Court Opinion

ID: 7077558
Source: CourtListenerOpinion
Date Created: 2022-07-24 08:28:39.604643+00
Date Added: 2024-06-11T16:12:50.449216
License: Public Domain

BAKER, Judge,
concurring in part and dissenting in part.
I concur with the majority’s conclusions that ESLIC did not waive its choice-of law argument and that under a choice-of-law analysis, California law applies. However, I part ways with the majority’s application of California law, trusting that if our envi*800ronmentally-conscious colleagues to the west were confronted with this issue, they would no longer permit their environment to go uncleansed.
To begin, Congress passed The Federal Comprehensive Environmental Responsibility, Compensation, and Liability Act of 1980 (CERCLA) to facilitate the prompt cleanup of hazardous waste sites. Cnty. of Santa Clara v. U.S. Fidelity & Guar. Co., 868 F.Supp. 274, 279 (N.D.Cal.1994). Likewise, the Hazardous Substance Account Act (HSAA),3 California’s version of CERCLA, incorporates many of the same ideas as CERCLA. For instance, upon finding an imminent or substantial danger because of a hazardous substance, the California Environmental Protection Agency (C-EPA) can order the responsible parties to either remediate or pay for the remediation. Cal. Health & Safety Code § 25358.3.
Then, in Foster-Gardner, Inc. v. National Union Fire Insurance Co., 18 Cal.4th 857, 77 Cal.Rptr.2d 107, 959 P.2d 265 (1998), environmental law and insurance law joined, creating a controversial issue, namely, whether there is a duty to defend under a standard comprehensive general liability (CGL) policy that is triggered by administrative proceedings against the insured. Foster-Gardner was a pesticide and fertilizer business, and in 1992, it received an “Imminent and Substantial Endangerment Order and Remedial Action Order” (the “Order”) from the CEPA. 77 Cal.Rptr.2d 107, 959 P.2d at 267.
The Order stated that Foster-Gardner was “a responsible party, and has incurred liability for cleaning up the Site.” Id., 77 Cal.Rptr.2d 107, 959 P.2d at 268. Additionally, Foster-Gardner was liable for oversight costs, expenses incurred in responding to a release of hazardous substances, and it could be held liable for $25,000 for each day it refused to comply with the Order and for punitive damages up to three times the amount of any costs incurred by the C-EPA. Id., 77 Cal.Rptr.2d 107, 959 P.2d at 268-69. In short, Foster-Gardner was facing substantial expenditures in cleaning up and remediating the site.
Foster-Gardner submitted its defense of the Order to four of its insurers, who had issued CGLs containing language that it would pay on behalf of the insured all sums “which the insured shall become legally obligated to pay as damages.” Id., 77 Cal.Rptr.2d 107, 959 P.2d at 269 (emphasis added). The insurance companies refused to defend or inadequately fund the defense. Id., 77 Cal.Rptr.2d 107, 959 P.2d at 270.
In a four-to-three decision, the Supreme Court of California observed that “[u]nder the policies, the insurers are required to defend a ‘suit,’ but have discretion to investigate and settle a ‘claim.’ ” Id., 77 Cal.Rptr.2d 107, 959 P.2d at 279. The Court determined that the Order was not a suit, and it was only if Foster-Gardner refused to comply with the Order that “an enforcement action in court might follow.” Id., 77 Cal.Rptr.2d 107, 959 P.2d at 280. The Court further reasoned that “the insurers here did not contract and receive premiums to defend anything but a civil lawsuit, requiring them to defend the Order would result in an unintended windfall for Foster-Gardner.” Id., 77 Cal.Rptr.2d 107, 959 P.2d at 283.
Justice Kennard along with two other Justices dissented. Acknowledging that a *801lay person would seek out a dictionary to determine the meaning of the “suit,” Justice Kennard, “canvassed a number of lay dictionaries” and noted that “most definitions of ‘suit’ do include a reference to some type of court proceeding.” Id., 77 Cal.Rptr.2d 107, 959 P.2d at 288. Nevertheless, Justice Kennard, cited two lay dictionaries that gave alternative definitions, referring to “legal process.” Id.
Justice Kennard also took issue with the majority’s conclusion that the term “suit” was unambiguous; instead, concluding that the term “claim” was unambiguous and meant “a prelitigation demand letter that may be ignored without adverse consequences.” Id., 77 Cal.Rptr.2d 107, 959 P.2d at 289. Under this definition, a notification letter from the C-EPA does not fit the definition of a claim. Id. Indeed failure to respond to this letter results in substantial legal consequences including fines up to $25,000 per day. Id. Thus, by process of elimination, the notification letter must be a suit, or the event that initiates the suit. Id.
Drawing on the reasonable expectations of lay persons, Justice Kennard concluded:
[A] reasonable insured would expect the insurer to pay cleanup costs whether the insured’s obligation for those costs is determined administratively or judicially, and a reasonable insured would also expect the insurer to represent and defend its interest in the forum — whether administrative or judicial-in which its cleanup costs were determined.
Id., 77 Cal.Rptr.2d 107, 959 P.2d at 290. Put another way, most individuals and businesses who have paid premiums to an insurance company in exchange for the insurer to defend them against any suit would not expect to be denied this benefit simply because the environmental law statutes are enforced through and adjudicated by administrative agencies rather than by the judiciary, particularly when the consequences could be as dire as a $25,000 per day fine.
Foster-Gardner continued to be the strict law in California governing the intersection of insurance coverage and administrative proceedings until Ameron International Corp. v. Insurance Co. of the State of Pennsylvania, 50 Cal.4th 1370, 118 Cal.Rptr.3d 95, 242 P.3d 1020 (2010). In Am-eron, a contract dispute case over defective siphons proceeded before the former United States Department of Interior Board of Contract Appeals (IBCA), and the issue arose whether the duty to defend was triggered by quasi-judicial adjudicative proceedings before an administrative body. Id., 118 Cal.Rptr.3d 95, 242 P.3d at 1022. The adjudicative proceeding lasted twenty-two days and involved numerous witnesses and substantial evidence. Id.
The California Supreme Court stated that it “would exalt form over substance to find such a complaint before the IBCA insufficient simply because the IBCA is not a court of law....” Id., 118 Cal.Rptr.3d 95, 242 P.3d at 1029. The Amer-on Court reasoned that the IBCA pleading requirements met the adequate standard for a complaint, namely appropriate notice of each claim. Id.
Justice Kennard concurred in the judgment, but wrote separately, observing that since the Foster-Gardner rule had been announced “no sister state court ha[d] adopted [it].” Id., 118 Cal.Rptr.3d 95, 242 P.3d at 1031. Justice Kennard noted that the court was limiting Foster-Gardner’s reasoning that “ ‘suit’ unambiguously refers only to court proceedings,” by holding that it does not apply to administrative agency adjudicative proceedings. Id. Justice Kennard opined that “[although I would prefer that Foster-Gardner be overruled, the decision here is at least a step in the right direction.” Id.
*802Since Ameron was a contract dispute case, the question remains, how the California Supreme Court would adjudicate an environmental law case such as the one with which we are now presented. Ann E. Carlson, the Shirley Shapiro Professor of Environmental Law at the UCLA School of Law, observed in a recent article that “20 years ago, California was an environmental leader. It still is.” Regulatory Capacity and State Environmental Leadership: California’s Climate Policy, 24 Fordham Envtl. L.Rev. 63, 63(2012-2013).
Probably one of California’s most impressive examples of its leadership in the environmental regulatory arena is AB 32, the California Global Warming Solutions Act of 2002. Id. at 68. AB 32’s goal was quite lofty-to cut California’s emissions by twenty percent to achieve 1990 levels with no adjustment for population or economic growth. Id. at 68-69. California’s goal is to achieve these levels by 2020. Id.
To attain AB 32’s objective, California implemented a renewable electricity standard, a low carbon fuel standard, regional transportation targets for local governments, certain vehicle efficiency measures, power requirements for “ocean-going vehicles,” a solar roofs program, energy efficiency measures for homes, businesses, and industries, and a cap-and-trade program. Id. at 69-70.
Since AB 32’s adoption, California has met its goal of adopting mandatory reporting emissions. Id. at 76. The EPA, by contrast, chronically misses deadlines. Id. Perhaps most impressive, California maintained the necessary staffing to continue implementing AB 32 through the recent recession. Id. at 80. Based on statutory authorization, fees are imposed on the 300 largest greenhouse gas emitters. Id. These fees fund all of the program’s administrative needs. Id. AB 32 is just one shining example of California’s environmental law successes.
Returning to the earlier question of what would California’s Supreme Court do if presented with the controversy with which this Court is now presented, I cannot turn a blind eye to the fact that California is indeed a leader in environmental law. This fact coupled with Justice Chin’s recent limiting of the Foster-Gardner Rule and Justice Kennard’s firm insistence that it should be overruled entirely certainly show a weakening of a rule that never received much support from either the California Supreme Court or the country at large from its inception.
But most of all, basic common sense informs me that the Foster-Gardner Rule does not further the objectives of California law. Indeed it impedes them. By holding that a remediation order from the EPA or C-EPA is insufficient to trigger the protections of CGL policies, the California Supreme Court is discouraging the environmental cleanup of its state, which from the discussion above, is clearly something that its citizens hold in high regard. “And there comes a point where [the courts] should not be ignorant as judges of what [they] know as men.” Watts v. Indiana, 338 U.S. 49, 52, 69 S.Ct. 1347, 93 L.Ed. 1801 (1949). Accordingly, for all these reasons, I believe that if the California Supreme Court was presented with this case at this time, it would no longer permit ill-advised precedent from giving its environmental law the full and complete effect it was intended to have. Therefore, I respectfully dissent.

. The Carpenter-Presley-Tanner Hazardous Substance Account Act, Cal. Health & Safety Code §§ 25300 et seq.