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Montrose Chemical Corp. v. Admiral Ins. Co.

Supreme Court of California

July 3, 1995, Decided

No. S026013.

Opinion

 [*654]  [**880]  [***326]    LUCAS, C. J. 

In Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal. 3d 674 [274 Cal. Rptr. 387, 798 P.2d 1230] (Prudential-LMI), we examined the issue of allocation of indemnity among insurers in a first party property insurance [****4]  case, where a loss had occurred over several policy periods but was not discovered until several years after it commenced. We found the "manifestation of loss rule" applicable, holding that the insurer insuring the property at the time appreciable property damage becomes manifest is solely responsible for indemnifying the insured once coverage is established. ( Id. at p. 699.) We expressly reserved the question of what rules should apply in third party liability insurance cases involving continuous or progressively deteriorating damage or injury. We recognized there are substantial analytical differences between first party property and third party liability policies, and cautioned that we were intimating no view as to the application of our decision in either the third party liability or commercial liability (including toxic tort) context. (Prudential-LMI, supra, 51 Cal. 3d at pp. 679, 694; see also Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal. 3d 395, 405-408 [257 Cal. Rptr. 292, 770 P.2d 704] (Garvey).)

In this case we address the issue reserved in Prudential-LMI. Specifically, we must determine whether four comprehensive general liability [****5]  (CGL) policies issued by defendant and respondent Admiral Insurance Company (Admiral) to plaintiff and appellant Montrose Chemical Corporation of California (Montrose) obligate Admiral to defend Montrose in lawsuits seeking damages for continuous or progressively deteriorating bodily injury and property damage that occurred during the successive policy periods. These losses, it is alleged, were caused by Montrose's disposal of hazardous wastes at times predating the commencement of Admiral's policy periods.

As explained below, we conclude that the standard CGL policy language, such as was incorporated into Admiral's policies in issue in this case, provides coverage for bodily injury and property damage that occurs during  [*655]  the policy period. In the case of successive policies, 1 bodily injury and property damage that is continuous or progressively deteriorating throughout several policy periods is potentially covered by all policies in effect during those periods. Stated in the insurance industry's parlance, we conclude the "continuous injury" trigger of coverage should be adopted for third party liability insurance cases involving continuous or progressively deteriorating [****6]  losses. 2 In this case,  [**881]  because the potential of coverage arose under Admiral's policies, so too did its duty to defend Montrose in the underlying lawsuits.

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10 Cal. 4th 645 *; 913 P.2d 878 **; 42 Cal. Rptr. 2d 324 ***; 1995 Cal. LEXIS 3714 ****; 95 Daily Journal DAR 8783; 95 Cal. Daily Op. Service 5148; 41 ERC (BNA) 1714

MONTROSE CHEMICAL CORPORATION OF CALIFORNIA, Plaintiff and Appellant, v. ADMIRAL INSURANCE COMPANY, Defendant and Respondent.

Subsequent History:  [****1]  As Modified August 31, 1995.

Prior History: Superior Court of Los Angeles County, Nos. C594148 and C597389, G. Keith Wisot, Judge.

Previously Reported at: 897 P.2d 1.

Disposition: The judgment of the Court of Appeal is affirmed, and the matter remanded for further proceedings consistent with the views expressed herein.

CORE TERMS

insured, coverage, policies, trigger, property damage, policy period, manifestation, progressively, occurrence, bodily injury, cases, deteriorating, third party, first party, exposure, third party liability, continuous injury, loss-in-progress, occurs, conditions, carriers, insurance policy, injury-in-fact, site, contingent, damages, occurrence-based, italics, property insurance, contamination

Insurance Law, Commercial General Liability Insurance, Coverage, General Overview, Torts, Elements, Causation, Types of Insurance, Property Insurance, Bodily Injuries, Accidental Injuries, Business Insurance, Property Claims, Triggers, Manifestation Triggers, Occurrences, Persons Insured, Third Parties, Contracts Law, Contract Interpretation, Intent, Claim, Contract & Practice Issues, Policy Interpretation, Ordinary & Usual Meanings, Ambiguous Terms, Unambiguous Terms, Technical Constructions & Meanings, Construction Against Insurers, Coverage Favored, Reasonable Expectations, Continuous Triggers, Multiple Insurers, Insurable Interests, Civil Procedure, Summary Judgment, Opposing Materials, Liability & Performance Standards, Good Faith & Fair Dealing, Duty to Defend, Known Loss Doctrine, Obligations of Parties, Governments, Local Governments, Claims By & Against, Disclosure Obligations by Insureds, Questions of Fact & Law