Pitzer College v. Indian Harbor Insurance Co.
2017 U.S. App. LEXIS 668
| 9th Cir. | 2017Background
- Pitzer College discovered polluted soil at a dorm construction site in Jan 2011, remediated it promptly using a scarce Transportable Treatment Unit, and completed work before move‑in.
- CUC purchased a pollution‑remediation policy from Indian Harbor that was governed by New York law by express choice‑of‑law clause.
- The Policy required the insured to (a) report conditions requiring remediation during the policy period (notice clause) and (b) obtain the insurer’s written consent before incurring remediation costs, with an emergency exception requiring the insured to notify the insurer "immediately thereafter".
- Pitzer did not notify or seek consent from Indian Harbor before remediation; notice was given months later. Indian Harbor denied coverage for late notice and lack of consent.
- The district court applied New York law, granted summary judgment for Indian Harbor, and held (1) California’s notice‑prejudice rule did not override the Policy’s New York choice‑of‑law clause and (2) Pitzer failed to comply with the consent provision (including the emergency exception).
- The Ninth Circuit certified two dispositive state‑law questions to the California Supreme Court instead of predicting California law: whether California’s notice‑prejudice rule is a "fundamental public policy" for choice‑of‑law purposes, and whether a consent provision in a first‑party policy can be treated as a notice provision subject to the notice‑prejudice rule.
Issues and Key Cases Cited
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Is California’s common‑law notice‑prejudice rule a "fundamental public policy" that can override a contractual choice‑of‑law? | Clemmer rule is entrenched, protects insureds, and should qualify as a fundamental policy preventing New York law from applying. | Nedlloyd requires that a fundamental policy be established by constitution/statute or be tied to unconscionability; notice‑prejudice is common law and thus not fundamental. | Ninth Circuit certified the question to the California Supreme Court for authoritative resolution. |
| 2) If notice‑prejudice is fundamental, does a consent provision in a first‑party policy operate as a notice provision subject to the rule? | In first‑party context consent serves like notice because insurer pays the insured directly; consent should therefore trigger notice‑prejudice protections; emergency exception applied here. | Consent provisions are different in purpose (insurer control over costs); prior authority (Jamestown Builders) holds notice‑prejudice does not apply to consent provisions; applying notice rule would render consent redundant. | Ninth Circuit certified the question to the California Supreme Court for authoritative resolution. |
| 3) Procedural impact and remedy | Pitzer contends California law should protect it and preclude summary judgment. | Indian Harbor contends New York law governs and justifies summary judgment. | Because the certified questions are dispositive and unresolved in California law, the Ninth Circuit stayed the case and requested certification. |
Key Cases Cited
- Clemmer v. Hartford Ins. Co., 587 P.2d 1098 (Cal. 1978) (articulating California’s notice‑prejudice rule)
- Nedlloyd Lines B.V. v. Superior Ct., 834 P.2d 1148 (Cal. 1992) (choice‑of‑law: contractual choice governs unless it conflicts with fundamental public policy established by constitution/statute or unconscionability)
- UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358 (1999) (discussing notice‑prejudice rule in broader federal context)
- Burns v. Int’l Ins. Co., 929 F.2d 1422 (9th Cir. 1991) (California notice‑prejudice rule does not apply to claims‑made policies)