Facts
- Montrose manufactured DDT at a Torrance, California facility from 1947 to 1982 and later faced environmental and toxic-tort suits alleging long-term contamination and progressively worsening bodily injury and property damage.
- Montrose purchased multiple comprehensive general liability (CGL) policies, including four Admiral policies covering periods from October 1982 through March 1986.
- Admiral’s policies promised to pay “all sums” Montrose became legally obligated to pay as damages because of “bodily injury” or “property damage” caused by an “occurrence,” defined to include “continuous or repeated exposure to conditions.”
- The underlying complaints alleged that wrongful disposal activities often began before Admiral’s policy periods, but that injury and damage continued or deteriorated during Admiral’s policy periods.
- Admiral denied defense and indemnity, asserting (1) no coverage because the wrongful conduct predated its policies and (2) the “loss-in-progress/known loss” rule barred coverage because the losses were already underway when the policies were issued.
- The trial court granted summary judgment for Admiral; the Court of Appeal reversed; the California Supreme Court granted review.
Issues
- Whether standard CGL policy language is triggered by continuous or progressively deteriorating bodily injury or property damage occurring during the policy period, even if the initial wrongful conduct or exposure began earlier.
- Whether the loss-in-progress/known-loss doctrines bar coverage for continuous environmental damage when, at policy inception, the insured’s liability is not fixed or inevitable.
- Whether the allegations created a potential for coverage sufficient to impose a duty to defend.
Decision
- The California Supreme Court affirmed the Court of Appeal’s reversal of summary judgment for Admiral.
- The Court held that continuous or progressively deteriorating injury or damage potentially triggers each CGL policy in effect during any period in which some injury or damage occurred.
- The Court rejected using a manifestation trigger for third-party CGL claims involving long-term pollution and toxic exposure.
- The Court held the loss-in-progress/known-loss doctrines do not bar coverage merely because some damage or injurious conduct predated the policy; the bar applies only if, at inception, the loss (or liability) was known, certain, or inevitable.
- Because the complaints alleged injury and damage extending into Admiral’s policy periods, Admiral owed a potential duty to defend.
Legal Principles
- Under standard CGL “occurrence” language, coverage is tied to when bodily injury or property damage occurs; continuous or progressive injury occurring across multiple years can trigger multiple successive policies.
- For third-party continuous injury cases, a continuous injury trigger applies: all policies on the risk during periods when injury or damage occurred are potentially triggered.
- The duty to defend is broad and arises whenever the allegations show a potential for coverage; an insurer may not refuse to defend solely because harmful conduct began before its policy period if injury or damage is alleged to continue into the period.
- Loss-in-progress/known-loss rules bar insurance only when, at contract formation, the insured knew (or should have known) the particular loss or liability was established, certain, or inevitable; knowledge of risks, past conduct, or some existing damage does not alone defeat fortuity where liability remains contingent.
Conclusion
The court held that third-party CGL coverage for long-term pollution and toxic exposure is potentially triggered by continuous or progressively deteriorating injury or damage occurring during the policy period, and that the known-loss/loss-in-progress doctrines bar coverage only when the insured’s loss or liability was known and effectively certain at policy inception; accordingly, the insurer had a potential duty to defend.