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The California Supreme Court's Decision in Foster-Gardner and Its Impact on Insurance for Environmental Defense and Remediation Expenses

March 1999

Citation: ELR 10129

Author: Michele Y. Horton and Meredith M. Newton

Editors' Summary: In environmental insurance litigation, coverage is often determined by the court's interpretation of key policy terms. This was just the case in Foster-Gardner, Inc. v. National Union Fire Insurance Co. of Pittsburgh, a recent suit decided by the California Supreme Court. Under the standard-form comprehensive general liability policies at issue, the insurer was required to defend a "suit" but not a "claim." The court was asked to resolve a dispute — whether administrative proceedings constituted a claim or a suit-over these two terms. In an unexpected decision, the California Supreme Court held that a suit is triggered by the filing of a complaint that initiates a civil action, and, thus, defense costs incurred in responding to a state environmental administrative order are not covered by the policies at issue. This Article reviews the facts and procedural history surrounding Foster-Gardner and details the California Supreme Court's analysis, holding, and remodification of its decision. While Foster-Gardner is sure to affect environmental enforcement and insurance recovery efforts in California, the ultimate impact of the decision on policyholders and insurers remains uncertain. Nevertheless, the Article discusses the potential ramifications of the Foster-Gardner decision. Included in this discussion are the likely impacts on environmental enforcement, access to umbrella and excess insurance, indemnity coverage, past defense costs, and judicial temperament in environmental insurance coverage litigation. The Article concludes that the California Supreme Court's decision in Foster-Gardner created more insurance coverage issues than it resolved.

Michel Y. Horton is a partner and Meredith (Mimi) Newton is an associate in the Los Angeles office of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. Mr. Horton regularly represents insureds in environmental and other insurance coverage litigations. Ms. Newton, a former Resource Conservation and Recovery Act enforcement attorney with the U.S. Environmental Protection Agency, practices environmental and insurance coverage law.

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