Opinion ID: 620294
Heading Depth: 3
Heading Rank: 2

Heading: Sierra's Claim for Insurance Coverage

Text: Sierra made a claim with the Insurers for the replacement of the Farad Dam following the flood. In July, 1998, Sierra obtained a preliminary estimate for the replacement cost of the dam. The parties dispute the effect of this estimate. Sierra claims that the estimate was an obviously unreliable, admittedly inaccurate and superseded estimate, and the Insurers claim that the number represented an agreement between them and Sierra as to the cost to replace the dam as it existed prior to the flood. Sierra also notes that this estimate was prepared without the benefit of design drawings or actual contractor bids for any required work. When Sierra obtained the estimate to replace the dam in July of 1998, it believed it would not need to comply with detailed requirements for environmental impact studies under the California Environmental Quality Act (CEQA). However, the California State Water Resources Control Board (CSWRCB) eventually did require detailed environmental impact studies, which resulted in design changes of the dam and even required moving the location. Numerous permits and easements were required to comply with these requirements. The costs associated with completing these studies, obtaining permits and easements, and design changes necessitated by the regulatory agencies were not included in the initial estimate to replace the dam. Sierra could not begin construction of the dam without the required permits, which it could not obtain until the CSWRCB issued its approval of Sierra's plans to rebuild the dam, which it finally did on June 25, 2003. Sierra finally obtained the requisite environmental permit from the CSWRCB in March of 2004, but was not able to obtain a permit from the California Transportation Commission until sometime in 2005. Meanwhile, in 2001, Sierra obtained bids and estimates to actually replace the dam. The amount to rebuild the dam was estimated to be $16,205,303. After the trial, the district court made a factual finding that the actual estimated cost to replace the dam was $19,800,000. The Insurers have not disputed that the actual estimated replacement cost of the Farad Dam is $19,800,000.