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Pitzer College v. Indian Harbor Ins. Co.

Supreme Court of California

August 29, 2019, Opinion Filed

S239510

Opinion

 [***703]   [**671]  CHIN, J.—California's notice-prejudice rule generally allows insureds to proceed with their insurance policy claims even if they give their insurer late notice of a claim, provided that the late notice does not substantially prejudice the insurer. (Campbell v. Allstate Ins. Co. (1963) 60 Cal.2d 303, 307 [32 Cal. Rptr. 827, 384 P.2d 155] (Campbell).) In this context, we consider two narrow questions from the United States Court of Appeals for the Ninth Circuit, restated as follows: (1) Is California's common [****2]  law notice-prejudice rule a fundamental public policy for the purpose of choice of law analysis? (2) If so, does the notice-prejudice rule apply to the consent provision of the insurance policy in this case? (Cal. Rules of Court, rule 8.548(f)(5) [Supreme Court may restate questions or ask the requesting court for clarification].) In line with California's strong preference to avoid technical forfeitures of insurance policy coverage, we conclude (1) that our notice-prejudice rule is a fundamental public policy of our state in the insurance context, and (2) the rule generally applies to consent provisions in the context of first party liability policy coverage and not to consent provisions in third party liability policies. We leave it for the Ninth Circuit to decide whether the consent provision at issue here contemplates first party or third party coverage.

I. Facts and Procedural History

The Claremont University Consortium (CUC) is an umbrella entity that enters into insurance contracts on behalf of the Claremont Colleges, including plaintiff Pitzer College (Pitzer). (Pitzer College v. Indian Harbor Ins. Co. (9th Cir. 2017) 845 F.3d 993, 994 (Pitzer College).) The CUC purchased an [*98]  insurance policy (Policy) from defendant Indian Harbor Insurance  [***704]  Company (Indian Harbor) that covered Pitzer for [****3]  legal and remediation expenses resulting from pollution conditions discovered during the policy period of July 23, 2010, to July 23, 2011. (Ibid.)

The Policy contains three provisions pertinent to our review. First, a notice provision requires Pitzer to provide oral or written notice of any pollution condition to Indian Harbor and, in the event of oral notice, to “furnish … a written report as soon as practicable.”1 Second, a consent provision requires Pitzer to obtain Indian Harbor's written consent before incurring expenses, making payments, assuming obligations, and/or commencing remediation due to a pollution condition.2 Pursuant to an emergency exception [**672]  to this consent provision, however, if Pitzer incurs costs “on an emergency basis where any delay … would cause injury to persons or damage to property or increase significantly the cost of responding to any [pollution condition],” then Pitzer is not required to obtain Indian Harbor's prior written consent, but it is required to notify Indian Harbor “immediately thereafter.” Third, a choice of law provision states that New York law governs all matters arising under the Policy.3

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8 Cal. 5th 93 *; 447 P.3d 669 **; 251 Cal. Rptr. 3d 701 ***; 2019 Cal. LEXIS 6240 ****; 2019 WL 4065521

PITZER COLLEGE, Plaintiff and Appellant, v. INDIAN HARBOR INSURANCE COMPANY, Defendant and Respondent.

Prior History:  [****1] Ninth Circuit, 14-56017. Central District of California, 2:13-cv-05863-GW-E.

Pitzer Coll. v. Indian Harbor Ins. Co., 845 F.3d 993, 2017 U.S. App. LEXIS 668 (9th Cir., Jan. 13, 2017)Pitzer College v. Indian Harbor Ins. Co., 2017 Cal. LEXIS 2235 (Cal., Mar. 22, 2017)

CORE TERMS

insurer, notice-prejudice, coverage, remediation, first party, fundamental public policy, provisions, fundamental policy, notice, contractual, choice of law, third party, insurance policy, costs, notice provision, pollution, courts, public policy, obligations, parties, timely notice, forfeiture, policies, reasons, greater interest, district court, superior bargaining power, choice of law provision, freedom of contract, summary judgment

Business & Corporate Compliance, Contracts Law, Contract Conditions & Provisions, Forum Selection Clauses, Civil Procedure, Preliminary Considerations, Federal & State Interrelationships, Choice of Law, Insurance Law, Claims Made Policies, Notice Requirements, Notice Prejudice, Contracts Law, Defenses, Unconscionability, Adhesion Contracts, Claim, Contract & Practice Issues, Policy Interpretation, Contract Interpretation, Good Faith & Fair Dealing, Business Insurance, Commercial General Liability Insurance, Coverage