Tidwell Enterprises v. Financial Pacific Ins. Co.
C078665M
| Cal. Ct. App. | Dec 20, 2016Background
- Financial Pacific insured Tidwell Enterprises for commercial general liability (CGL) policies from 2003–2010; policies covered "property damage" caused by an "occurrence" (including continuous/repeated exposure) that "occurred" during the policy period.
- Tidwell installed a custom chimney termination/top at a Copperopolis house circa 2006–2007; homeowner Fox’s house burned on November 11, 2011 (after Financial Pacific coverage ended). State Farm (Fox’s insurer) sued Tidwell for negligence and sought subrogation for the 2011 fire loss.
- Expert reports (for State Farm and for Tidwell) suggested the custom top restricted draft, causing excessive heat in the chimney over time; Tidwell’s expert opined pyrolysis (progressive chemical degradation lowering ignition temperature) could have occurred during Financial Pacific policy periods and culminated in the 2011 fire.
- Financial Pacific denied a duty to defend, reasoning the insured loss (the November 2011 fire) occurred after policy expiration and thus no potential coverage existed; Tidwell sued for declaratory relief and breach for refusing defense.
- Trial court granted insurer summary judgment; Court of Appeal reversed, holding insurer failed to eliminate all possibility of coverage because earlier physical injury during policy periods (via continuous exposure/pyrolysis) could have caused the later fire.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Financial Pacific had a duty to defend Tidwell in State Farm’s suit | Tidwell: expert evidence and known facts created a plausible theory that continuous/repeated exposure during policy periods caused physical injury (pyrolysis) that led to the 2011 fire, so there was potential coverage | Financial Pacific: State Farm sued for damage from the 2011 fire (post-policy); coverage requires the damaging event to occur during the policy period, so no potential coverage | Held: Duty to defend existed — insurer failed to eliminate all possibility of coverage because earlier property damage during policy periods could have been a causal link to the 2011 fire |
Key Cases Cited
- Gray v. Zurich Ins. Co., 65 Cal.2d 263 (1966) (insurer owes duty to defend when facts give rise to potential liability under policy)
- Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (1993) (extrinsic facts can create a duty to defend; any doubt resolved for insured)
- Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal.4th 645 (1995) (continuous-injury trigger: progressive damage across multiple policies can be covered by all policies in effect during injury)
- American States Ins. Co. v. Progressive Cas. Ins. Co., 180 Cal.App.4th 18 (2009) (insurer moving for summary judgment must present undisputed facts eliminating any possibility of coverage)
- Remmer v. Glens Falls Indem. Co., 140 Cal.App.2d 84 (1956) (time of damage alleged in third-party complaint controls when damage manifestly is a present maintenance/continuing nuisance)
- Hurley Constr. Co. v. State Farm Fire & Cas. Co., 10 Cal.App.4th 533 (1992) (insured cannot manufacture coverage by mere speculation about unpled third-party claims)
- Gunderson v. Fire Ins. Exchange, 37 Cal.App.4th 1106 (1995) (same: extrinsic speculation cannot create duty to defend when complaint shows no potential for covered property/bodily injury)