Opinion ID: 2610834
Heading Depth: 3
Heading Rank: 2

Heading: interpretation of cgl policy language

Text: The CGL policies at issue in this case cover sums which FMC becomes legally obligated to pay as damages (or ultimate net loss) incurred because of property damage. We next consider whether, as a matter of law, the types of relief at issue in the third party suits satisfy these requirements.
(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.
We next consider whether FMC's prospective legal obligation in the third party suits is to pay damages. Because the CGL policies do not define the word damages, for interpretation purposes we look to its ordinary and popular definition. (Civ. Code, § 1644; Allstate Ins. Co. v. Thompson (1988) 206 Cal. App.3d 933, 938 [254 Cal. Rptr. 84].) Section 3281 of the Civil Code provides: Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefor in money, which is called damages. (6) As our cases have pointed out, this provision is intended to represent the plain and ordinary meaning of the word damages. (See, e.g., Hoban v. Ryan (1900) 130 Cal. 96, 99 [62 P. 296]; Wainscott v. Occidental Bldg. & Loan Assn. (1893) 98 Cal. 253, 255 [33 P. 88].) Other lay and legal definitions are similar. One dictionary, for example, defines damages as the estimated reparation in money for detriment or injury sustained: compensation or satisfaction imposed by law for a wrong or injury caused by a violation of a legal right. (Webster's New Internat. Dict. (3d ed. 1981) p. 581.) Black's Law Dictionary similarly defines damages as [a] pecuniary compensation or indemnity, which may be recovered in the courts by any person who has suffered loss, detriment, or injury, whether to his person, property, or rights, through the unlawful act or omission of another. (Black's Law Dict. (4th ed. 1951) p. 466, col. 2.) Whatever their semantic differences, the statutory and dictionary definitions of damages share several basic concepts. Each requires there to be compensation, [11] in money, recovered by a party for loss or detriment it has suffered through the acts of another. [12] The courts have generally applied similar definitions for insurance purposes. (See, e.g., Jaffe v. Cranford Ins. Co. (1985) 168 Cal. App.3d 930, 935 [214 Cal. Rptr. 567] [`damages' describes a payment made to compensate a party for injuries suffered]; Specialty Coatings, supra, 535 N.E.2d at p. 1080 [applying dictionary definition]; National Indem. Co. v. U.S. Pollution Control Inc., supra, 717 F. Supp. at p. 767 [applying dictionary definition]; Intel, supra, 692 F. Supp. at p. 1189 [applying Cal. statutory definition]; New Castle County v. Hartford Acc. & Indem. Co., supra, 673 F. Supp. at p. 1365 [applying dictionary definition].) Several courts, however, have declined to apply dictionary or statutory definitions. At one end of the spectrum, some decisions have used narrower technical meanings, focusing on the distinction between law and equity. (See, e.g., Armco, supra, 822 F.2d at p. 1352 [`Damages,' as distinguished from claims for injunctive or restitutionary relief, includes `only payments to third persons when those persons have a legal claim for damages.'].) For purposes of California law, which interprets policy language in its ordinary and popular sense unless the parties expressed an intent otherwise (Civ. Code, § 1644), we decline to follow this approach. Defining damages as sums paid to third persons as a result of legal claims would render the policy language at issue here redundant as well as inconsistent with an ordinary interpretation of the word damages; if the policies are construed in this manner, the phrase legally obligated to pay would have no meaning not already expressed by the subsequent phrase providing coverage of damages. Under established principles, we decline to apply a definition that would create this result. (See Civ. Code, § 1641 [The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.].) At the other end of the spectrum, some courts have applied definitions broader than the statutory or dictionary definitions described above. In Aerojet, supra, 211 Cal. App.3d at page 226, the Court of Appeal rejected the statutory and dictionary definitions, reasoning that from the standpoint of the lay insured, `damages' could well include any sum expended under sanction of law.... [T]he insured may reasonably expect coverage for any sums expended, either at law or equity, as a result of the insured's causing property damage to another. ( Ibid. ; see also U.S. Fidelity and Guar. Co. v. Thomas Solvent Co. (W.D.Mich. 1988) 683 F. Supp. 1139, 1168 [it seems to me that the insured ought to be able to rely on the common sense expectation that property damage within the meaning of the policy includes a claim which results in causing him to pay sums of money because his acts or omissions affected adversely the rights of third parties.]; New Castle County v. Hartford Acc. & Indem. Co., supra, 673 F. Supp. at p. 1366 [Since the required remedial actions were ultimately enforceable in a legal proceeding, they constituted sums that the County was legally obligated to pay as damages.]; Fireman's Fund Ins. Companies v. Ex-Cell-O Corp., supra, 662 F. Supp. at p. 75 [coverage does not hinge on the form of action taken or the nature of relief sought, but on an actual or threatened use of legal process to coerce payment or conduct by a policyholder.].) This definition includes the basic concepts of loss or detriment recognized in the statutory and dictionary definitions, but omits any requirement that the expenditure incurred as a result of such loss be compensation provided to an aggrieved party. Although we agree that a layperson might reasonably define damages in such broad terms, it is unlikely that he would do so in the context of the coverage provision at issue here, taken as a whole. In this respect, the Aerojet ( supra, 211 Cal. App.3d 216) definition suffers from the same defect as the narrow one discussed above. It essentially construes damages as all sums the insured becomes legally obligated to pay because of property damage. CGL policies, however, cover all sums which the insured becomes legally obligated to pay as damages because of property damage. (Italics added.) As several courts have noted, defining damages in the broad sense accepted by Aerojet would effectively render the phrase as damages meaningless. (See, e.g., NEPACCO, supra, 842 F.2d at p. 986; Armco, supra, 822 F.2d at p. 1352.) For this reason, we hesitate to apply the Aerojet definition. (See Civ. Code, § 1641.) We note, however, that CERCLA and the Hazardous Substance Account Act authorize alternative remedies  injunction and reimbursement  that are relatively interchangeable in a way perhaps not foreseen by the parties at the time they entered the CGL policies. As we discuss at greater length below, the policies necessarily present some ambiguity in light of statutory schemes that by their very operation tend to eliminate the formal distinction between compensation paid to an aggrieved party and sums expended by the insured under compulsion of injunction. (See post, p. 840.) For this reason, although we take the statutory and dictionary definitions described above to be the ordinary and popular definition of damages for interpretation purposes, we will not apply this definition inflexibly. To the extent that policy language is ambiguous in light of the way environmental statutes authorize relief, our goal remains to protect the objectively reasonable expectations of the insured. (See, e.g., Reserve Insurance Co. v. Pisciotta, supra, 30 Cal.3d at p. 808.) With this background, we now examine whether the basic forms of relief at issue in the underlying suits are damages.
(7) In numerous CERCLA suits seeking recovery from responsible parties, courts have routinely referred to reimbursement of response costs as damages, regardless of the nature of the cleanup performed or property interest possessed by the plaintiff. (See, e.g., Pennsylvania v. Union Gas Co. (1989) 491 U.S. 1, 19-20 [105 L.Ed.2d 1, 19-20, 109 S.Ct. 2273, 2284-2285]; Wickland Oil Terminals v. Asarco, Inc. (9th Cir.1986) 792 F.2d 887, 890; Jones v. Inmont Corp. (S.D.Ohio 1984) 584 F. Supp. 1425, 1429.) In the insurance context, this view is persuasive. The ordinary, nontechnical meaning of damages, as stated by statute and dictionaries and used by the courts in related contexts, encompasses reimbursement of response costs. The agencies' expenditure of federal funds to investigate and initiate cleanup of hazardous waste constitutes loss or detriment. Furthermore, reimbursement by responsible parties is monetary compensation for such loss. The first element of the statutory and dictionary definitions of damages is fulfilled in this case. The agencies suffer loss or detriment in two separate ways when they incur response costs under CERCLA and similar statutes. First, release of hazardous waste into groundwater and surface water constitutes actual harm to property in which the state and federal governments have an ownership interest; this harm is detriment in statutory terms. (Civ. Code, § 3282; Wat. Code, § 102 [All water within the State is the property of the people of the State, but the right to the use of water may be acquired by appropriation in the manner provided by law.].) Second, the agencies' out-of-pocket expenses of investigating and removing the waste as required by statute is loss incurred as a direct result of harm allegedly created through the unlawful act or omission of FMC. Viewed in this second context, such expenditure constitutes loss or detriment even as to agency efforts specifically directed at cleaning up property in which neither the state nor the federal government has an ownership interest. Under statute, the agencies are charged with the duty of removing hazardous waste, whether or not their proprietary interests are harmed or they ultimately are compensated for their efforts. They are not mere contractors who act out of an expectation of recompense for their cleanup work; their expenses are incurred as a matter of public duty rather than hope of private gain. Thus, when they seek reimbursement of their response costs, the basis of the claim is harm done to the public fisc. In ordinary terms, such harm constitutes loss or detriment. The language of the CGL policies themselves supports this view. The clauses at issue here cover sums expended as damages because of property damage. If damages is construed to include a requirement that the aggrieved party suffered harm to a proprietary interest in the damaged property, the latter phrase becomes redundant. The plain language of the policies therefore supports the conclusion that the agencies' out-of-pocket expenditures, irrespective of the government interest in the property sought to be cleaned up, constitute loss or detriment. The second element of the statutory and dictionary definitions of damages is also fulfilled in this case. FMC's reimbursement of government response costs is monetary compensation for the loss suffered by the agencies when they proceed with environmental cleanups. Moreover, because the compensable loss is all remedial out-of-pocket expenditures incurred by the agencies, the compensation sought from FMC includes reimbursement for costs of cleaning up existing contamination on and off the disposal site itself, investigating the extent of contamination or the viability of cleanup options, and monitoring the spread of waste from the site. (See, e.g., Intel, supra, 692 F. Supp. at p. 1192.) As long as some property damage, as defined below, has already taken place, the agencies' expenses for responding constitute loss or detriment, whether or not the expenses are attributable to actual cleanup, mitigation of damage, or investigation and monitoring. When the agencies seek reimbursement of such expenses from the insured under CERCLA, their claim is for compensation for all their expenses, not merely those resulting from actual cleanup efforts on government property. Any other conclusion would be illogical as a matter of the reasonable expectations of the insured. (See Aerojet, supra, 211 Cal. App.3d at p. 227; Globe Indem. Co. v. State of California (1974) 43 Cal. App.3d 745, 751 [118 Cal. Rptr. 75].) For three specific reasons not relating to the ordinary meaning of the word damages, however, the insurers contend that a reasonable interpretation excludes reimbursement of response costs from coverage under the CGL damages provision. First, they argue that because CERCLA distinguishes response costs from damages, it mandates the same distinction in the insurance context because the agencies do not seek damages as prescribed by statute. Second, the insurers contend that because environmental statutes authorize the agencies to recover response costs even if they suffer no property damage or personal injury, such recovery is a government-imposed cost of doing business rather than compensation for loss or detriment. Finally, the insurers contend that reimbursement is best characterized as restitutive relief, the measure and purpose of which is sufficiently different from damages to render the two concepts mutually exclusive. None of these arguments is persuasive in the insurance context. (i) Statutory distinctions between response costs and damages. (8) CERCLA expressly distinguishes between recovery of response costs and recovery of damages to natural resources. (See 42 U.S.C. § 9607(a).) The difference between the two types of recovery and the way they are to be measured by the courts, however, is neither clearly laid out in the statute itself nor fully explained in its sparse legislative history. On the one hand, several sections of the statute suggest that response costs are essentially a subset of damages. (See, e.g., id., § 9607(f)(1) [providing that measure of damages to natural resources shall not be limited to the sums which can be used to restore or replace such resources].) On the other hand, statements made during legislative debate regarding the remedies provisions suggest that government recovery of damages to natural resources is limited to the lesser of the diminution in value of the natural resources in question or the cost of restoring such resources. (See State of Idaho v. Bunker Hill Co. (D.Idaho 1986) 635 F. Supp. 665, 675-676 [quoting statements of Sen. Simpson].) However damages and response costs are measured, we do not believe, as the insurers contend and several courts have concluded (see, e.g., NEPACCO, supra, 842 F.2d at p. 986; Mraz v. Canadian Universal Ins. Co., Ltd., supra, 804 F.2d at p. 1329), that CERCLA intended that reimbursement of response costs be treated as definitionally or conceptually distinct from recovery of damages. Congress clearly intended considerable overlap between the two forms of recovery. It is clear that response costs can, in certain situations, be recovered as damages to natural resources. (See, e.g., United States v. Shell Oil Co. (D.Colo. 1985) 605 F. Supp. 1064, 1084-1085, fn. 10.) Indeed, one court recently held that the cost of restoration is the proper measure of statutory damages, even if greater than the diminution in value of harmed property. (See State of Ohio v. U.S. Dept. of the Interior (D.C. Cir.1989) 880 F.2d 432, 459.) Seen in this light, whether recovery of remedial costs is sought under the response cost subdivision or that allowing recovery for damages to natural resources, it can be construed to fall within the scope of the insurance policies at issue here. Moreover, we fail to see how the distinction made by CERCLA between response costs and damages to natural resources  forecloses response costs from being characterized as damages in a generic sense under CGL policies. More significantly, our ultimate conclusion as to whether reimbursement of response costs is damages for insurance purposes is, as noted above, predominantly a question of how, under state law, insurance policies should be interpreted. (Cf. Aerojet, supra, 211 Cal. App.3d at p. 235; Chesapeake Utilities Corp. v. American Home Assur., supra, 704 F. Supp. at p. 560; Intel, supra, 692 F. Supp. at pp. 1186-1187; Specialty Coatings, supra, 535 N.E.2d 1071, 1080.) We are not bound by distinctions or definitions contained in CERCLA itself, if such distinctions do not reflect the intent of the parties to the CGL policies at the time of their formation. For this reason, even to the extent that CERCLA distinguishes between response costs and damages, this fact seems immaterial to the interpretation question at issue in this case. The parties' intent in entering the CGL policies could not possibly have been influenced by the niceties of statutory language adopted many years after the policies were drafted. (ii) Reimbursement of response costs as a cost of doing business. (9) The insurers also contend that FMC's reimbursement of response costs does not constitute damages because it does not depend on the incidence of any tangible harm to government property. Instead, they argue, such reimbursement is merely a cost of complying with the regulatory objectives of government agencies, and in this sense is an uninsurable cost of doing business instead of compensation for detriment suffered by the agencies. As one court has concluded, [u]nder CERCLA, the rule is simply that he who releases hazardous substances must pay for the cleanup. In other words, response costs are simply a government-imposed cost of doing business for firms which release hazardous substances. Such costs are not covered by CGL policies, any more than the cost of installing fire extinguishers as required by the Occupational Safety and Health Administration would be covered. ( Aetna Cas. & Sur. v. Gulf Resources & Chem. Corp., supra, 709 F. Supp. at p. 962.) In Armco, supra, 822 F.2d 1348, the Fourth Circuit Court of Appeals focused on this argument in holding that reimbursement of response costs under CERCLA is not covered by CGL policies: From an insurer's perspective, investigative and remedial action taken by the government respecting potential environmental hazards constitutes a prophylactic measure.... [In this case, the government] has intervened immediately upon learning of the toxic contamination. The case thus presents no instance of harm to human or animal life, but merely the prevention of such harm. ( Id. at pp. 1353-1354.) As reflected by Aetna Cas. & Sur. v. Gulf Resources & Chem. Corp . and Armco, the argument that reimbursement of response costs is uninsurable has two strands, both emanating from the fact that government agencies rather than private landowners are the parties seeking reimbursement. First, government agencies have only a regulatory interest in the property sought to be cleaned up. Second, the response they seek is prophylactic in nature, and therefore cannot be the subject of insurance. Neither of these arguments possesses merit in the context of the environmental cleanups at issue here. The first contention fails to take into account the principles that guide interpretation of insurance policies. An ordinary definition of damages does not necessarily focus on the aggrieved party's proprietary interest; it is sufficient that the party have suffered some detriment, purely regulatory though it may be, that is compensable by an award from a responsible party. (See ante, pp. 828-829.) Although the second argument has some merit in the abstract, it misperceives the nature of the response costs sought by the agencies in most hazardous waste cases, including this one. As is discussed below, it is true that government regulations or court orders requiring businesses such as FMC to undertake purely prophylactic measures designed to prevent future discharges of hazardous waste result in costs that are not covered by CGL policies. Such government actions are distinguishable, however, from the reimbursement sought by the agencies here, as well as that in cases such as Armco, supra, 822 F.2d 1348. In our view, the Armco approach to what constitutes damages for insurance policy purposes is unduly narrow. In many contexts, a party may recover damages without any harm to human or animal life having occurred. The absence of such harm does not vitiate the loss incurred by the agencies in undertaking remedial measures. Because the third party suits here (like that at issue in Armco ) rest on allegations of past and present damage to land and water on and surrounding hazardous waste sites, they concern reimbursement not for prophylactic purposes, but rather for remedial and mitigative actions. [13] Recovery of the costs of both types of measures is damages in ordinary terms. A release of hazardous waste constitutes an unlawful act or omission that causes detriment to government interests (i.e., out-of-pocket loss), and reimbursement of response costs is compensation therefor in money. Thus, even if government response costs are incurred largely to prevent damage previously confined to the insured's property from spreading to government or third party property (i.e., the costs are mitigative in character), reimbursement of such costs constitutes damages in ordinary terms. A contrary result would fail to fulfill the reasonable expectations of the parties. (See Aerojet, supra, 211 Cal. App.3d at p. 227, citing Globe Indem. Co. v. State of California, supra, 43 Cal. App.3d at p. 751 [it would seem strangely incongruous to the insured that his policy would cover him for damages to tangible property destroyed through his negligence in allowing a fire to escape but not for the sums incurred in mitigating such damages by suppressing the fire]; Goodyear Rubber & Supply v. Great Am. Ins. Co. (9th Cir.1976) 545 F.2d 95, 96 [It would be a strange kind of justice, and a stranger kind of logic, that would hold the defendant to be liable for as much as $450,000 if the barge and its contents had been consumed by fire, but free of liability for a much lesser amount because of the fortuity of rescue.]; Intel, supra, 692 F. Supp. at p. 1192; Bankers Trust Co. v. Hartford Acc. & Indem. (S.D.N.Y. 1981) 518 F. Supp. 371, 373-374; Leebov v. United States Fidelity and Guaranty Co. (1960) 401 Pa. 477 [165 A.2d 82, 84].) For this reason, we consider it immaterial to the issue before us whether or not the agencies, in seeking reimbursement of response costs, have suffered harm to a proprietary interest. Unlike the situation when agencies seek prophylactic measures, reimbursement of environmental response costs  whether incurred for remedial or mitigative purposes  is not an uninsurable cost of doing business. [14] (iii) Reimbursement of response costs as restitution. (10) The insurers contend that reimbursement of response costs is restitution, which they view as mutually exclusive from damages. This argument has two separate thrusts: one going to the measure of the types of relief at issue, and one concerning the fundamental character of such relief. The flaw in the insurers' contention is that neither of these strands takes into account the ultimate considerations underlying judicial interpretation of insurance policies. Even if recovery of response costs is technically restitution rather than damages, this fact is of little consequence to policy interpretation in the absence of evidence on the face of the policies that technical distinctions were intended. The insurers' argument as to the measure of relief is as follows: recovery of common law damages is limited to the lesser of the diminution in value of property harmed or the costs of repair. Reimbursement of response costs, however, resembles the costs of repair, which may be higher than diminution in the value of property. If costs of repair exceed the value of damaged property (as they often may under CERCLA), either the entire recovery or, at a minimum, the excess cannot be considered damages because it exceeds the actual harm to the plaintiffs' property. (See, e.g., NEPACCO, supra, 842 F.2d at pp. 986-987; Travelers Ins. Co. v. Ross Elec. of Washington, Inc., supra, 685 F. Supp. at p. 744; Hanna, supra, 224 F.2d at p. 503.) The insurers' argument contains several flaws. First, recovery of tort damages is not invariably limited by the value of damaged property. The courts have recognized that recovery in excess of such value may be necessary to restore the plaintiff to the position it occupied prior to a defendant's wrongdoing. (See, e.g., Heninger v. Dunn (1980) 101 Cal. App.3d 858, 863 [162 Cal. Rptr. 104] [permitting recovery of reasonable repair costs in excess of value of damaged property, when plaintiff has personal reason for making repairs]; Dandoy v. Oswald Bros. Paving Co. (1931) 113 Cal. App. 570, 572-573 [298 P. 1030] [To hold that appellant is without a remedy merely because the value of land has not been diminished, would be to decide that by wrongful act of another, an owner of land may be compelled to accept a change in the physical condition of his property, or else perform the work of restoration at his own expense. This would be a denial of the principle that there is no wrong without a remedy.]; see generally Rest.2d Torts, § 929.) Second, even if the courts generally award tort damages in an amount limited to the lesser of the value of damaged property or the costs of repair, that does not mandate that a greater recovery authorized by state or federal statutes therefore should be held to constitute something other than damages in conceptual terms. (See State of Ohio v. U.S. Dept. of the Interior, supra, 880 F.2d at p. 459.) Even if a court applying common law might not award the full extent of such costs, the excess above what is awarded remains damages for insurance policy interpretation purposes. The whole recovery of response costs, not just the amount limited to the value of harmed property, constitutes loss or detriment for harm caused by FMC's allegedly unlawful act or omission. This brings us to the alternative thrust of the insurers' argument: reimbursement of government response costs is not damages because it is a restitutive remedy that is specific rather than substitutive in character. The United States Supreme Court recently adopted this distinction in discussing whether a state's claim for reimbursement of federal Medicaid subsidies is a claim for money damages under the terms of the Administrative Procedure Act (APA) (5 U.S.C. § 702). Characterizing such a claim as one for restitution, the high court held that it was therefore not a claim for money damages: Our cases have long recognized the distinction between an action at law for damages  which are intended to provide a victim with monetary compensation for an injury to his person, property, or reputation  and an equitable action for specific relief  which may include an order providing ... for `the recovery of specific property or monies. ...' ( Bowen v. Massachusetts (1988) 487 U.S. 879, 893 [101 L.Ed.2d 749, 763, 108 S.Ct. 2722] [citation omitted, italics in original]; see also Maryland Dept. of Human Resour. v. Dept. of H.H.S. (D.C. Cir.1985) 763 F.2d 1441, 1446 [the term `money damages' [under the APA] ... normally refers to a sum of money used as compensatory relief. Damages are given to the plaintiff to substitute for a suffered loss, whereas specific remedies `are not substitute remedies at all, but attempt to give the plaintiff the very thing to which he was entitled.' [Citation omitted.]].) We, too, have recognized a distinction between restitution and compensatory damages. (See McHugh v. Santa Monica Rent Control Bd., supra, 49 Cal.3d at p. 363 [maj. opn.]; id. at p. 387 [Panelli, J., conc.].) Reimbursement can reasonably be labelled a restitutive remedy, either because it awards a plaintiff the very thing to which he was entitled (see Maryland Dept. of Human Resour. v. Dept. of H.H.S., supra, 763 F.2d at p. 1446), or because it attempts to compensate a plaintiff for the cost of performing the duty of another (see Rest., Restitution, § 115 [providing that a person who performs the duty of another is entitled to restitution]). This label does not, however, preclude characterization of the amounts in question here as damages awarded to compensate a plaintiff for out-of-pocket expenditures. Indeed, restitution, to which the insurers analogize the reimbursement at issue here, is frequently denominated as one type of damages for descriptive purposes. (See, e.g., McHugh v. Santa Monica Rent Control Bd., supra, 49 Cal.3d at p. 363; U.S. v. Conservation Chemical Co., supra, 653 F. Supp. at pp. 192-193; Rest.2d Torts, § 903 [defining compensatory damages as damages awarded to person as compensation, indemnity or restitution for a harm sustained by him]; 5 Corbin on Contracts (1964) § 996, p. 15 [noting that damages is frequently used to denote any sum of money for which a court gives judgment to an injured party, but rejects this usage for purposes of treatment of contract damages]; Dobbs, Handbook on the Law of Remedies (1973) § 4:5.) Whatever technical distinctions we and other courts have drawn between restitution and compensatory damages in other contexts, in ordinary terms both concepts are within the definition of damages. For the purposes of interpretation, this fact is dispositive. (11) Nonetheless, because reimbursement of response costs is restitutive in that it attempts to restore to the agencies the value of a benefit constructively conferred on FMC, we consider one further argument. California courts have held that, as a matter of public policy, an insured's payment of certain types of restitution cannot be covered by insurance. (See, e.g., State Farm Fire & Cas. Co. v. Superior Court (1987) 191 Cal. App.3d 74 [236 Cal. Rptr. 216] [insurer has no duty to defend criminal prosecution of insured, because restitution to victims of criminal conduct is punitive remedy not coverable as damages]; Jaffe v. Cranford Ins. Co., supra, 168 Cal. App.3d 930 [insurer has no duty to defend insured against criminal prosecution for Medicaid fraud, despite fact that state could have sought civil reimbursement of fraudulently procured funds instead of prosecuting; such reimbursement would be restitution, not damages].) These cases are inapposite. Unlike State Farm Fire & Cas. Co. v. Superior Court, supra, 191 Cal. App.3d 74 the relief sought in the underlying suits at issue here is not punitive. CERCLA, for example, is a strict liability statute that serves essentially remedial goals, irrespective of fault. (See, e.g., United States v. Northeastern Pharmaceutical, supra, 810 F.2d at pp. 732-737, 740-741; J.V. Peters & Co., Inc. v. Administrator, EPA (6th Cir.1985) 767 F.2d 263, 265-266; State of N.Y. v. Shore Realty Corp. (2d Cir.1985) 759 F.2d 1032, 1043-1044.) Reimbursement of response costs, moreover, is not restitutive in the narrow sense identified by Jaffe as inappropriate for insurance coverage. (See Jaffe v. Cranford Ins. Co., supra, 168 Cal. App.3d at p. 935 [Although the concept of `restitution' may have a broader meaning in other contexts, we limit our reference to it here to situations in which the defendant is required to restore to the plaintiff that which was wrongfully acquired.]; Aerojet, supra, 211 Cal. App.3d at p. 231 [distinguishing Jaffe on this basis].) (12) (See fn. 15.) In short, we are not persuaded that the relief at issue here is of the narrow type identified by these cases as not a proper subject of coverage by insurance. [15] We conclude that reimbursement of environmental response costs is damages under the terms of the insurance policies at issue here, and that public policy does not prevent coverage. [16]
(13) The statutes on which the third party suits are based provide that, in lieu of remedying contamination and seeking reimbursement, the agencies may obtain injunctions compelling responsible parties to both cease discharging hazardous waste and clean up damage already present. (See ante, p. 816.) As courts and commentators have recognized, government cleanup efforts are generally considerably more expensive than cleanups performed by the responsible party. (See, e.g., Intel, supra, 692 F. Supp. at p. 1183; Chemical Applications Co. v. Home Indemnity Co. (D.Mass. 1977) 425 F. Supp. 777, 778-779; Pendygraft et al., Who Pays for Environmental Damage: Recent Developments in CERCLA Liability and Insurance Coverage Litigation (1988) 21 Ind.L.Rev. 117, 151.) For this reason, federal and state governments generally seek voluntary and involuntary cleanup by the responsible party (pursuant to injunction if necessary) before performing it themselves and seeking reimbursement under CERCLA. (See, e.g., Intel, supra, 692 F. Supp. at p. 1193; Health & Saf. Code, § 25355.5, subd. (a) [prohibiting state Department of Health Services from spending state Superfund funds prior to determining that potentially responsible party has not complied with orders or agreements to take corrective action].) We now examine whether any or all of the costs of complying with injunctions issued under CERCLA and similar statutes are damages under the CGL policies. The costs of injunctive relief, whether incurred for prophylactic, mitigative, or remedial purposes, do not readily satisfy the statutory or dictionary definitions of damages. Because such costs are paid to employees or independent contractors rather than aggrieved parties, they do not directly compensate aggrieved persons for loss or detriment. (See ante, pp. 828-830.) To be sure, in economic terms it may make little difference whether cleanup is performed and paid for directly by the insured pursuant to injunction or undertaken by the agencies (who then seek reimbursement). Nonetheless, it is difficult to construe the two methods of payment as equally covered by the ordinary definition of the word damages, as we have described it above. If the costs of injunctive relief may be deemed damages, the as damages limitation contained in the policies seems to be rendered meaningless. The costs of injunctions are essentially sums to which the insured becomes legally obligated to pay ... because of property damage. Construing them also to be sums to which the insured becomes legally obligated to pay as damages because of property damage makes the italicized phrase redundant. Because we are obligated to give effect to every part of an insurance policy (Civ. Code, § 1641), we hesitate to reach this result. It is unlikely, however, that the parties to CGL policies intended to cover reimbursement of response costs but not the costs of injunctive relief, at least where the latter costs are incurred  generally at a lower total cost  for exactly the same purposes addressed through governmental expenditure of response costs. In this respect, we note that the relationship between the remedies authorized by CERCLA and similar statutes is not the same as that between damages and injunctive remedies traditionally available at common law and in equity. In ordinary tort actions, injunctive relief is generally available only if legal remedies (e.g., monetary compensation) are inadequate. (Code Civ. Proc., § 526; Civ. Code, § 3422; see generally 6 Witkin, Cal. Procedure (3d ed. 1985) Provisional Remedies, § 276, p. 576, and cases cited therein.) Thus, a plaintiff ordinarily may seek to enjoin conduct that constitutes a nuisance, even though the activity complained of does not cause him any cognizable property or personal damage. In such a situation, the defendant's costs of complying with an injunction might not be covered by CGL policies. (See, e.g., Hanna, supra, 224 F.2d 499; Desrochers v. New York Casualty Co., supra, 106 A.2d 196; Garden Sanctuary, Inc. v. Insurance Co. of No. Amer., supra, 292 So.2d 75; Ladd Const. Co. v. Ins. Co. of North America (1979) 73 Ill. App.3d 43 [391 N.E.2d 568].) In Hanna, supra, 224 F.2d 499, the leading case holding that the cost of complying with mandatory injunctions in tort actions is not damages under CGL policies, adjoining property owners brought suit against the insured, alleging trespass by boulders and debris from the insured's property. The owners sought no damages (and there was no evidence that the value of their property had decreased as a result of the encroachment). Instead, they sought, and obtained, an injunction ordering the insured to remove the debris. The Fifth Circuit Court of Appeals held the costs of complying with the injunction not covered under the insured's liability policy, which contained substantially the same coverage clause as those at issue here. Its reasoning, however, focused on the fact that, under Florida law, the owners' potential damages remedy was limited to the diminution in value of their property; injunctive relief, by contrast, required monetary payment whether or not the value of the owners' property had decreased. Because there was no evidence of any decrease in property value, the court reasoned, the costs of complying with the injunction were not damages. ( Hanna, supra, 224 F.2d at p. 503.) We need not here decide whether the reasoning of Hanna is persuasive as a matter of California law. [17] Unlike Florida, California does not, as is noted above, absolutely limit damages for trespass to the diminution in value of the plaintiff's property. (See ante, p. 834.) Moreover, the basic foundation of the Hanna decision  the interplay of legal and equitable remedies in tort actions in which it is entirely speculative whether the plaintiff has suffered compensable harm  differs from the relationship between the various remedies authorized by CERCLA, under which injunctive relief may be available even though legal or restitutive remedies are adequate. (See, e.g., United States v. Waste Industries (4th Cir.1984) 734 F.2d 159, 168 [injunction available under RCRA even if reimbursement under CERCLA would be adequate remedy]; United States v. Conservation Chemical Co. (W.D.Mo. 1985) 619 F. Supp. 162, 212-213 [injunction under CERCLA, 42 U.S.C. § 9606, not absolutely barred by availability of reimbursement under 42 U.S.C. § 9607(a)].) The mere fact that the agencies seek an injunction in an environmental protection action does not indicate an absence of cognizable property damage or personal injury. The prima facie case for injunctive relief is identical to that for reimbursement of response costs, with the single added element of imminent and substantial endangerment of public health or welfare or the environment. (See, e.g., United States v. Bliss (E.D.Mo. 1987) 667 F. Supp. 1298, 1313.) Moreover, in its remedial aspects, the injunction results in exactly the type of expenditures involved in reimbursement of response costs, whether or not the agencies have an adequate remedy in the form of reimbursement. (See, e.g., United States v. Price (D.N.J. 1983) 577 F. Supp. 1103, 1112 [Congress intended injunctive relief under 42 U.S.C. § 9606 to be a viable alternative or concurrent means of achieving the same goal as reimbursement under 42 U.S.C. § 9607].) For these reasons, it would exalt form over substance to interpret CGL policies to cover one remedy but not the other. Given the practical similarity of remedies available under the environmental statutes at issue here, we believe a reasonable insured would expect both remedies to fall within coverage as damages. Insofar as injunctive relief is an equivalent substitute for the goal of government remedial action, the distinction relied on by Hanna, supra, 224 F.2d 499, is inapposite in the CERCLA context. A majority of courts have also reached this conclusion. Some have reasoned that such costs are damages according to the reasonable expectations of the parties, even if they would not be damages under technical definitions. (See, e.g., C.D. Spangler Construction Co. v. Industrial Crankshaft & Engineering Co., Inc., supra, 388 S.E.2d 557, 565; Aerojet, supra, 211 Cal. App.3d at p. 228; Chesapeake Utilities Corp. v. American Home Assur., supra, 704 F. Supp. at pp. 559-560.) Others have stated this conclusion in terms of public policy: costs of compliance must be interpreted as damages in the environmental context, because to hold otherwise would make insurance coverage hinge on the mere fortuity of the way in which government agencies seek to enforce cleanup requirements, would unreasonably constrain the agencies' choice of cleanup mechanisms, and would introduce substantial inefficiency into the cleanup process. (See, e.g., C.D. Spangler Construction Co., supra, 388 S.E.2d 557, 566; Intel, supra, 692 F. Supp. at pp. 1183, 1193; Chemical Applications Co. v. Home Indemnity Co., supra, 425 F. Supp. at pp. 778-779; United States Aviex Co. v. Travelers Ins. Co., supra, 336 N.W.2d at p. 843.) We agree with the underlying rationale of these decisions. Under CERCLA and similar statutes, injunctive relief and reimbursement of response costs serve substantially the same purpose. For this reason, we find CGL policy language is ambiguous as applied to remedial and mitigative costs incurred pursuant to injunction under CERCLA and similar statutes, and therefore must be construed in favor of coverage to satisfy the reasonable expectations of the insured. (See ante, p. 822.) In contrast to our determination, two federal Courts of Appeals have concluded that the costs of injunctive relief under CERCLA and similar statutes are not covered by CGL policies. (See NEPACCO, supra, 842 F.2d at p. 986; Armco, supra, 822 F.2d at p. 1353.) One of these decisions essentially relies on an uncritical adoption of the Hanna result ( supra, 224 F.2d 499). ( NEPACCO, supra, 842 F.2d at p. 986 [stating that black letter insurance law holds that claims for equitable relief are not claims for `damages' under liability insurance contracts, while citing four cases supporting the proposition and three challenging it in the environmental context].) The other decision supports its conclusion by referring to the prophylactic, and therefore uninsurable, nature of injunctive relief. (See, e.g., Armco, supra, 822 F.2d at p. 1353.) Because the reasoning of the Hanna court is not compelling in the CERCLA context, and because it is incorrect to portray injunctive relief under CERCLA and related statutes as wholly prophylactic in nature, we decline to follow these decisions. [18] It is true that some costs required under environmental injunctions are prophylactic in nature (e.g., altering dumping practices to prevent recurrences of leakage). As we discuss below, these costs are not incurred because of property damage, and therefore are not covered by CGL policies. Nevertheless, environmental injunctions requiring remedial and mitigative action result in costs that constitute damages under CGL policies. Because an insured would reasonably expect equal coverage of the costs of equivalent or alternative remedies, the costs of injunctive relief under the statutes in question here are damages for CGL purposes. [19]
(14) Several courts have held that government claims for injunctive relief and reimbursement of costs incurred in cleaning up disposal sites and water surrounding them are not covered by CGL policies, because such claims do not allege property damage. (See, e.g., Armco, supra, 822 F.2d at pp. 1353-1354; Mraz v. Canadian Universal Ins. Co., Ltd., supra, 804 F.2d at pp. 1327-1329.) We disagree. As we note above, these decisions either misperceive the basic character of remedies available under environmental statutes or apply an unduly narrow definition of property damage. (See ante, pp. 832-833.) CGL policies cover sums expended as damages not only because of harm to human or animal life ( Armco, supra, 822 F.2d at p. 1354), but more generally because of property damage. Contamination of the environment satisfies this requirement. (Cf. Aerojet, supra, 211 Cal. App.3d at pp. 229-230; NEPACCO, supra, 842 F.2d at p. 983; Port of Portland v. Water Quality Ins. Syndicate (9th Cir.1986) 796 F.2d 1188, 1193-1194; Chesapeake Utilities Corp. v. American Home Assur., supra, 704 F. Supp. at p. 566; Intel, supra, 692 F. Supp. at pp. 1183, 1185; New Castle County v. Hartford Accident & Indem. Co., supra, 673 F. Supp. at p. 1366; U.S. v. Conservation Chemical Co., supra, 653 F. Supp. at p. 193; Boeing, supra, 784 P.2d at p. 516; Compass Ins. Co. v. Cravens, Dargan & Co., supra, 748 P.2d at p. 728; Specialty Coatings, supra, 535 N.E.2d at pp. 1081-1082.) We also hold that reimbursement of response costs and the costs of injunctive relief under CERCLA and related statutes are incurred because of property damage. As discussed above (see ante, pp. 828-829), the mere fact that the governments may seek reimbursement of response costs or injunctive relief without themselves having suffered any tangible harm to a proprietary interest does not exclude the recovery of cleanup costs from coverage under the damages provision of CGL policies. For similar reasons, in plain and ordinary terms such recovery is because of property damage. It is immaterial whether motivations other than protection of property  for example, protection of the health of persons living near hazardous waste sites  also contribute to the agencies' pursuit of statutory relief. The Court of Appeal's emphasis on the fact that the agencies' objectives may be regulatory rather than proprietary is misplaced. Whatever their dominant motive, the event precipitating their legal action is contamination of property. The costs that result from such action are therefore incurred because of property damage. (See, e.g., Aerojet, supra, 211 Cal. App.3d at p. 236; Boeing, supra, 784 P.2d at p. 516.) This is true, moreover, whether the cleanup at issue in the underlying suits takes place on property owned by FMC, the state or federal government, or third parties. The provisions at issue here do not specify that coverage hinges on the nature or location of property damage. We therefore construe them to encompass damages because of property damage in general, regardless of by whom it is suffered. We do agree that prophylactic costs  incurred to pay for measures taken in advance of any release of hazardous waste  are not incurred because of property damage. (Cf. Aerojet, supra, 211 Cal. App.3d at p. 236; Boeing, supra, 784 P.2d at p. 516; CPS Chem. Co., Inc. v. Continental Ins. Co., supra, 536 A.2d at p. 317.) Until such damage has occurred, whether on the waste site itself or elsewhere, there can be no coverage under CGL policies. Beyond this limited circumstance, however, and because the agencies in this suit allege that the waste sites themselves and the water on and surrounding the sites have already been contaminated by hazardous waste, we conclude that the reimbursement and the costs of injunctive relief sought here at least in part constitute damages because of property damage.