Opinion ID: 1801815
Heading Depth: 2
Heading Rank: 3

Heading: Application of the Sudden and Accidental Exception to the 1978 Release

Text: The Court of Appeal concluded the State, having experienced the 1969 overflow and been advised on, but not taken, measures to avoid a repetition, must have expected the 1978 flooding, making the 1978 release nonaccidental. The State insists it did take protective measures after 1969, but these were ineffective in the extraordinary circumstances of the 1978 rains; the evidence, the State argues, shows at most it was negligent in allowing the overflow conditions of 1978 to occur, not that it expected or intended the 1978 release. We conclude the record reflects a triable issue of fact on this issue. (7) As the parties agree, an accidental discharge, within the meaning of the sudden and accidental exception to the pollution exclusion, is one the insured neither intended nor expected to happen ( Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at p. 755 ( Shell Oil Co. )), and a discharge is considered expected only when the insured subjectively knew or believed it was highly likely to occur ( id. at p. 746 [The plain meaning of `expected' does not include `should have known.' Rather, the word comprehends actual belief in the probability of a future event.]). (See also Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 304-305 [24 Cal.Rptr.2d 467, 861 P.2d 1153] [citing Shell Oil Co. for the proposition that the test for `expected' damage is whether the insured knew or believed its conduct was substantially certain or highly likely to result in that kind of damage].) While the State bears the ultimate burden of proving the exception applicable ( Aydin Corp. v. First State Ins. Co., supra, 18 Cal.4th at p. 1194), on summary judgment we ask only whether the record reflects the existence of a triable factual issue on the question. The evidence, liberally construed in favor of the State as the nonmoving party ( Yanowitz v. L'Oreal USA, Inc., supra, 36 Cal.4th at p. 1037), shows the following: After the 1969 overflow, which resulted from a 50-year storm that overwhelmed the site's runoff diversion channels, the State temporarily closed the site, rebuilt the ponds and modified the diversion channels to improve storm drainage. Before the site was reopened, the county flood control agency checked it and found the drainage adequate. After the site was permanently closed to new waste in 1972, the State's chief geologist, Alvin Franks, inspected and assessed it, finding that in addition to leakage, there was a danger of overflow in sufficiently heavy rains. In his 1974 report, Franks suggested, among other measures, leveling and capping the site to prevent flooding of the ponds. Neither that measure nor the others recommended, however, were taken before the 1978 rains, though the State did transfer about 375,000 gallons of waste from the site to other facilities. Had Franks's recommendations been followed, the federal court special master found, the 1978 release would not have occurred. In early 1978, severe rainstorms struck the region. A state of emergency in Riverside County was declared by Governor Brown on February 5, and on February 15 President Carter declared the county a disaster area. On March 3, concerned about rising levels in the Stringfellow site's evaporation ponds, James Anderson, executive officer of the Regional Water Quality Control Board, had additional storage ponds dug on the site and started pumping water to the new ponds. On March 5, as heavy rain continued, the main pond was again full. National Guard troops placed sandbags on top of the dam and pumping continued, though it was limited when one of the two pumps broke. When a crack was observed in the face of the dam, Anderson ordered wastes released through a spillway to prevent an uncontrolled release of up to 20 million gallons. The controlled release was stopped on March 7, but restarted on March 10 when the dam began to give way. It was stopped again on March 11, when the danger of collapse had passed. (8) As Insurers point out, in one obvious sense the 1978 discharges were not accidental: the wastes were intentionally released at Anderson's direction. But Anderson ordered the release only to prevent a larger, uncontrolled discharge of wastes if, as threatened, the dam broke, which the State maintains would have been an accidental discharge. Liability policies have been held to cover damages resulting from an act undertaken to prevent a covered source of injury from coming into action, even if that act would otherwise not be covered. ( Globe Indem. Co. v. State of California (1974) 43 Cal.App.3d 745, 750-753 [118 Cal.Rptr. 75] ( Globe Indemnity ) [statutory liability for fire suppression costs, incurred after the insured negligently started a fire that spread to neighboring property, held covered even under a policy limited to liability for bodily injury and property damage]; Goodyear Rubber & Supply v. Great Am. Ins. Co. (9th Cir. 1976) 545 F.2d 95, 96 ( Goodyear Rubber ) [decided under Oregon law: liability for salvage costs covered under property damage liability policy, where salvager had acted to prevent further damage from fire, a covered source of damage]; see also AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 833 [274 Cal.Rptr. 820, 799 P.2d 1253] [citing Globe Indemnity and Goodyear Rubber as support for holding that government response costs designed to prevent environmental damage from spreading constitute damages under liability policy].) This rule makes sense as a matter of causation, for just as [d]anger invites rescue ( Wagner v. International Ry. Co. (1921) 232 N.Y. 176 [133 N.E. 437]), so the evident threat of property damage (arising by hypothesis from a covered cause) leads naturally to acts, whether by the insured or others, to prevent or mitigate the damage. (See Globe Indemnity, supra, 43 Cal.App.3d at p. 751 [since all of the fire suppression costs in question were expended to prevent further damage to tangible property, it can be said that the insureds became legally obligated to pay these fire suppression costs because of damage to tangible property]; Goodyear Rubber, supra, 545 F.2d at p. 96 [the peril insured against, the damage caused by the occurrence of explosion and fire, set the salvage operation in motion].) The rule fits, as well, with the principle that insurance policies are to be read in accord with the parties' reasonable expectations; when an insured takes out a policy providing coverage for property damage liability, [i]t would seem strangely incongruous to him, as it does to us, 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. ( Globe Indemnity, supra, 43 Cal.App.3d at p. 751; see AIU Ins. Co. v. Superior Court, supra, 51 Cal.3d at p. 833 [A contrary result would fail to fulfill the reasonable expectations of the parties.].) Finally, according coverage in this situation encourages a most salutary course of conduct, that is, the taking of measures to mitigate or prevent damage. ( Globe Indemnity, supra, 43 Cal.App.3d at p. 752.) And Insurers are not harmed by such measures, since they would be responsible for greater liability were the measures not taken. 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. ( Goodyear Rubber, supra, 545 F.2d at p. 96.) This policy has been codified as to first party insurance in Insurance Code section 531, subdivision (b), which provides for coverage [i]f a loss is caused by efforts to rescue the thing insured from a peril insured against. For these reasons, we conclude that to the extent the conditions in March 1978 threatened a sudden and accidental release of wastes from the Stringfellow site, the qualified pollution exclusion does not bar coverage for liability arising from the State's intentional releases performed to prevent such a greater accidental release. [5] We turn to the question of whether the overflow and dam break threatened in 1978 would in fact have been accidental. Insurers were entitled to summary adjudication on this point only if the record demonstrates, as an undisputed fact, that the State knew or believed a discharge was highly likely to occur because of flooding. ( Shell Oil Co., supra, 12 Cal.App.4th at p. 746.) Unlike the Court of Appeal, we find a triable issue of fact on this point. After the extraordinary rainfalls of 1969, which statistically would be expected to occur no more than once every 50 years, the State took measures to prevent future flooding: it improved the runoff diversion system and removed a large amount of waste from the ponds. The facility was reopened only after the county flood control agency reviewed the drainage system and found it sufficient. When new flooding hit in January and February of 1978due to rainfall so intense as to provoke a government declaration of emergency and designation of the county as a disaster areathe State attempted to alleviate the flooding emergency by topping the dam with sandbags and digging new storage ponds into which waste could be pumped. The State official in charge hoped the rain would abate and these measures would be sufficient. But the rain continued, a pump broke, and the dam began to crack. The State's preventive measures had proved inadequate. These facts do not demonstrate the State expected rains so heavy they would overwhelm the improved drainage, defeat emergency measures, and threaten the dam; they show only that the State was aware of a flooding risk and took what proved to be inadequate measures against it. Being aware of a risk of a particular event is not equivalent to knowing or believing the event is highly likely to occur. The Court of Appeal considered the risk of flooding, after 1969, so great as to compel a finding the State expected it: Here, though there was a theoretical chance that after 1969 it would never again rain heavily enough to cause any discharge, if that were enough to make a discharge `accidental,' the term would cease to have any practical meaning. To be sure, the evidence in a given case might show the insured was aware of a risk so great that no reasonable person could find the insured did not expect the event. But the evidence here did not establish that level of probability. The special master found only that the State was aware in 1973 of a danger of overflow, and the undisputed fact as framed in the Insurers' statement was only that Franks, the State's geologist, recognized a potential for overflow during a heavy storm. The State took measures to prevent and control flooding; the rains that led to both the 1969 and 1978 discharges were no everyday events, but extraordinary, unpredictable phenomena; and the ultimate release was caused partly by mechanical failure of a pump and partly by structural failure of the site dam. On this evidence, a trier of fact could reasonably find the State did not expect this set of events. The State failed to take a measurecovering the site with an impermeable capthat was suggested to it and that would have prevented the release. Even assuming this failure was unreasonable, however, the State's omission demonstrates only negligence, against which the policy insured. As the State argues: Many accidents occur when a policyholder negligently delays taking steps to eliminate a remote risk of harm, such as when an auto driver negligently delays replacing his tires, resulting in an auto accident, or a homeowner puts off cutting down an aging tree which he knows could be blown over and cause damage in an extraordinarily ... heavy windstorm.... Evidence the State should have known flooding was likely, and should have taken additional measures against it, is insufficient to prove, as an undisputed fact, that a waste discharge due to flooding was expected and therefore nonaccidental. ( Shell Oil Co., supra, 12 Cal.App.4th at p. 746.)