duty to defend does not extend beyond a civil action prosecuted in court, the duty to indemnify is not broad enough to extend beyond money ordered by a court. The court therefore holds that the insurer does not need to indemnify the insured for fines imposed by the state administrative agencies. Moreover, in its language imposing the duty to indemnify, the policy is clear that it is limited to money ordered by a court.

A dissenting judge would hold that standard language in a CGL insurance policy, under which the liability carrier promises to indemnify the insured for all sums that the insured becomes legally obligated to pay as damages, would obligate the carrier to pay the costs of complying with an administrative order to mitigate and remediate the effects of environmental pollution.

Counsel for Petitioners
Patrick A. Cathcart
Hancock, Rothert & Bunshoft
515 S. Figueroa St., 17th Fl., Los Angeles CA 90071
(213) 623-7777

Counsel for Respondent
[No counsel appeared for Respondent.]

George, Baxter, Chin, and Brown, JJ., concur; Kennard and Werdegar, JJ., dissent