Court Finds Duty to Defend Despite Pollution Exclusion, Where the Possibility of a Sudden and Accidental Discharge of Contaminants Was Demonstrated
County of Stanislaus v. Travelers Indem. Co. 2015 U.S. Dist. LEXIS 150550 (E.D. Cal. Nov. 5, 2015)
In County of Stanislaus, the court resolved competing motions for summary judgment and found that the insurer had a duty to defend its insured because the insured demonstrated a possibility of coverage under the sudden and accidental exception to the pollution exclusion contained in the policy.
The insured, the County of Stanislaus, operated a landfill in the eastern edge of the San Joaquin Valley, which contained approximately 4.5 million tons of waste deposited into excavated cells in the ground. A pollution exclusion in the policy at issue excluded coverage for discharges of contaminants or pollutants, but also reinstated coverage under an exception for “sudden and accidental” discharges.
Six years after the landfill closed, the California Regional Water Control Board issued a cease and desist order in connection with contaminated groundwater at the landfill. The County of Stanislaus sued the City of Modesto for the contamination, and the City of Modesto cross-complained. The insured tendered the cross-complaint to its insurer, the Travelers Indemnity Company (“Travelers”). The insured then sought a declaratory judgment that Travelers had a duty to defend the action.
The court found that, when addressing similar exclusions, California courts have held that an insured establishes an insurer’s duty to defend “if there is any potential that the release or escape of at least some of the pollutants was ‘sudden and accidental[,]’” and the insurer fails to “conclusively establish” the absence of any such potential. The court further construed the phrase “sudden and accidental” as meaning “abrupt” and “unexpected.”
Differentiating between the initial deposit of waste in a landfill and a later escape of contaminants, the court found the insured set forth sufficient circumstantial evidence establishing the possibility that, although the landfill was intended to contain waste, the groundwater was suddenly contaminated when it seeped into the cells during heavy rain because the insured had negligently excavated the cells. Accordingly, the court found that the “sudden and accidental” exception applied and that Travelers had a duty to defend.
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