Court Opinion

ID: 2728693
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:35:20.145546+00
Date Added: 2024-06-11T15:45:22.238595
License: Public Domain

FILED
                                                   Dec 06 2012, 8:52 am

FOR PUBLICATION                                           CLERK
                                                        of the supreme court,
                                                        court of appeals and
                                                               tax court

ATTORNEYS FOR APPELLANTS:                  ATTORNEYS FOR APPELLEE
                                           CONTINENTAL CASUALTY CO.:
GEORGE M. PLEWS
DONNA C. MARRON                            MARY K. REEDER
KAREN B. SCHEIDLER                         Riley Bennett & Egloff, LLP
JOSH S. TATUM                              Indianapolis, Indiana
Plews Shadley Racher & Braun LLP
Indianapolis, Indiana                      STEVEN M. CRANE, Pro Hac Vice
                                           BARBARA S. HODOUS, Pro Hac Vice
                                           Berkes Crane Robinson and Seal LLP
                                           Los Angeles, California

                             IN THE
                   COURT OF APPEALS OF INDIANA

THOMSON, INC. n/k/a TECHNICOLOR            )
USA, INC., TECHNICOLOR, INC., and          )
TECHNICOLOR LIMITED,                       )
                                           )
      Appellants/Plaintiffs,               )
                                           )
             vs.                           )     No. 49A05-1201-PL-24
                                           )
CONTINENTAL CASUALTY CO.;                  )
TRAVELERS CASUALTY & SURETY CO. &          )
TRAVELERS PROPERTY CASUALTY                )
CO. OF AM.; ACE AM. INS. CO. &             )
CENTURY INDEMNITY CO., INDEMNITY           )
INS. CO. OF N. AM., INS. CO. OF N. AM.,    )
& CIGNA INS. CO.; XL INS. AM., INC.;       )
and NORTHERN ASSURANCE CO. OF AM.;         )
                                           )
      Appellees/Defendants.                )

                   APPEAL FROM THE MARION SUPERIOR COURT
                        The Honorable Michael D. Keele, Judge
                              Cause No. 49D07-0807-PL-30746

                                      December 6, 2012

                             OPINION – FOR PUBLICATION

BRADFORD, Judge

                                     CASE SUMMARY

       Several years ago, Thomson, Inc., acquired the assets of Technicolor, Inc., which

included, among other things, three contaminated former film-processing sites.

Eventually, local environmental authorities directed Thomson to remediate the

contamination at the sites, an expensive and ongoing process for which Thomson seeks

indemnification from Continental, who insured Technicolor from 1969 to 1974.

Thomson argues that the umbrella policy Continental issued to Technicolor covers losses

resulting from orders from administrative agencies, as occurred here. Continental argues

that its liability is limited to losses resulting from courtroom litigation.

       After both parties moved for summary judgment on the question of whether

coverage exists, the trial court ruled in Continental’s favor.            Appellants/Plaintiffs

Thomson Inc. n/k/a Technicolor USA, Inc., Technicolor, Inc., and Technicolor, Ltd.

(collectively, “Thomson”) now appeal from the trial court’s grant of summary judgment

in favor or Appellee/Defendant Continental Casualty Co. Finding that under California

law, damages under the umbrella policy are limited to those as a result of courtroom

litigation rather than administrative proceedings, we affirm.

                        FACTS AND PROCEDURAL HISTORY

                                       A. Background

                                               2
       Beginning in 1924, Consolidated Film Industries (“CFI”) operated a film-

processing facility at 959 Seward Street in Hollywood, California. In February of 2000,

Technicolor, Inc., of Hollywood, California, purchased CFI. In 2002, operations ceased

at the Hollywood facility, and all nine buildings at the facility were demolished in 2005.

Beginning in 1936, Technicolor Limited, a wholly-owned English subsidiary of

Technicolor, Inc., operated a film-processing facility on Bath Road, West Drayton,

United Kingdom.      Beginning in 1964, Technicolor, Inc., operated a film-processing

facility at 4050 Lankershim Boulevard in North Hollywood, California. In February of

2001, Thomson, Inc., acquired Technicolor, Inc., and Technicolor Limited, consequently

also acquiring the three film-processing facilities.

       Testing has revealed chlorinated solvent contamination at the Hollywood, North

Hollywood, and West Drayton facilities, with the addition of diesel fuel contamination at

the North Hollywood site. In 2009, Thomson notified Continental that it had been

required by local authorities to clean up the three sites. As of November 9, 2011,

remediation had cost approximately $4,800,000 for the Hollywood site, over $1,000,000

for the West Drayton site, and approximately $730,000 for the North Hollywood site,

although none had been completely cleaned up.

                                 B. The Umbrella Policy

       From 1969 to 1974, Continental issued three primary liability insurance policies to

Technicolor, Inc. From August 15, 1969, to January 1, 1973, Continental also issued one

umbrella policy, designated RDU-806-03-36 (“the Umbrella Policy”), to Technicolor,

Inc. Coverage B of the Umbrella Policy provides, in relevant part, that

                                              3
      The company will indemnify the insured with respect to any occurrence not
      covered by underlying insurance, or with respect to damages not covered
      by underlying insurance but which results from an occurrence covered by
      underlying insurance, for ultimate net loss in excess of the insured’s
      retained limit which the insured shall become obligated to pay as damages
      by reason of liability imposed upon the insured by law or assumed by the
      insured under any contract because of
                                   personal injury
                                   property damage, or
                                   advertising injury
      to which this coverage applies, caused by an occurrence. The company,
      with respect to an occurrence not covered in whole or in part by underlying
      insurance or to which there is no other insurance in any way applicable,
      shall have the right and duty to defend any suit against the insured seeking
      damages on account of such personal injury, property damage or
      advertising injury, even if any of the allegations of the suit are groundless,
      false or fraudulent, and may make such investigation and settlement of any
      claim or suit as it deems expedient, but the company shall not be obligated
      to pay any claim or judgment or to defend any suit after the applicable limit
      of the company’s liability has been exhausted.
      ….
      “ultimate net loss” means the sums paid as damages in settlement of a
      claim or in satisfaction of a judgment for which the insured is legally liable
      after making deductions for all other recoveries … and also includes
      investigation, adjustment, appraisal, appeal and defense costs paid or
      incurred by the insured with respect to damages covered hereunder.

Appellant’s App. pp. 70, 72.

                                C. Procedural History

      On July 17, 2008, Thomson filed suit in Marion County Superior Court, seeking

coverage from various insurance companies for remediation of the Hollywood, North

Hollywood, and West Drayton sites. Continental was added to the suit on September 28,

2009. On March 30, 2011, Thomson moved for partial summary judgment against

Continental, seeking a declaration of coverage for the remediation sites under Coverage

B of the Umbrella Policy. On August 1, 2011, Continental cross-moved for summary

                                            4
judgment against Thomson, contending, inter alia, that under California law the

Umbrella Policy did not cover costs and expenses Thomson incurred “to respond to

administrative directives to remedy environmental contamination[.]” Appellant’s App. p.

525. On December 23, 2011, the trial court granted Continental’s summary judgment

motion and denied Thomson’s as to all three remediation sites.

                            DISCUSSION AND DECISION

                     Whether the Trial Court Erred in Granting
                     Continental’s Summary Judgment Motion

       When reviewing the grant or denial of a summary judgment motion, we apply the

same standard as the trial court. Merchs. Nat’l Bank v. Simrell’s Sports Bar & Grill, Inc.,

741 N.E.2d 383, 386 (Ind. Ct. App. 2000). Summary judgment is appropriate only where

the evidence shows that there is no genuine issue of material fact and the moving party is

entitled to a judgment as a matter of law. Id.; Ind. Trial Rule 56(C). All facts and

reasonable inferences drawn from those facts are construed in favor of the nonmoving

party. Id. To prevail on a motion for summary judgment, a party must demonstrate that

the undisputed material facts negate at least one element of the other party’s claim. Id.

Once the moving party has met this burden with a prima facie showing, the burden shifts

to the nonmoving party to establish that a genuine issue does in fact exist. Id. The party

appealing the summary judgment bears the burden of persuading us that the trial court

erred. Id.

       Both parties agree that California insurance law governs the merits of this appeal

and that the remediation of the three sites at issue is being done pursuant to directives

                                            5
from local environmental agencies.        Moreover, Thomson concedes that there is no

coverage under the primary liability policies Technicolor, Inc., had with Continental from

1969 to 1974. Thomson argues, however, that coverage exists under the Umbrella

Policy.   Specifically, Thomson contends that the language of Coverage B and the

Umbrella Policy’s definition of “ultimate net loss” provide coverage. This argument

requires us to evaluate the relevant language of the Umbrella Policy.

       Under California law,

               “While insurance contracts have special features, they are still
       contracts to which the ordinary rules of contractual interpretation apply.”
       “The fundamental goal of contractual interpretation is to give effect to the
       mutual intention of the parties.” “Such intent is to be inferred, if possible,
       solely from the written provisions of the contract.” “If contractual language
       is clear and explicit, it governs.”
               “A policy provision will be considered ambiguous when it is capable
       of two or more constructions, both of which are reasonable.” The fact that
       a term is not defined in the policies does not make it ambiguous. Nor does
       “[d]isagreement concerning the meaning of a phrase,” or “‘the fact that a
       word or phrase isolated from its context is susceptible of more than one
       meaning.’” “‘[L]anguage in a contract must be construed in the context of
       that instrument as a whole, and in the circumstances of that case, and
       cannot be found to be ambiguous in the abstract.’” “If an asserted
       ambiguity is not eliminated by the language and context of the policy,
       courts then invoke the principle that ambiguities are generally construed
       against the party who caused the uncertainty to exist (i.e., the insurer) in
       order to protect the insured’s reasonable expectation of coverage.”

Foster-Gardner, Inc. v. Nat’l Union Fire Ins. Co., 959 P.2d 265, 272-73 (Cal. 1998)

(citations omitted).

       Under California insurance law, as it relates to commercial general liability

policies, “damages” are limited to losses resulting from a “suit,” which is understood to

refer, in general, to courtroom litigation.

                                              6
         [T]he duty to defend a “suit” seeking “damages” under pre-1986 CGL
         policies is restricted to civil actions prosecuted in a court, initiated by the
         filing of a complaint, and does not include claims, which can denote
         proceedings conducted by administrative agencies under environmental
         statutes. Likewise, the duty to indemnify for “‘all sums that the insured
         becomes legally obligated to pay as damages’” ([Certain Underwriters at
         Lloyd’s of London v. Superior Court, 16 P.3d 94, 105 (Cal. 2001)]) in the
         same standard primary policies is limited to money ordered by a court, and
         does not include expenses such as may be incurred in responding to
         administrative agency orders.

CDM Investors v. Travelers Cas. & Sur. Co., 139 Cal. Rptr. 3d 669, 674 (Cal. Ct. App.

2006).

         Consequently, unless the Umbrella Policy provides coverage for proceedings

beyond “suits” or for indemnity for losses beyond “damages,” there is no coverage under

California law.     Thomson argues that the policy’s definition of “ultimate net loss”

expands the general definition of “damages,” while Continental argues that the California

Court of Appeal has already addressed and rejected this precise argument in CDM

Investors. We agree with Continental.

         In CDM Investors, the court evaluated the following language from the coverage

clause, which provided indemnity for “‘the ultimate net loss in excess of the applicable

underlying limit which the insured shall become legally obligated to pay as damages.’”

43 Cal. Rptr. 3d at 676. The CDM Investors court concluded that coverage did not

extend beyond “damages,” observing that “[t]he coverage clause imposing the duty to

indemnify is clear in its limitation to court-rendered damages. It states: ‘The company

will pay … the ultimate net loss … which the insured shall become legally obligated to

pay … as damages.’” Id. at 677 (emphasis in CDM Investors).

                                               7
        The coverage language in the Umbrella Policy is legally indistinguishable from

the above, and so we reach the same conclusion as did the CDM Investors court. The

coverage clause in the Umbrella Policy provides that “[t]he company will indemnify the

insured … for ultimate net loss … which the insured shall become obligated to pay as

damages[.]” Appellant’s App. p. 70 (emphasis added). Just as clearly as it did in the

policy at issue in CDM Investors, the coverage clause in the Umbrella Policy limits

“ultimate net loss” to “damages.”

        Indeed, the Umbrella Policy’s language points even more strongly to a lack of

coverage than did the policy language in CDM Investors. Specifically, the Umbrella

Policy’s definition of “ultimate net loss” is also explicitly limited to “damages,” whereas

the definition of the same term in CDM Investors was not:1

        “ultimate net loss” means the sums paid as damages in settlement of a
        claim or in satisfaction of a judgment for which the insured is legally liable
        after making deductions for all other recoveries … and also includes
        investigation, adjustment, appraisal, appeal and defense costs paid or
        incurred by the insured with respect to damages covered hereunder.

Appellant’s App. p. 72 (emphases added). Following the California Court of Appeal’s

decision in CDM Investors, we conclude that the Umbrella Policy limits Continental’s

indemnity obligations to “damages.” Consequently, Continental has no obligation to

        1
          “The policy later defines ‘ultimate net loss’ as ‘the sum actually paid or payable in cash in the
settlement or satisfaction of any claim or suit for which the insured is liable either by adjudication or
settlement with the written consent of the company.’” CDM Investors, 43 Cal. Rptr. 3d at 676.

                                                    8
indemnify Thomson for the remediations of the Hollywood, North Hollywood, and West

Drayton sites as a matter of law.2

        The judgment of the trial court is affirmed.3

VAIDIK, J., and CRONE, J., concur.

        2
          Thomson urges us to apply the holding of the California Supreme Court in Powerine Oil Co. v.
Superior Court, 118 P.3d 589 (Cal. 2005) (Powerine II), in which coverage was found despite the lack of
courtroom litigation. The coverage clauses at issue in Powerine II, however, specifically included
coverage for “damages, direct or consequential and expenses ....[,]” which led the Court to conclude that
“the addition of the term ‘expenses’ in the central insuring clause of these excess/umbrella policies
extends coverage beyond the limitation imposed were the term ‘damages’ used alone, and thereby
enlarges the scope of coverage beyond ‘money ordered by a court.’” Id. at 602 (emphasis in Powerine
II). As previously mentioned, the Umbrella Policy’s coverage is expressly limited to “damages.”
Thomson’s reliance on Powerine II is unavailing.
        3
           Because we conclude that the language of the Umbrella Policy precludes coverage, we need not
address Continental’s arguments that there is no coverage for additional reasons specific to each of the
three sites.

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