Lead Opinion
This extraordinary writ proceeding arises from a declaratory relief action brought against environmental polluters by their insurers. Petitioners Aerojet-General Corporation and Cordova Chemical Company seek a writ of mandate to set aside an order granting real party insurance companies’ summary adjudication of the issue that no portion of environmental cleanup and restoration costs, imposed upon petitioners by the state and federal governments, constitute damages within the meaning of petitioners’ comprehensive general liability policies. We issued an order to show cause in lieu of an alternative writ, and heard oral argument. We issue a peremptory writ of mandate.
I.
Since the early 1950’s petitioners have operated a research and development facility near Sacramento, California, where they developed rocket engines, rocket components, and related products for the country’s aerospace and defense programs. Petitioners’ operations involved the use of various toxic chemicals. In 1979 government regulatоry agencies discovered that toxic chemicals had entered the soil and groundwater beneath petitioners’ facility, and had leached into the groundwater of neighboring properties and into the American River.
On December 26, 1979, the State of California filed a “Complaint for Injunction^] Abatement, and Other Equitable and Civil Monetary Relief’ against petitioners in Sacramento County Superior Court. The state alleged that petitioners’ discharge of toxic chemical wastes had polluted state-owned waters, both groundwater and the American River, causing “impairment and destruction” of a “natural resource of this state.”
On January 15, 1986, the United States Department of Justice, at the request of the Environmental Protection Agency, brought suit against petitioners in the United States District Court for the Eastern District of California. The action was brought pursuant to sections 106(a) and 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (42 U.S.C. §§ 9606(a), 9607), and other federal statutes. The federal complaint alleged that hazardous chemicals and pollutants had migrated from petitioners’ facility to the soil, then to the groundwater and ultimately to the American River, a navigable waterway of the United States. The United States claimed both present and future damage to the environment, and sought injunctive relief to abate an “imminent and substantial endangerment to public health, welfarе or [the] environment.”
The complaint also alleged that the United States, in order to combat the effects of petitioners’ pollution, had incurred and was incurring “response costs” as defined by CERCLA (see 42 U.S.C. § 9601(25)), for which petitioners were liable (42 U.S.C. § 9607). CERCLA defines the costs of “response” to include costs of removal of hazardous substances from the environment and the costs of other remedial work. (42 U.S.C. § 9601(25).)
Under the CERCLA statutory scheme, the government may postpone litigation of liability and obtain an injunction to compel a polluter to clean up its pollution, or the government may conduct the сleanup itself and then sue the polluter for reimbursement. (42 U.S.C. §§ 9606, 9607; see United
Although we are not provided with precise information, it is not disputed that petitioners have responded to the government lawsuits by engaging in cleanup activities designed to correct and mitigate environmental damage and facilitate a settlement of the actions. Petitioners claim to have expended “tens of millions of dollars” on cleanup, removal of chemicals from the groundwater, and activity designed to prevent chemicals already in the soil from migrating into the groundwater. We are informed that the state and federal governments and petitioners have entered into a consent decree concerning response costs, which is still subject to public comment (see 42 U.S.C. § 9622(d)(2)(B)), and is not included in the record. The CERCLA consent decree evidently incorporates not only the state and federal CERCLA actions, but also the state action seeking analogous cleanup costs under Water Code section 13304.
Petitioners seek to recoup their response costs from their liability insurers. During the period of their Sacramento operations petitioners have carried comprehensive general liability (CGL) insurance purchased from real parties in interest. The parties agree that the operative coverage provision of virtually all the policies is essentially identical: the insurer agreed “[t]o pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or loss, destruction or loss of use of property.” (Italics added.) The policies do not specifically define “damages.” Petitioners tendered defense of the government actions to real parties, who refused to defend and deniеd coverage.
To seek resolution of the coverage question, two of real party insurers brought the instant declaratory relief action against petitioners and remaining real parties. The action sought a declaration that the insurers had no duty to indemnify petitioners under the policy language. Real parties then moved for summary adjudication of two issues: (1) that the government actions against petitioners “assert only claims for equitable relief,” and (2) that the policy language quoted above “limit[s] the insurers’ obligations to legal claims for ‘damages’ asserted against the insured, [and the insurers] have no obligation with respect to claims for equitable relief asserted against the insured[.]”
The trial court granted real parties’ motion for summary adjudication of both issues, i.e., that the government claims sought equitable relief and that the policy language did not afford coverage for equitable relief, but only for a traditional award of damages in an action at law. The trial court thus ruled as a matter of law that no portion of environmental cleanup costs are “damages” within the meaning of the policies.
This timely petition followed.
II.
Petitioners contend the policies cover CERCLA response costs because the layperson buying such insurance would reasonably expect that an agreement “[t]o pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or loss, destruction or loss of use of property” includes any monetary outlay incurred under compulsion of law. Real parties, noting that CERCLA remedies are generally classified as forms of equitable relief, respond that “damages” unambiguously refers only to an award of legal damages in an
After an examination of both California law and the considerable body of federal and sister state decisions resolving this issue under CERCLA, we conclude that the policies generally cover CERCLA response costs. Because the trial court reached a contrary legal conclusion, petitioners are entitled to relief.
A.
Since we have been called upon to interpret the policy without extrinsic evidence, the interpretation is one of law (Chong v. Fremont Indemnity Co. (1988)
In interpreting an insurance contract we are guided by well-established rulеs. An insurance policy “should be read as a lay[person] would read it and not as it might be analyzed by an attorney or an insurance expert.” (Crane v. State Farm Fire & Cas. Co. (1971)
Whether there is an ambiguity in policy language is to be determined from the perspective of the layperson. (Spaid v. Cal-Western States Life Ins. Co. (1982)
B.
For ease of reference, the pertinent coverage language is here restated: “To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or loss, destruction or loss of use of property. ” (Italics added.)
In contending this clause provides coverage for environmental response costs, petitioners submit that the term “damages” is either unambiguous, or is ambiguous and therefore to be construed against the insurers. Asserting that “damages” unambiguously includes response costs, petitioners argue that “damages” is not to be accorded its technical meaning of damages awarded in an action at law, but its ordinary plain meaning. Petitioners contend the ordinary plain meaning of “damages” includes any sums payable under sanction of law, regardless of the nature of the proceeding or of the relief sought. (See, e.g., Webster’s New Collegiate Dict. p. 286 [“damages” defined аs “compensation in money imposed by law for loss or injury”]; Black’s Law Dict. (5th ed. 1979) pp. 351-352 [“damages” defined as “[a] pecuniary compensation or indemnity, which may be recovered in
It is not unreasonable to argue that while a technical meaning of “damages” may refer to an award in an action at law, the ordinary plain meaning of damages is broader and covers environmental response costs incurred at the behest of government entities and under express or implied sanction of law. The argument finds some support in Civil Code section 3281, which defines “damages” as compensation for the “detriment [caused by] the unlawful act or omission of another . . . .” Petitioners observe their “detriment” is the same whether the governments compelled them to initially incur the response costs, or performed the cleanup themselves and then sued petitioners for damages for reimbursement.
We conclude, however, that “damages” is not as clearly read as petitioners would have it, and is subject to two reasonable interpretations of its ordinary plain meaning. The primary source of ambiguity is the obvious fact that “damages because of injury to or loss, destruction or loss of use of property” could mean damages at law or equitable monetary relief designed to correct the damage to property. From the standpoint of the lay insured, “damages” could well include any sum expended under sanction of law, including both money damages and sums paid out to an injured party in response to its claim for equitable relief. Even a federal CERCLA decision supporting real parties, a case discussed infra, seems to agree with this conclusion. (Continental Ins. v. Northeastern Pharmaceutical (8th Cir. 1988)
This conclusion finds support in California law, particularly Globe Indem. Co. v. State of California, supra,
The Globe court resolved the ambiguity by interpreting the policy in light of the reasonable expectations of the pаrties regarding the scope of coverage. “When an insured takes out an indemnity policy, as in this case, it is more reasonable to suppose that he expects to be protected by his insurance in any situation wherein he becomes liable for damage to tangible property. It would seem strangely incongruous to him, as it does to us, that his policy would cover him for damages to tangible property destroyed through his negligence in allowing a fire to escape but not for the sums incurred in mitigating such damages by suppressing the fire.” (Globe Indem. Co. v. State of California, supra,
Real parties argue that Globe is limited to an emergency situation in which there is no time to seek the insurer’s consent to incur mitigation costs. This claim is based in part on an issue not before either this court or the trial court, an argument that the policy does not cover expense of the insured incurred without the insurer’s consent. In any case, real parties read too much into the Globe opinion, and at the same time have read too little: “A rule, reasonably applied, permitting expenses incurred in the mitigation of damages to tangible property to be recoverable under policies insuring against liability inсurred because of damages to tangible property would seem to require universal application as it encourages a most salutary course of conduct.” (Globe Indem. Co. v. State of California, supra,
Under a Globe analysis, petitioners could reasonably expect that funds expended to correct third party property damage caused by pollution, and to mitigate the effects of that damage, are covered by their CGL policies. Their pollution has damaged the groundwater and river water of the state
Petitioners have become legally obligated to clean up their pollution by virtue of the polite but puissant compulsion of CERCLA. At least to the reasonable insured, this obligation is no less a legal sanction than that of a monetary judgment. Indeed, hаving purchased insurance to cover them for damages because of property damage, petitioners would be surprised indeed to learn that coverage depended on whether the proceeding employed to obtain recompense was defined as “legal” or “equitable.” An insured reading the coverage clause before us would reasonably conclude it provided coverage for any economic outlay compelled by law to rectify and mitigate property damage caused by the insured’s pollution. To phrase it another way, persons purchasing a comprehensive general liability policy which promises “to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or loss, destruction or loss of use of property” would reasonably expect to be insured if their negligence caused injury to or loss, destruction or loss of use of [another’s] property. It would come as an unexpected, if not incomprehensible, shock to the insureds to discover that their insurance coverage was being denied because the plaintiff chose to frame his complaint in equity rather than in law.
Real parties maintain, however, that the government suits plainly seek only equitable relief and that “damages” is an unambiguous term limited to an action at law. Real parties contend that “damages” must restrict the meaning of the preceding phrase, “all sums which the insured shall become legally obligated to pay,” such that “damages” necessarily limits coverage to a legal damage award. This textual argument does not directly address the definitional ambiguity of “damages.” Moreover, in making the argument real parties effectively sunder “damages” from the additional restrictive phrase “because of injury to or loss, destruction or loss of use of property.” Indeed, at oral argument real parties went so far as to contend that the coverage clause actually ended at the word “damages,” and the “because of . . .” phrase was a separate “property damage clause.” This argument is as much a sophistry as a transparent attempt to persuade us to ignore our rеsponsibility to interpret the coverage clause as a whole. (See Civ. Code, § 1641 [contract must be viewed as a whole and effect given to every part].) The term “damages” does not stand by itself in a vacuum, but is the keystone of the operative phrase “all sums which the insured shall become legally obligated to pay as damages because of injury to or loss,
Real parties also contend there can be no “damages” under the policy because the government suits do not allege property damage. (For the purpose of this argument, real parties seem to reverse their position that the “damages” and the “property damage” segments of the coverage clause are severable.) With regard to thе state and federal CERCLA complaints, real parties contend the suits are not for damages, but simply an exercise of police power. We defer discussion of this point to part 11(C) below. With regard to the two state complaints, real parties claim there are no “damages” involved because the state cannot sue for “damages” as would a traditional, fee-simple-absolute property holder. Real parties assert that the concept of public ownership of water, presumably because limited to rights of use and regulation, is a “19th-century fiction.” The short answer to this contention is that real parties did not challenge the state’s standing below, and should not be permitted to do so now. However, since we conclude real parties are mistaken and the issue could arise again, we resolve it here.
In this state, all ownership of water is usufructuary; water rights decisions “do not speak of the ownership of water, but only of the right to its use.” (United States v. State Water Resources Control Bd. (1986)
Unquestionably, the state and federal governments are third party property owners for purposes of insurance coverage. Pollution of the ground and river waters is damage to public property, as well as a direct injury to public welfare. (See Port of Portland v. Water Quality Ins. Syndicate (9th Cir. 1986)
Real parties further argue that CERCLA cleanup costs are “restitutionary” in nature, and that several California cases hold that restitutionary payments are not “damages” in the insurance context. (See Hackethal v. National Casualty Co. (1987)
Real parties place far too much weight on the broad assertion that CERCLA cleanup costs are restitutionary. True, the federal decisions construing CERCLA describe suits seeking response costs as involving equitable relief. (Maryland Cas. Co. v. Armco, Inc. (4th Cir. 1987)
But the equitable nature of CERCLA relief begins, not ends, the inquiry into the reasonable expectation of the insured regarding coverage. Especially where, as here, the insured does not simply reimburse the government for its response costs, but incurs a direct out-of-pocket economic detriment for the response costs in the first instance, the question is not whether the action or the relief sought is equitable or legal, but whether the insured has a reasonable expectation that such costs are insured as “damages because of injury to or loss, destruction or loss of use of property.”
This is especially true because CERCLA response costs, while arising from an essentially equitable proceeding, may not in effect be restitutionary. In its typical sense, restitution is the return of something wrongfully received. Response costs, whether incurred directly by the polluter or paid to reimburse the government for its cleanup efforts, do not fit easily into this definition. Furthermore, the cost of restoration of property to its undamaged condition is one measure of compensatory property damages. (Geddes & Smith, Inc. v. St. Paul Mercury Indem. Co. (1965)
Nothing in the five decisions cited by real parties (see p. 230, ante) compels a different conclusion.
Hackethal is even less apposite. It concerned a policy of income reimbursement for attendance at a “ ‘trial of a civil suit for damages against the insured alleged to have been caused by malpractice.’ ” (Hackethal v. National Casualty Co., supra, 189 Cal.App.3d at pp. 1104-1105, italics omitted.) The court held the policy did not apply to a Board of Medical Quality Assurance administrative hearing because it was not a suit for damages, even though Dr. Hackethal was “damaged” by the resultant license suspension. Finally, Nationwide only holds that there is no coverage for “damages” for a suit seeking an injunction for the removal of an air conditioner for violation of condominium restrictions. Obviously, there was no issue in that case of property damage and any sums expended “because of’ that damage.
We thus conclude that “damages because of injury to or loss, destruction or loss of use of property” is ambiguous with regard to response costs, and that the ambiguity must be construed against the insurer to maximize the scope of reasonably expected coverage. (Reserve Insurance Co. v. Pisciotta, supra,
C.
A review of federal and sister-state authority deciding the response costs issue under CERCLA shows that the great weight of authority is consistent with our decision. Real parties, however, rely heavily on two circuit court decisions applying the laws of Maryland and Missouri, which have held that response costs are not damages: Maryland Cas. Co. v. Armco, Inc., supra,
In Armco, the Fourth Circuit held that a suit under CERCLA for injunctive relief and reimbursement of remedial costs was not a claim for “damages” under a CGL policy. However, Armco was a diversity case decided under Maryland law which, unlike California, “adopt[s] the somewhat narrow, technical definition of damages.” (Maryland Cas. Co. v. Armco, Inc., supra,
In Continental, the Eighth Circuit reached a similar result, but only in a sharply divided en banc decision. The majority applied the law of the forum state, Missouri, which providеd for an ordinary, plain meaning construction of insurance policies. (Continental Ins. v. Northeastern Pharmaceutical, supra,
As was the Armco court, the Continental majority was concerned that absent a limited definition of damages, “ ‘all sums which the insured shall become legally obligated to pay as damages’ ” would be reduced to “ ‘all sums which the insured shall become legally obligated to pay.’ ” (Continental Ins. v. Northeastern Pharmaceutical, supra,
The dissent in Continental noted that Missouri law, like California’s, requires a reasonable-layperson construction of insurance policies. Under that construction “damages” should have been read to include cleanup
In addition to Armco and Continental, real parties rely on Cincinnati Ins. Co. v. Milliken and Co. (4th Cir. 1988)
The reasoning of both Armco and the Continental majority opinions is based on rules of interpretation or construction adverse to California law, and thus should not be considered persuasive. Armco is based on a technical definition of damages apparently required under Maryland law, and Continental follows such a definition in derogation of the reasonable layperson test proper under the forum-state law under review. Both cases argue that a broader construction of “damages” would render the term surplusage, requiring coverage of essentially any obligation to pay. As discussed above, a construction of “damages” which includes sums connected with equitable relief is not a boundless universe—such “damages” still must be “because of’ property damage. Thus, Armco’s conclusion that an insurer would be held liable for prophylactic safеty measures, taken in advance of any damage to property, is not applicable to the policies under review. Neither is real parties’ extrapolation that the insurer would be liable for the costs of compliance with government safety regulations, such as OSHA regulations, rules requiring fire extinguishers, protective clothing, and the like. Such prophylactic costs are not incurred “because of injury to or loss, destruction or loss of use of property” for the simple reason that no property damage has yet occurred, and such costs are ordinary business expenses. At oral
Finally, real parties contend that damages cannot be claimed in the CERCLA actions because the governments have not sued under a CERCLA provision for recovery of damages to natural resources. The suits seek liability under 42 United States Code section 9607(a)(4)(A), which provides that the polluter shall be responsible for response costs. Section 9607(a)(4)(C) of 42 United States Code provides a separate bаsis of liability for “damages for injury to, or destruction of, or loss of natural resources, ...” The statutory distinction between response costs and natural resources damages, however, does not alter the reasonable expectation of the insured that cleanup costs are “damages.” (Continental Ins. v. Northeastern Pharmaceutical, supra, 842 F.2d at pp. 989-990 (dis. opn. of Heaney, J., Lay, J. & Fagg, J.) The distinction is not entirely clear: “While CERCLA provides separate claims for recovery of costs incurred for ‘remedial action,’ and for damage to natural resources, it can be expected that there is a great deal of overlap between the two.” (United States v. Shell Oil Co. (D.Colo. 1985)
Numerous federal and sister-state decisions reject Armco and Continental or otherwise favor petitioners’ position. The dissent in Continental (which is consistent with the original panel opinion,
In Port of Portland v. Water Quality Ins. Syndicate, supra,
In an oft-cited decision, United States Aviex Co. v. Travelers Ins. Co., supra,
In Fireman’s Fund Ins. Companies v. Ex-Cell-O Corp. (E.D.Mich. 1987)
Finally, in Broadwell Realty v. Fidelity & Cas. (N.J.Super.Ct.App.Div. 1987)
These decisions render a broader interpretation of “damages” consistent with the reasonable expectations of the insured. The insured expects to be covered for sums expended as a result of a legal obligation, regardless of whether the nature of that obligation is legal or equitable. This is especially true when the sums are expended to remedy pollution-caused property damage. Such sums are expended because of the polluter’s obligation to the government to conduct cleanup operations, and are thus a legal obligation to pay “because of’ property damage. (Moreover, as the Continental dissent noted, the insurance companies are free to rewrite their policies to cure the ambiguity surrounding the word “damages.”)
The interpretation of the coverage clauses under review to encompass cleanup costs is also supported by sound public policy. The California Attorney General, appearing as amicus curiae for petitioners, posits that if an insured polluter knows it is covered for cleanup costs, cleanup activities will be conducted sooner and with greater cooperation with government. Thus, in the long run insurance coverage would seem to enhance the quality of environmental protection.
III.
We concur with the majority of repоrted decisions that response costs incurred under CERCLA and Water Code section 13304 are “damages because of injury to or loss, destruction or loss of use of property damage” within the meaning of the CGL coverage clauses at issue. We have reached this conclusion without benefit of a specific factual record of the exact nature and scope of petitioners’ response costs in this particular case. We thus qualify our holding with the caveat that not all of petitioners’ economic outlays may be considered “damages.” While the CERCLA definition of “response costs” is broad enough to include costs incurred to prevent threatened future pollution where none has yet occurred, those response costs covered as damages must be those in the subset of costs incurred “because of’ property damage. Undoubtedly, some portion of the response costs in this case will be covered as “damages,” because they will constitute legally compelled expenses for the cleanup of extant pollution. The consent decree might, however, require an expenditure to prevent future pollution of a type which has not yet occurred, or to prevent pollution from a source which has not yet caused pollution. These costs would not be causally related to property damage and would therefore not be covered as “damages” under the policies.
This is illustrated by the following hypothetical: Petitioners have two underground storage tanks for toxic waste. Tank # 1 has leaked wastes into
To summarize, petitioners purchased CGL policies protecting them in the event their insured conduct caused injury to or loss, destruction or loss of use of another’s property. The government lawsuits contend that such events transpired. To that extent, petitioners are entitled to rely on their policies for protection.
IV.
The superior court erred in granting real parties’ motion for summary adjudication. Accordingly, petitioners are entitled to an extraordinary writ to vacate the order granting real parties summary adjudication of issues.
Let a peremptory writ of mandate issue commanding respondent Superi- or Court of San Mateo County to vacate its order granting summary adjudication of issues, and to enter in its place a new and different order denying said motion.
Low, P. J., and King, J., concurred.
A petition for a rehearing was denied on May 18, 1989, and the following opinion was then rendered:
Notes
Water Code section 102 provides, in part, that “[a]ll water within the State is the property of the people of the State, . . In suing petitioners the state was exercising its power to ensure a reasonable and beneficial use of the water in the public interest. (Cal. Const., art. X, § 2; see Wat. Code, § 12922, declaring the People “have a primary interest in the correction and prevention of irreparable damage to, or impaired use of, the ground water basins of this State.”) The state also asserted a “public trust” interest in the American River. (See National Audubon Society v. Superior Court (1983)
The definition of response costs includes two basic components: costs of removal, defined as the cleanup or removal of hazardous substances in the event of their release or threatened release into the environment (42 U.S.C. § 9601(23)), and costs of remedial actions, defined as “actions consistent with permanent remedy taken instead of or in addition to removal actions ... to prevent or minimize the release of hazardous substances so that they do not migrate to cause substantial danger to present or future public health or welfare or the environment.” (42 U.S.C. § 9601(24).)
The parties, both in their briefs and at oral argument, have persistently referred to various items of extrinsic evidence supposedly presented to the trial court and involved in its decision on the motion. Although some extrinsic evidence was referred to in support of and in opposition to the motion for summary adjudication, the purported evidence was not relied upon in the statements of material fact. Indeed, with both parties arguing as if the issue was purely one of law, the factual matters dubbed “extrinsic evidence” were seemingly offered only for informational purposes. At the hearing on the motion, counsel on both sides asserted the motion raised an issue of law. More significantly, our review of the record reveals that all of the extrinsic evidence on both sides of the motion for summary adjudication was stricken by rulings granting cross-motions to strike. Neither petitioners nor real parties have assigned error to these rulings.
Claiming the extrinsic evidence had been considered by the trial court in deciding a motion to reconsider, petitioners argue from the evidence in this court seeking a ruling that at the very least interpretation must await trial. The evidence, however, was not considered by the court below. The court, after observing that petitioners had argued the issue initially as a point of law, stated: “I will deny the motion for reconsideration. I am basing my denial on the basis of the original ruling I made, not the evidence that was presented in the motion for reconsideration, because I don’t think it was properly before me. It should have been brought before me at the time the response was made to the motion . . .for summary adjudication. . . . [j|]. . . In looking it over I still think it’s a matter of law. . . .” (Italics added.)
Thus, we do not reach petitioners’ secondary and tertiary arguments. Petitioners contend that should we disagree with their primary position, the interpretation issue must be resolved as a question of fact at trial. Petitioners also advance a “fallback” contention that the extrinsic evidence proifered in support of the motion for reconsideration precludes summary adjudication in real parties’ favor. Because this “evidence” was not considered by the trial court (see fn. 3, ante), this argument is without merit. (Cf. Mahoney v. Superior Court (1983)
The conclusion is also amply supported in Intel Corp. v. Hartford Acc. and Indem. Co. (N.D.Cal. 1988)
Real parties also suggest that Globe only applies when coverage is undisputed, so that the insurer who denies coverage may escape liability. To state such an argument is to refute it.
Real parties also claim that petitioners, in their pleadings in the government lawsuits and elsewhere, have denied they had caused property damage by pollution. Evidently we are asked to adopt a rule that whenever an insured denies liability to a third party, its insurance company may deny coverage. We need not further discuss this novel concept, as the alleged denials were contained in documents stricken from the record by the trial court.
California has long dispensed with the distinction between legal and equitable actions (Code Civ. Proc., § 30), but retains a distinction, at least for some purposes, between legal and equitable relief. The distinction, however, seems to be blurred: “ ‘In reality the distinction between the two classes of remedies is more or less arbitrary and groundless. It is well said also that the courts of equity are reaching into new fields of operation and the courts of law are encroaching upon the former territory of the courts of equity.’ ” (3 Witkin, Cal. Procedure (3d ed. 1985) Actions, § 77, p. 105, quoting Philpott v. Superior Court (1934)
Real parties also maintain that Insurance Code section 533.5, subdivision (a), enacted in 1988, bars coverage. The statute provides, in part, that “[n]o policy of insurance shall provide, or be construed to provide, any coverage or indemnity for the payment of any fine, penalty or restitution in any civil or criminal action or proceeding brought by the Attorney General, any district attorney, or any city prosecutor . . . .” In our view this statute is inapplicable to the payment of CERCLA response costs, which are not restitution in the normal sense of the term. Petitioners do not contend that the policies cover fines or penalty payment.
Lead Opinion
Real parties in interest petition for rehearing contending we have omitted or misstated material facts in our opinion filed April 19, 1989. We have reviewed the allegations of the petition and have found them without merit. We deny the petition for rehearing and add the following comments.
There has been considerable confusion in this case over the role played by the extrinsic evidence in the trial court. Although some extrinsic evidence was presented below, it was entirely stricken on cross-motions to strike and the trial court resolved the question as a matter of law. When this was
Aside from the fact that the current contention is broader than real parties’ response at oral argument, we cannot agree with real parties’ interpretation of the record. Real parties accompanied their motion for summary adjudication with numerous items of purported extrinsic evidence. These items were not cited as supportive evidence of either of the two material facts set forth in real parties’ separate statement of material facts. Indeed, real parties took pains to note again and again that the motion posed only a legal question of insurance contract interpretation; for instance, real parties stated that the motion “presents a legal issue that depends only on the plain meaning of the insurance policies.” The motion suggested the factual matters were not necessary to resolve the legal issue, and were presented only for “context.” In its opposition to the summary judgment motion, Aerojet attached numerous items of purported extrinsic evidence. In their reply brief, real parties presented additional evidentiary items.
Aerojet filed a motion to strike the purported evidence submitted in support of both the motion for summary adjudication and the reply brief. Aerojet’s motion was made “on the ground that the material sought to be stricken does not relate to the issues or to the allegedly undisputed facts set forth in [real parties’] Separate Statement [of Material Facts], and, in the case of evidentiary materials, is not listed in said Separate Statement as supporting evidence, all in violation of the applicable statute and Rules of Court.” The motion to strike was not limited to the reply brief and was not made on the ground that any extrinsic evidence should have been presented with the original motion. Real parties filed their own motion to strike several factual assertions of Aerojet’s opposition brief as well as its supporting extrinsic evidence.
At the hearing on the motion for summary adjudication, the trial court stated: “Now, moving on through the objections and the motion [xz'c] to strike certain evidence. I don’t know which order they came in but I’ve looked at them both being as far as Chesire’s, the way I understand, the evidence that [Aerojet is] objecting to is in the reply memorandum which would not be proper and I would sustain it. And it would not enter into my decision on the motion. []}] As to [real parties’ counsel’s] objection to Aero
It is clear, especially from the court’s later ruling denying a motion for reconsideration, that the trial court considered the question one of law. This is the only evident basis for the trial court’s granting in its entirety real parties’ motion to strike, which targeted Aerojet’s extrinsic evidence, with the last sentence of the quoted passage. Although the court suggested its “understanding” of Aerojet’s objections as speaking to the reply only, the court’s ruling “and I would sustain it” clearly sustained the objections in their entirety. Curiously, real parties neither sought clarification that their original-motion evidence was still in the case nor focused on that evidence in the ensuing argument on the issue of law raised by thе motion. In light of these circumstances, and the parties’ obvious understanding, shared by the court, that the issue was purely a question of law, we think it clear the extrinsic evidence played and continues to play no role in this case, and we adhere to the phrasing of our opinion.
We also comment on an argument raised in the petition for rehearing concerning the coverage clause. As noted in our opinion, real parties contended at oral argument that the coverage clause actually ended at the word “damages” and the ensuing “because of. . .” phrase was a separate “property damage clause.” Having suffered defeat in the writ proceeding real parties now urge in their petition for rehearing that “[rjeal parties did not and do not make that contention.” This claim is wholly inaccurate. Real parties, having made the contention, may not now deny it to suit their present needs. One may not alter one’s appellate argument as the chameleon does his color, to suit whatever terrain one inhabits at the moment.
Low, P. J., and King, J., concurred.
A petition for a rehearing was denied May 18, 1989, and the petition of real parties in interest for review by the Supreme Court was denied August 10, 1989. Panelli, J., was of the opinion that the petition should be granted.
Before Low P. J., Haning, J., and King, J.