Opinion ID: 2610834
Heading Depth: 4
Heading Rank: 1

Heading: Legally Obligated

Text: (5) The first requirement for coverage is that FMC be legally obligated to pay the costs at issue. Because it is clear that, if FMC is held liable in the third party suits, it will be obligated to pay for whatever relief the courts order, the only remaining question is whether that obligation may be considered legal under applicable rules of interpretation. [10] The insurers contend it may not, for the simple reason that whether the courts award injunctive relief or order FMC to reimburse the agencies for their response costs, they will be exercising equitable rather than legal authority. Both injunctions and awards of response costs under CERCLA reasonably can be viewed as equitable relief. (See, e.g., United States v. Northeastern Pharmaceutical (8th Cir.1986) 810 F.2d 726, 749, cert. den. (1987) 484 U.S. 848 [98 L.Ed.2d 102, 108 S.Ct. 146] [no right to jury trial in suit seeking reimbursement of response costs]; In re Acushnet River & New Bedford Harbor Proceed. (D.Mass. 1989) 712 F. Supp. 994, 1001 [no right to jury trial in suit for injunction and reimbursement of response costs under CERCLA]; United States v. Dickerson (D.Md. 1986) 640 F. Supp. 448, 451 [statute of limitations and right to jury do not apply to suit for recovery of response costs under CERCLA].) The mere characterization of relief under federal law, however, is not dispositive of the proper construction of insurance policies under state law. Because California has generally abandoned the traditional distinction between courts of equity and courts of law (see Code Civ. Proc., §§ 24, 30; Aerojet, supra, 211 Cal. App.3d at pp. 230-231, fn. 8), even a legally sophisticated policyholder might not anticipate that the term legally obligated precludes coverage of equitably compelled expenses. Because the relief is ordered by a court of law, as that term is used in the modern sense, FMC could reasonably believe that its obligation to pay is legal. As the Court of Appeal noted in Aerojet, supra, 209 Cal. App.3d at page 228: [P]etitioners would be surprised indeed to learn that coverage depended on whether the proceeding employed to obtain recompense was defined as `legal' or `equitable.' ... It would come as an unexpected, if not incomprehensible, shock to the insureds to discover that their insurance coverage was being denied because the plaintiff chose to frame his complaint in equity rather than in law. Thus, as a matter of plain meaning, the term legally obligated covers injunctive relief and recovery of response costs. Moreover, even if this phrase raises doubts in the minds of legally trained observers about whether a law-equity distinction was intended, it would be unreasonable to conclude that it unambiguously incorporates this sophisticated distinction into the policies. In this respect, whatever ambiguity it possesses in light of a party's legal knowledge is resolved in favor of coverage. (See ante, p. 822.) Whether the term legally obligated is ambiguous or not, therefore, we conclude that it encompasses the types of relief sought in the third party suits.