FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CITY OF SAN BUENAVENTURA,

Plaintiff-Appellant,

v.

THE INSURANCE COMPANY OF THE

STATE OF PENNSYLVANIA,

Defendant-Appellee.

No. 10-56727

D.C. No.

2:09-cv-09098-

DSF-CW

OPINION

CITY OF SAN BUENAVENTURA,

Plaintiff-Appellant,

v.

GREAT LAKES REINSURANCE (UK)

PLC,

Defendant-Appellee.

No. 11-55284

D.C. No.

2:10-cv-00227-

DSF-CW

Appeal from the United States District Court

for the Central District of California

Dale S. Fischer, District Judge, Presiding

Argued and Submitted

April 11, 2012—Pasadena, California

Filed June 26, 2013
2 CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA.

 The Honorable Algenon L. Marbley, District Judge for the U.S. *

District Court for the Southern District of Ohio, sitting by designation.

 This summary constitutes no part of the opinion of the court. It has

**

been prepared by court staff for the convenience of the reader.

Before: Andrew J. Kleinfeld and Milan D. Smith, Jr.,

Circuit Judges, and Algenon L. Marbley, District Judge.*

Opinion by Judge Kleinfeld

SUMMARY

**

Insurance Law

The panel affirmed the district court’s summary judgment

in favor of insurers in a declaratory judgment action brought

by the City of Buenaventura to establish insurance coverage

in underlying condominium buyers’ litigation against the

City.

The panel held under California law that any occurrence

or wrongful act alleged by the condominium buyers took

place prior to the policy periods, and therefore there was no

insurance coverage. The panel declined to extend the holding

in Montrose Chemical Corp. v. Admiral Ins. Co., 913 P.2d

878 (Cal. 1995) (holding that claims for pollutants deposited

into the ground prior to the insurance policy period, but

continuing to leach into soil and groundwater during the

policy period, gave rise to insurance coverage), to this case to

extend the period of insurance coverage.
CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA. 3

 According to the parties’ joint statement of facts, the “Covenants, 1

Conditions, and Restrictions” governing the development, which were

recorded, refer to Cal. Health & Safety Code § 50079.5, which limits

“lower income households” to those qualifying for Section 8 housing. See

42 U.S.C.A. § 1437, et. seq. The Department of Housing and Urban

Development sets the Section 8 income levels. The City’s affordable

housing program then publishes a list each year showing the maximum

sales price for low income units.

COUNSEL

David A. Shaneyfelt, Anderson, Kill, Wood, & Bender, P.C.,

Ventura, California, for Appellant.

Rosemary J. Springer, McCurdy & Fuller, LLP, Menlo Park,

California, for Appellee Insurance Company of the State of

Pennsylvania; Bruce Winkelman, Craig & Winkelman, LLP,

Berkeley, California, for Appellee Great Lakes Resinsurance.

OPINION

KLEINFELD, Senior Circuit Judge:

This is a declaratory judgment action to establish

insurance coverage.

FACTS

The City of San Buenaventura (“City”) contracted with a

developer to build condominium units for people of low and

moderate income. Sale and resale prices were limited to

ceilings governing the development. Sales could not close

1

until the City issued certificates of compliance with its

affordable housing program.
4 CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA.

In 2004, a number of buyers sued the City, the developer,

and the developer’s partners. The buyers alleged that they

had bought low-income condominiums in 2001, and obtained

certificates of compliance, without being told that their

condominiums were subject to low-income ceilings. They

also alleged that they had paid prices higher than the ceilings.

The condominium buyers sought two forms of relief against

the City. They sought a declaratory judgment that the City’s

affordable housing program restrictions did not apply to their

condominiums. In the alternative, if the court found that

restrictions did apply to their condominiums, they sought

damages and a declaration of which restrictions applied.

Their theory of damages was that the City failed adequately

to review their sale documentation, issued erroneous

certificates of compliance, and negligently failed to tell them

about the low-income price ceilings. As a result, they

claimed to have suffered financial damage to the extent of

their overpayments and to the extent that they paid extra

interest and property taxes because of the higher than

permitted prices.

This appeal is consolidated from lawsuits brought by the

City against two insurance companies. It is not an appeal of

the lawsuits by the condominium buyers against the City and

developers. The City bought general liability insurance

policies from Great Lakes Reinsurance (UK) PLC (“Great

Lakes”), covering July 2002 to July 2003, and from the

Insurance Company of the State of Pennsylvania (“ICSOP”),

covering July 2003 to July 2004. In both policies, the City

self-insured for the first million dollars of liability, and the

insurers covered liability exceeding one million up to ten

million dollars.
CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA. 5

 The City later dropped its breach of the covenant of good faith and fair 2

dealing claim against Great Lakes.

 See Cort v. St. Paul Fire & Marine Ins. Cos., Inc., 311 F.3d 979, 983 3

(9th Cir. 2002).

In 2007, three years after the condominium buyers’

litigation began, the City tendered this action to the two

insurers, saying the City had exhausted its million dollar selfinsured retention. The tender letters do not say whether

defense or indemnity or both are sought. Both insurers

rejected the City’s claims, saying that the City’s alleged

negligence and wrongful conduct in connection with the sales

occurred prior to their policy periods. The City then sued

each of the insurers. The City’s declaratory judgment actions

to establish coverage claimed breach of contract and breach

of the covenant of good faith and fair dealing. The City’s 2

complaints do not say whether its breach of contract claims

are based on breach of the duty to defend, breach of the duty

to indemnify, or both.

The district court granted summary judgment in favor of

both insurers, because any occurrence or wrongful act alleged

by the homeowners took place prior to the policy periods.

ANALYSIS

We review the district court’s grants of summary

judgment de novo, and apply California law to our

interpretation of the insurance policies. We reach the same 3

conclusion as the district court.

It is undisputed that the City’s alleged negligence

occurred in 2001, prior to the policy periods. The City argues
6 CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA.

 One set of buyers no longer operates under the low-income ceiling. 4

The City agreed to re-designate their condominium as a moderate-income

unit and allow them to sell under the moderate-income ceiling.

 Montrose Chem. Corp. v. Admiral Ins. Co., 913 P.2d 878 (Cal. 1995). 5

 Id. at 880–83, 888. 6

 State v. Cont’l Ins. Co., 281 P.3d 1000, 1005 (Cal. 2012) (quoting 7

Montrose Chem., 913 P.2d at 880).

that because the condominium buyers continue to suffer

under the burden of having overpaid and having their resale

prices restrained by a ceiling, the “occurrence” has continued 4

into the policy periods. The core of the argument is an

analogy to the California Supreme Court’s decision in

Montrose Chemical Corp. v. Admiral Insurance Co. That 5

decision held that claims for pollutants deposited in the

ground prior to the policy period, but continuing to leach into

soil and groundwater during the policy period, gave rise to a

duty to defend, because continuance of the property damage

during the policy period gave rise to coverage.6

The City stretches Montrose Chemical too far. The

insured in Montrose Chemical had deposited chemical wastes

prior to the policy period, but wastes were still there and

causing more damage during the policy period. Under

California law, “property damage that is continuous or

progressively deteriorating throughout several policy periods

is potentially covered by all policies in effect during those

periods.” State v. Continental Insurance Co. explains that 7

this kind of long tail on a tort frequently occurs “in the

context of environmental damage and toxic exposure
CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA. 7

 Id. 8

 Id. at 1002–03. 9

 Montrose Chem., 913 P.2d at 889. 10

 Id. 11

 Id. at 890. 12

litigation.” Continental arose out of the State of California’s

8

negligent construction of a waste disposal site in the 1950s

that resulted in continuous discharge of industrial wastes

many years after the site was closed, and a federally ordered

cleanup in 1998.9

The policies in Montrose Chemical covered “property

damage . . . caused by an occurrence . . . .” Property

10

damage was defined as “physical injury to or destruction of

tangible property which occurs during the policy period

. . . .” The antecedent for “which” in the Montrose

11

Chemical policies is “injury to or destruction of.” Thus under

that policy, there was coverage if injury occurred during the

policy period, even if the accident that caused it occurred

prior to the policy period. As Montrose Chemical explains,

this policy language unambiguously

distinguishes between the causative event—an

accident or “continuous and repeated

exposure to conditions”—and the resulting

“bodily injury or property damage.” It is the

latter injury or damage that must “occur”

during the policy period, and “which results”

from the accident or “continuous and repeated

exposure to conditions.”12
8 CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA.

 See Scottsdale Ins. Co. v. MV Transp., 115 P.3d 460, 466 (Cal. 2005) 13

(“[T]hat the precise causes of action pled by the third-party complaint may

fall outside policy coverage does not excuse the duty to defend where,

By contrast, the Great Lakes policy language promises

indemnification for loss caused by property damage “first

arising out of an Occurrence during the Policy Period . . . .”

That language is materially different from the Montrose

Chemical policy language. The Montrose Chemical policies

required only damages during the policy period, but the Great

Lakes policy requires the occurrence causing the damage to

have been during the policy period. Likewise, the ICSOP

policy affords coverage for liability incurred because of

“property damage arising out of an occurrence during the

Policy Period.” Perhaps the underwriters of these two

policies had read Montrose Chemical and drafted around it to

avoid similar exposure.

No occurrence is or could be alleged to have occurred

during the Great Lakes or ICSOP policy period. The Great

Lakes policy defines “occurrence” as “an accidental

happening,” which would fit the negligent failure to apply the

affordable housing program properly when the condominium

purchasers bought their units, but would not fit keeping the

program in place. Similarly, the ICSOP policy defines

“occurrence” as “an accident . . . which resultsin . . . property

damage neither expected nor intended,” phrasing applicable

to the City’s claimed errors at the time the condominiums

were sold, but not to keeping the affordable housing program

in force.

The City asserts that ICSOP has a duty to defend, and that

therefore ICSOP is liable if the condominium buyers’

complaints show the potential for coverage. However, “if, 13
CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA. 9

under the facts alleged, reasonably inferable, or otherwise known, the

complaint could fairly be amended to state a covered liability.”).

 Id. 14

 Certain Underwriters at Lloyd’s of London v. Superior Court, 16 P.3d 15

94, 102 (Cal. 2001) (“Where there is a duty to defend, there may be a duty

to indemnify; but where there is no duty to defend, there cannot be a duty

to indemnify.”).

as a matter of law, neither the complaint nor the known

extrinsic facts indicate any basis for potential coverage, the

duty to defend does not arise in the first instance.” Here, 14

there is no duty to defend. ICSOP was not given any

information outside of the complaints suggesting a possibility

of coverage, and the facts alleged and reasonably inferable

from the complaints do not show any basis for potential

coverage. There is in this case neither a duty to defend, nor

a duty to indemnify.15

The condominium buyers’ complaints allege that they

were damaged by the City’s negligence when they purchased

their units in early 2001, over a year prior to the 2002–2003

Great Lakes policy and two years prior to the 2003–2004

ICSOP policy. They do not allege that they were wrongfully

damaged by the City’s affordable housing program, or that

the program was in any way unlawful. They merely ask that

the program be suspended as to them because of the City’s

2001 negligence. And both policies expressly exclude

coverage for declaratory or injunctive relief, so those claims

by the condominium buyers cannot provide a basis for duties

to defend or indemnify.

The City argues that leaving the affordable housing

restrictions in place was a “wrongful act” that took place
10 CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA.

 Montrose Chem., 913 P.2d at 888. 16

 Cont’l, 281 P.3d at 1005. 17

under the ICSOP policy, which provides coverage for “loss

arising out of [the insured’s] wrongful act that takes place

during the Policy Period.” “Wrongful act” is defined in the

policy as “[a]ny actual or alleged error or misstatement,

omission, negligent act, or breach of duty including

misfeasance, malfeasance, and nonfeasance by [the insured]

including, but not limited to, those constituted by . . . [a]ny

negligent ministerial act . . . .” Just as leaving lawful housing

policies on the books is not an “occurrence” resulting in

property damage under either policy, it is also not a

“wrongful act” as defined by the ICSOP policy.

The City would have us read “occurrence” more broadly,

because the policies define “occurrence” as “including

continuous or repeated exposure to substantially the same

general harmful conditions” (Great Lakes), and “including

continuous, repeated or related exposure to substantially the

same general harmful conditions” (ICSOP). This language

describes the kind of continuing event resulting in exposure

to toxic waste discussed in Montrose Chemical and 16

Continental, but not the kind of event claimed by the 17

condominium buyers. They claim that they were harmed by

the City’s 2001 errors, not by any errors since. When a

pollutant is deposited in the ground before the policy period,

but leaches more toxins into the soil during the policy period,

the subsequent leaching may itself be an occurrence.

Under the insurance policy language at issue

in Montrose, we determined that a continuous

condition becomes an occurrence for the
CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA. 11

 Id. at 1006 (quotations marks and citation omitted). 18

 Cf. Montrose Chem., 913 P.2d at 888. 19

 See Bank of the West v. Superior Court, 833 P.2d 545, 552 (Cal. 20

1992).

purposes of triggering insurance coverage

when ‘property damage’ results from a

causative event consisting of ‘the accident or

continuous and repeated exposure to

conditions.’ The limitation on potential

indemnity was that the damage must ‘occur’

during the policy period and ‘ . . . result[]’

from the accident or ‘continuous and repeated

exposure to conditions.’18

No such subsequent occurrence was or could be alleged here.

The City’s argument is essentially that failure to remedy a

pre-coverage occurrence is itself a continuing, subsequent

occurrence.

The City’s argument for extending Montrose Chemical to

failure to provide a remedy for a past occurrence would imply

an absurd result. Were the “continuous exposure” or

“continuous damage” language in Montrose Chemical

construed to apply to failure to remedy a discrete previous

harm, then a 2001 automobile accident resulting in tort

liability and as yet uncompensated would fall within the

coverage of a policy sold in 2003 and covering only

occurrences during the year 2003. Such a construction 19

would fall outside the reasonable expectations of the insured

to such a policy, and would enable the City to delay buying 20

insurance until after it had incurred a tort liability, yet obtain
12 CITY OF SAN BUENAVENTURA V. THE INS. CO. OF PA.

 See Borg v. Transamerica Ins. Co., 54 Cal. Rptr. 2d 811, 818–20 (Ct. 21

App. 1996).

coverage for the pre-policy tort because the City had not

compensated the victim. There may be circumstances where

the Montrose Chemical and Continental rules apply outside

the pollution context, but this case is not one of them. 21

AFFIRMED.