Procedural Posture

Appellant, a company that manufactured pollution sensing devices, challenged the order of the Superior Court of Los Angeles County (California), which entered a judgment in favor of respondent insurer determining that respondent owed no duty under its comprehensive general liability policy to defend appellant in an action seeking to recover for losses caused by a leak in an underground fuel tank.

Overview: ca labor board file a claim

Appellant, a company that manufactured pollution sensing devices, was sued by a client after the sensors appellant had installed on the client's underground fuel storage tanks failed to detect a major leak. Respondent, appellant's general liability insurer, disclaimed coverage under the policy's pollution exclusion clause and brought a declaratory action seeking a judgment vindicating its disclaimer. The trial court entered judgment entitling respondent to disclaim any obligation tao defend or indemnify on the basis of the pollution exclusion clause. On appeal the court reversed. The court held that the coverage provisions of the policy were to be liberally construed in favor of the insured and the exclusions from coverage narrowly construed against the insurer. Applying these principles, the court held that the precise exclusion language that loss arising out of any order that insured or others in any way respond to the effects of pollutants excluded coverage only for response costs which the tank owner was ordered by a government agency to incur. This construction of the pollution exclusion clause excluded some but not all of the response costs the tank owner had incurred.

Outcome

The court reversed the judgment vindicating respondent insurer's disclaimer of coverage, and remanded for further proceedings consistent with the court's opinion that some pollution response costs, incurred due to a failure of appellant's pollution sensing devices, were covered by appellant insured's policy.