Tidwell Enterprises, Inc. v. Financial Pacific Insurance Co.
6 Cal. App. 5th 100
| Cal. Ct. App. | 2016Background
- Tidwell (contractor) installed a fireplace/ custom chimney termination top at a Copperopolis home in 2006–2007. Financial Pacific insured Tidwell from 2003–2010.
- A house fire on November 11, 2011 (after Financial Pacific policies expired) damaged the home; State Farm (homeowner’s insurer) sued Tidwell for negligence and sought subrogation.
- Investigations suggested the custom termination restricted draft, causing excessive heat; experts later opined repeated heating could have caused pyrolysis (chemical degradation) of chimney wood, lowering its ignition point over years.
- Tidwell tendered defense to Financial Pacific; the insurer denied coverage, saying the claimed property damage (the November 2011 fire) occurred after the policy period.
- Tidwell sued Financial Pacific for declaratory relief and breach, seeking a defense; the trial court granted insurer summary judgment. Tidwell appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer had a duty to defend under CGL policy when third‑party sued for post‑policy fire that may have resulted from progressive damage occurring during policy periods | Tidwell: repeated exposure to excessive heat (an ‘‘occurrence’’) during policy periods may have caused pyrolysis (property damage) that led to the 2011 fire, so there is a potential for coverage triggering a duty to defend | Financial Pacific: State Farm sued for damage occurring after coverage ended; coverage requires the damage sued on to occur during policy period, so no potential for coverage | Reversed: potential for coverage existed because earlier physical injury from continuous exposure could have occurred during policy periods and causally contributed to the later fire, creating a duty to defend |
| Whether insured may rely on extrinsic facts/experts (pyrolysis theory) to show potential for coverage | Tidwell: insurer knew of expert reports and cannot ignore extrinsic facts that show a possibility of covered property damage during policy periods | Financial Pacific: insured is speculating; third‑party complaint controls and it alleges only post‑policy damage | Court: extrinsic facts can create a duty to defend; insured’s experts presented a viable, non‑speculative causal theory that insurer failed to negate |
| Whether prior case law (manifestation/continuous injury) bars coverage absent manifestation during policy period | Tidwell: continuous‑injury trigger applies (Montrose) and successive policies can be implicated for progressively deteriorating damage | Financial Pacific: relies on manifestation rule (Remmer, out‑of‑state authorities) to argue no coverage when injury manifests post‑policy | Court: applies continuous/ progressive injury approach (Montrose), rejects manifestation rule as controlling here |
| Whether insurer met summary judgment burden to eliminate all possibility of coverage | Tidwell: insurer failed to present undisputed facts negating pyrolysis or that pyrolysis occurred during policy periods | Financial Pacific: argued expert support lacking or speculative | Court: insurer failed to eliminate possibility; summary judgment reversed |
Key Cases Cited
- Gray v. Zurich Ins. Co., 65 Cal.2d 263 (insurer’s duty to defend arises when facts show potential for liability)
- Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287 (extrinsic facts can trigger duty to defend; continuous injury trigger applies)
- Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal.4th 645 (distinguishes occurrence from resulting property damage; continuous injury across policies may be covered)
- Remmer v. Glens Falls Indem. Co., 140 Cal.App.2d 84 (manifestation approach applied where complaint sought damages for present nuisance)
- American States Ins. Co. v. Progressive Cas. Ins. Co., 180 Cal.App.4th 18 (insurer moving for summary judgment must present undisputed facts eliminating any possibility of coverage)
- Hurley Constr. Co. v. State Farm Fire & Cas. Co., 10 Cal.App.4th 533 (insured may not manufacture coverage by pure speculation about unpled third‑party claims)
- Gunderson v. Fire Ins. Exchange, 37 Cal.App.4th 1106 (same principle: cannot create coverage by speculative amendments to third‑party complaint)