BECHTEL PETROLEUM OPERATIONS, INC., Plaintiff and Appellant, v. CONTINENTAL INSURANCE COMPANY et al., Defendants and Respondents.
This is an appeal from the trial court's grant of summary judgment to several insurers. The court concluded the insurers had no duty to defend an insured, Bechtel Petroleum Operations, Inc., against lawsuits brought by employees of Bechtel's subcontractors. The lawsuits sought damages for injuries caused by years of exposure to toxic substances at a work site, and included claims Bechtel fraudulently concealed the existence, nature or extent of the toxic substances by failing to inform its subcontractors their workers would be exposed to conditions that were unsanitary, hazardous or dangerous to their health. The court found no potential for coverage under the general liability policies at issue, based upon absolute pollution exclusions in the policies, and refused to consider extrinsic evidence submitted to the insurers long after they had rejected Bechtel's tender of defense. The court also concluded there was no duty to defend based on the additional insured endorsements and employee exclusions in two of the policies.
After Bechtel filed notices of appeal and its opening brief, Royal Insurance Company of America filed a motion to dismiss the appeal. Royal argues, based on post-judgment statements by Bechtel's counsel, that Bechtel's defense in the underlying lawsuits was paid for by its own insurer and Bechtel therefore is not an aggrieved party and has no standing to appeal.
We conclude that:
(1) Royal's motion to dismiss is without merit.
(2) The insurers had no duty to defend Bechtel, because the absolute pollution exclusions in the insurance policies operate to exclude coverage for bodily injuries allegedly caused by toxic substances, which are “pollutants” within the meaning of the policies.
(3) Bechtel's submission of extrinsic evidence, purporting to show underlying plaintiffs sought recovery for injuries from non-toxic causes, does not raise a possibility of coverage under the policies.
(4) Bechtel's argument that the pollution exclusion does not apply because the work site was not “occupied” by the named insured, as required under the terms of several of the exclusions, is without merit.
The trial court's grant of summary judgment to the insurers is therefore affirmed.1
FACTUAL AND PROCEDURAL BACKGROUND
Appellant Bechtel Petroleum Operations, Inc. was a general contractor engaged in the production, storage and distribution of oil and gas at a 78 square mile site known as the Naval Petroleum Reserve in Kern County, California. Bechtel hired a number of subcontractors, including Bob Morton Construction Company, Gilliam & Sons, Inc. and Westside Oilfield Construction, Inc., to perform soil moving, drilling, excavation and other work at the Reserve. In 1995 and 1996, numerous plaintiffs who had worked at the Reserve as employees of the subcontractors filed six different lawsuits against Bechtel.2 The lawsuits alleged the employees suffered bodily injuries as a result of years of exposure to toxic substances at the Reserve. The complaints included allegations that Bechtel allowed the discharge of toxic substances “into and/or onto the air, land, soils and general environment of” the Reserve, and that chemicals and heavy metals, known to cause cancer and reproductive toxicity, were used, produced and found at the Reserve, including hazardous concentrations of lead and arsenic.3 The complaints asserted causes of action for negligence, fraud by concealment, and violation of Health and Safety Code section 25249.6.4
Bechtel tendered the complaints to its subcontractors' insurance carriers, whose policies named Bechtel as an additional insured. The insurers rejected the tender, denying they owed any duty to defend Bechtel in the underlying actions, principally due to absolute pollution exclusions in their policies of insurance.
In September 1997, Bechtel filed this lawsuit against Steadfast Insurance Company, Royal Insurance Company of America, Continental Insurance Company, and The Home Insurance Company.5 Bechtel sought a declaration the insurers had a duty to defend Bechtel in the underlying lawsuits and Bechtel was entitled to reimbursement of defense costs, and asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.
Steadfast and Continental brought motions for summary judgment, asserting the absolute pollution exclusion clauses in their insurance contracts barred coverage for the underlying claims. Royal joined in Continental's motion.6 The policy exclusions differed in some respects, but generally excluded from coverage any liability for bodily injury arising out of the discharge, dispersal, release or escape of “pollutants” from any premises occupied by the insured. “Pollutants” were generally defined as any solid, liquid, gaseous or thermal irritant or contaminant.7
Bechtel's response to the Steadfast and Continental summary judgment motions argued that (a) pollution exclusions do not apply to non-environmental bodily injury claims, and (b) the underlying lawsuits alleged injuries caused by acts or omissions other than exposure to toxic substances, thus raising a potential for coverage. Bechtel also asserted that facts extrinsic to the underlying complaints revealed a possibility of coverage. These extrinsic facts consisted of verified questionnaires from underlying plaintiffs, their responses to Bechtel's contention interrogatories, an expert declaration, and a declaration from the attorney for the underlying plaintiffs. The extrinsic facts, provided to the insurers a year after this suit was filed or only after the insurers moved for summary judgment, consisted of assertions plaintiffs were injured by toxic exposure and harmful or unsanitary working conditions. Bechtel argued these assertions were strong extrinsic evidence the underlying plaintiffs were seeking recovery from Bechtel for injuries from causes unrelated to exposure to pollutants, and thus were potentially covered by the insurers' policies.
The trial court refused to consider the extrinsic evidence offered by Bechtel, concluding the insurers were entitled to make their decisions on potential coverage based on information available to them at the time of tender, citing Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1117, 44 Cal.Rptr.2d 272 [once an insurer determines, on the basis of the complaint and facts known to it at the time, that no potential exists for coverage, there is no continuing duty to investigate or monitor the lawsuit “to see if the third party later made some new claim, not found in the original law suit”].8
The court concluded that all the theories of liability alleged in the underlying complaints arose out of exposure to toxic chemicals and pollutants and were therefore barred by the pollution exclusions. A minute order granting Steadfast's motion for summary adjudication was entered on August 26, 1999, and the Continental and Royal motions for summary judgment were granted by minute order entered on November 4, 1999.9
Judgments were entered in favor of the insurers, and Bechtel filed a timely notice of appeal.10 After Bechtel's opening brief was filed, Royal moved to dismiss the appeal, to take additional evidence, and to request judicial notice, and Continental joined in Royal's motions. Royal and Continental claimed, based on recent statements by counsel for Bechtel in a related case, that Bechtel's defense was provided by its own insurer and therefore Bechtel had no standing to bring this suit. Rulings on those motions were deferred.11
I. Royal's motion to dismiss Bechtel's appeal on the ground Bechtel's defense was provided by another insurer, depriving Bechtel of standing to pursue its appeal, is without merit.
After Bechtel's opening brief was filed, Royal filed a motion to dismiss the appeal. Royal argues that Bechtel has no standing to pursue its appeal-and had no standing to sue in the first place-because Bechtel was fully defended in the underlying actions by its own insurer, Industrial Indemnity Company. Royal states Bechtel's lawyer, in conversations and opposition papers in connection with a related case, has admitted Bechtel's defense fees were paid by Industrial.12 Royal concludes that Bechtel therefore has no legally cognizable claim against Royal or any other insurer, citing as authority Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1295, 77 Cal.Rptr.2d 296 [where several insurers cover the same risk and the insured has recovered the full amount of its loss from one of them, the insured has no further rights against the other insurers, and the liability of the other insurers to the insured likewise ceases].13
We conclude Royal is mistaken. First, while it is undisputed that Industrial Indemnity paid Bechtel's defense fees in the first instance, Royal has not established Bechtel has no liability for those fees. Bechtel's declaration in opposition to Royal's motion to dismiss states that under various agreements with Industrial Indemnity, “Bechtel is obligated to pay substantial defense fees and/or to reimburse Industrial Indemnity for a portion of the defense fees for the defense of the lawsuits tendered to Royal.” The declaration further states Industrial claims entitlement to 100 percent reimbursement of the fees it paid for Bechtel's defense, and Bechtel believes a final accounting will show Bechtel has already paid Industrial all or a substantial portion of the fees “by virtue of having made over payments [to Industrial] on other matters.”
Second, nothing in Fireman's Fund Ins. Co. v. Maryland Casualty Co., supra, suggests that initial payment of an insured's defense fees by an insurer who disclaims ultimate liability for payment deprives the insured of standing to seek those fees from other insurers on the risk. Fireman's Fund correctly points out that, where several insurance policies cover the same risk, an insured who “has recovered the full amount of its loss” from one of the carriers has no further rights against the others. (65 Cal.App.4th at p. 1295, 77 Cal.Rptr.2d 296.) However, an insured has not “recovered the full amount of its loss” if it is obligated to reimburse the insurer which initially paid the fees. Indeed, Fireman's Fund notes that, where several insurance policies cover the same risk, “the fact the insured is only entitled to recover the actual amount of its loss does not bar it from demanding full coverage from each insurer, as long as its demand is made in good faith.” (Id. at p. 1295 n. 5, 77 Cal.Rptr.2d 296.)
In sum, the evidence in connection with Royal's motion to dismiss demonstrates, at best, a contention by Royal that Bechtel has not yet paid any defense fees. Bechtel disputes that contention. Moreover, the very opposition papers cited by Royal as Bechtel's “admission” that Industrial Indemnity paid its defense fees also specifically states that Bechtel is responsible for those fees and must reimburse Industrial Indemnity.14 Under these circumstances, the principle cited in Fireman's Fund does not apply to deprive Bechtel of standing to seek defense fees from its other insurers.
II. The absolute pollution exclusions in the policies of insurance operate to exclude coverage for bodily injuries allegedly caused by toxic substances, which are “pollutants” within the meaning of the policies.
The substance of Bechtel's argument on appeal is that the absolute pollution exclusions at issue should be interpreted to exclude coverage only for injuries caused by “traditional environmental pollution,” not for workplace or industrial injuries “that do not relate to environmental contamination.” The historical purpose of the pollution exclusion, Bechtel says, limits its scope to environmental damage. Moreover, Bechtel contends, the exclusions are ambiguous as applied to the facts of this case.
Similar questions have been extensively litigated in other jurisdictions, with conflicting results.15 In this case, neither of Bechtel's arguments is persuasive. On the contrary, the exclusion clauses are clear and unambiguous as applied to the underlying claims, which allege a form of “traditional” environmental contamination.
First, we reject Bechtel's argument that the historical purpose of the pollution exclusion clause limits its scope to claims of environmental damage, and that “personal injury claims” or “workplace injuries” are therefore not within the scope of the exclusion. California courts are not at liberty to rewrite the plain terms of an insurance contract based on our view of a provision's historical purpose.16 The principles governing interpretation of insurance contracts in California are well established: “If contractual language is clear and explicit, it governs.” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545.) Thus, “if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning.” (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822, 274 Cal.Rptr. 820, 799 P.2d 1253.) Language in a contract is required to 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.’ ” (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265, 10 Cal.Rptr.2d 538, 833 P.2d 545, quoting Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 916 n. 7, 226 Cal.Rptr. 558, 718 P.2d 920 [italics added in Bank of the West ].) Accordingly, if there is no ambiguity in the contract language, we do not consider the “drafting history” of the clause. (See ACL Technologies v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at pp. 1790-1791, 22 Cal.Rptr.2d 206 [“reliance on extrinsic drafting history contradicts the basic rule that words in insurance policies should be interpreted as laypersons would interpret them”].) 17
The meaning a layperson would ascribe to the pollution exclusions at issue is not ambiguous. The exclusions specifically provide the insurance does not apply to bodily injury “arising out of the actual, alleged or threatened emission, discharge, dispersal, seepage, migration, release or escape of ‘pollutants'. ․” The term “pollutants” is defined broadly to include “any noise, solid, semi-solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, mists, acids, alkalis, chemicals, biological and etiologic agents or materials, electromagnetic or ionizing radiation and energy, genetically engineered materials, teratogenic, carcinogenic and mutagenic materials, ‘waste’ and any irritant or contaminant.” 18
In this case, the bodily injuries alleged plainly arose out of the “emission, discharge, dispersal, seepage, migration, release or escape” of toxic substances. The underlying complaints specifically assert bodily injury from Bechtel's “purchase, delivery, manufacture, transportation, distribution, use, storage, release, spillage, discharge, loading, unloading, generation, disposal and dumping of harmful, dangerous, unsafe toxic substances into and/or onto the air, land, soils and general environment of” the Reserve, and allege Bechtel “caused, allowed and failed to prevent the contamination of the air, land, soils and general environment of [the Reserve] with said toxic substances.” Indeed, it is inconceivable how the underlying plaintiffs could be injured by exposure to toxic substances as alleged unless there were “emission, discharge, dispersal, seepage, migration, release or escape” of such a substance, as described in the exclusion. (See East Quincy Services Dist. v. Continental Ins. Co. (E.D.Cal.1994) 864 F.Supp. 976, 980 [similar terms of pollution exclusion covered “every conceivable manner in which a person could experience exposure to a pollutant. The very assertion of contact by the [underlying plaintiffs] requires emission, release, dispersal, or escape”].) In short, we perceive no ambiguity in the pollution exclusions as applied to the facts of this case.19
Other courts have concluded, as Bechtel points out, that the pollution exclusion does not bar coverage when events do not involve “typical forms of environmental pollution.” (See Nationwide Mut. Ins. Co. v. Richardson, supra, 270 F.3d 948, 953-954 [categorizing cases, and certifying to the District of Columbia Court of Appeals the question whether the pollution exclusion clause applies to injuries arising from carbon monoxide poisoning].) Some courts have found, for example, an ordinarily intelligent insured could reasonably interpret the pollution exclusion clause as applying only to environmental pollution, and would not understand his policy did not cover injuries arising from the use of products associated with his business for the purpose for which the products were intended. (Nautilus Ins. Co. v. Jabar (1st Cir.1999) 188 F.3d 27, 30 [injuries caused by fumes from products used by the insured to repair roof at underlying plaintiff's place of employment; if clause were read literally, its scope would be “virtually boundless”; such an interpretation would render policy virtually meaningless to the insured].) Other courts have found that the historical purpose shielding insurers from the costs of environmental cleanups prevents the clause from barring coverage for “everyday industrial and residential accidents.” (See Nationwide Mut. Ins. Co. v. Richardson, supra, 270 F.3d at p. 955, citing Stoney Run Co. v. Prudential-LMI Commercial Ins. Co. (2d Cir.1995) 47 F.3d 34, 36-38 [clause ambiguous in case involving residential carbon monoxide poisoning].) 20 Still other courts have found a strictly literal reading of the provision could yield absurd results, and have refused to apply the clause to “injuries resulting from everyday activities gone slightly, but not surprisingly, awry.” The latter view is explained in a frequently quoted federal case from the Seventh Circuit:
“The terms ‘irritant’ and ‘contaminant,’ when viewed in isolation, are virtually boundless, for ‘there is virtually no substance or chemical in existence that would not irritate or damage some person or property.’ [Citation.] Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results. To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries suffered by one who slips and falls on the spilled contents of a bottle of Drano, and for bodily injury caused by an allergic reaction to chlorine in a public pool. Although Drano and chlorine are both irritants or contaminants that cause, under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as pollution.” (Pipefitters Welfare Educ. Fund v. Westchester Fire (7th Cir.1992) 976 F.2d 1037, 1043, 1044.) 21
None of these theories of ambiguity, however, convinces us the pollution exclusions are ambiguous as applied in this case. The injuries alleged are not the result of a routine commercial hazard, “everyday industrial and residential accidents,” or “everyday activities gone slightly, but not surprisingly, awry.” The underlying plaintiffs allege injury and death from exposure to toxic substances at outdoor worksites over extended periods of time-claims akin to “traditional environmental contamination.” Indeed, plaintiffs specifically allege Bechtel's “contamination of the air, land, soils and general environment” of the Reserve with toxic substances.
Finally, it is an accepted principle of California insurance law that contract language is to be construed in the circumstances of the particular case, and cannot be found ambiguous in the abstract. (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265, 10 Cal.Rptr.2d 538, 833 P.2d 545.) In short, we need not be concerned with contemplating possible instances in which application of the clause would be absurd. This is not such a case.22 We therefore align ourselves with the court in MacKinnon v. Truck Ins. Exchange, supra, 95 Cal.App.4th 235 [115 Cal.Rptr.2d 369], and with other jurisdictions which have found absolute pollution exclusions to bar coverage in a wide variety of circumstances. (See, e.g., Technical Coating v. U.S. Fidelity & Guaranty (11th Cir.1998) 157 F.3d 843, 846 [absolute pollution exclusion unambiguously excluded coverage for bodily injuries sustained by breathing vapors emitted from insured's roofing products, regardless of whether the insured used the products properly or negligently, applying Florida law]; Certain Underwriters at Lloyd's v. C.A. Turner Const. (5th Cir.1997) 112 F.3d 184, 188 [pollution exclusion unambiguously applies to bar coverage for workplace injuries to a welder caused by accidental release of cloud of phenol gas; clause does not limit its application to only those discharges causing environmental harm; applying Texas law]; Nat. Elect. Mfrs. v. Gulf Underwriters Ins. (4th Cir.1998) 162 F.3d 821, 825-826 [exclusion as written is not limited to atmospheric or environmental pollution only; no duty to defend class action by welders for neurological injuries from exposure to manganese fumes while using welding products; applying District of Columbia law]; Madison Const. v. Harleysville Mut. Ins. (1999) 557 Pa. 595, 607-608, 610 [735 A.2d 100, 107] [pollution exclusion clause relieves insurer of duty to defend insured in an action seeking damages for injuries when worker was overcome by fumes from a concrete curing agent and fell into an excavation site; “ambiguity (or the lack thereof) is to be determined by reference to a particular set of facts”; definition of pollutant including “any ․ irritant” clearly and unambiguously applies to product which contained toxic chemicals, a suspected carcinogen and hazardous air pollutants; exclusion encompassed discharges that do not leave the work site]; Park-Ohio Industries, Inc. v. Home Indem. Co. (6th Cir.1992) 975 F.2d 1215, 1217-1218 [pollution exclusion bars coverage of claims by workers for injuries caused by defective furnaces which, in a rubber de-nuding process, released products containing carcinogenic agents into the atmosphere which were breathed or otherwise ingested by the employees; applying Ohio law].)
Accordingly, we conclude the absolute pollution exclusions in the insurers' policies operate to exclude coverage for bodily injuries allegedly caused by exposure to toxic substances at the Reserve, and the insurers therefore had no duty to defend Bechtel against lawsuits asserting damages from such exposure.
III. Neither the underlying complaints nor the additional evidence presented to the insurers after rejection of Bechtel's tender of defense raised any possibility of coverage under the policies.
Bechtel argues that the underlying complaints, and particularly the “extrinsic evidence” presented to the insurers after the initial rejection of Bechtel's tender of defense, sufficiently allege plaintiffs' injuries may have been due to non-toxic causes, raising a potential for coverage under the policies. Again, we disagree.
The principles governing determination of an insurer's duty to defend are well established, and were reiterated in Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081, 17 Cal.Rptr.2d 210, 846 P.2d 792:
“[A] liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. [Citation.] As we said in Gray [v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 275, 54 Cal.Rptr. 104, 419 P.2d 168], ‘the carrier must defend a suit which potentially seeks damages within the coverage of the policy.’ [Citation.] Implicit in this rule is the principle that the duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages ultimately are awarded. [Citations.] [¶] The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy. [Citation.]”
Accordingly, we examine first the allegations of the complaint, and then any facts known to the insurers extrinsic to the complaint, to determine whether there is any possibility of coverage under the policy.
The underlying complaints
Bechtel argues that the allegations in the complaints are sufficiently broad to include the possibility that “any substances or conditions which may have caused the plaintiffs injuries were not toxic substances.” Bechtel says the complaints allege the plaintiffs were exposed to “working conditions that were unsanitary, hazardous and dangerous to their health and that there was a failure to provide protective equipment.” These claims, Bechtel argues, trigger a potential for coverage “which could not be absolutely barred by pollution exclusions ․”
We conclude it is not possible to read the underlying complaints to allege any claim of bodily injuries not arising out of exposure to toxic substances.23 Every paragraph of the complaints-except those describing the parties, incorporating other allegations, or referring to the “aforesaid wrongful acts”-attributes plaintiffs' injuries to exposure to toxic substances.24 The complaints repeatedly allege that as a direct legal result of Bechtel's wrongful acts, plaintiffs were “exposed on virtually a daily basis to said toxic substances in the aforesaid contaminated air, land, soils and general environment” at the Reserve. The allegation plaintiffs were exposed to “working conditions” which were “unsanitary, hazardous or dangerous to their health” is no different; it, too, is inextricably tied to exposure to toxic substances. Indeed, that allegation appears only in the plaintiffs' causes of action for fraudulent concealment. It is asserted as an example of the manner in which Bechtel concealed “the existence, nature and/or extent of said toxic substances,” namely, by giving no information to the subcontractors that would indicate that, “in the course of providing the services called for in their contracts, the workers would be exposed to conditions which were unsanitary, hazardous or dangerous to their health. ․” 25 In short, the complaints allege no harmful working conditions that may reasonably be construed as different or separate from their claims of exposure to toxic substances.
Bechtel also argues the plaintiffs allege they were not provided with protective safety equipment and their injuries were caused by Bechtel's failure to enforce policies and procedures regarding safety. Again, however, these allegations appear only in connection with plaintiffs' claims that Bechtel fraudulently concealed the existence, nature and extent of the toxic substances to which plaintiffs were exposed. Moreover, the assertion of varying theories of liability does not operate to change the fact that the injuries asserted “aris[e] out of” an excluded cause: the discharge, dispersal, release or escape of toxic substances. (See Century Transit Systems, Inc. v. American Empire Surplus Lines Ins. Co. (1996) 42 Cal.App.4th 121, 127-128, 49 Cal.Rptr.2d 567 [policy exclusion for any claim “based on assault and battery” precludes coverage for alleged negligent hiring, supervision and retention of cab driver who committed the assault; exclusion bars coverage irrespective of the legal theory asserted against the insured].) 26 Accordingly, the insurers' initial refusal to defend was entirely proper because the underlying lawsuits did not even potentially seek damages for anything other than injuries arising from exposure to toxic substances.
As noted above, the allegations of the complaints are not conclusive. “Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy.” (Horace Mann Ins. Co. v. Barbara B., supra, 4 Cal.4th at p. 1081, 17 Cal.Rptr.2d 210, 846 P.2d 792.) Moreover, we look “not to whether noncovered acts predominate in the third party's action, but rather to whether there is any potential for liability under the policy.” (Id. at p. 1084, 17 Cal.Rptr.2d 210, 846 P.2d 792.)
Bechtel argues that after it filed this lawsuit on September 2, 1997, a variety of extrinsic evidence came to light in the underlying lawsuits.27 This evidence made it clear, Bechtel says, that the injuries alleged by the underlying plaintiffs may have been caused by something other than exposure to toxic substances. If that were so, and if that “something” were not an irritant, contaminant or pollutant within the meaning of the pollution exclusions, then the underlying lawsuits potentially sought damages within the coverage of the policy, and the insurers had a duty to defend the suits. The extrinsic facts cited by Bechtel consisted of:
-Verified questionnaires, made available to the insurers in November 1998, completed by the plaintiffs in the underlying actions. One of these, responding to the question how Bechtel caused the death from cancer of plaintiff's decedent, answered that Bechtel “caused, allowed and failed to prevent toxic exposure [and] harmful working conditions at [the Reserve].”
-An expert declaration filed in connection with the underlying Sweaney lawsuit. The expert opined that an array of symptoms described to her, one of which was “[t]hr[owing] up dust and dirt,” can be indicative of physical deficits resulting from exposure to chemical substances allegedly present at the Reserve. The expert concluded that decedent Sweaney's health was “seriously injured by exposure to chemicals and heat in his workplace,” and that “but for that exposure, he most likely would have lived” longer than he did.28
-Responses from the underlying plaintiffs to contention interrogatories, provided to the insurers in August 1999. These responses contended that Bechtel “caused, allowed and failed to prevent toxic substance exposure and harmful working conditions at [the Reserve].” 29
-The declaration of the lead attorney for the underlying plaintiffs, executed August 24, 1999, and filed with Bechtel's supplemental brief opposing the insurers' summary judgment motions. The attorney stated the underlying plaintiffs were seeking recovery for injuries caused by toxic exposure “and/or for injuries caused by non-toxic causes, such as harmful and/or unsanitary working conditions.”
We conclude the facts extrinsic to the complaints cited by Bechtel add nothing to suggest the underlying plaintiffs were claiming injuries not arising from exposure to toxic substances. Indeed, the extrinsic “facts” are no different in substance from the facts alleged in the complaints. The underlying plaintiffs identified no harmful working condition, except their exposure to toxic substances and Bechtel's failure to provide protective equipment or otherwise prevent that exposure. To the extent, if any, the extrinsic facts suggest plaintiffs' or their decedents' disabilities, illnesses and/or deaths were caused by “unsanitary” working conditions, rather than by toxic substances, we fail to see how such conditions could arise from anything other than discharge or dispersal of waste or other pollutants, irritants or contaminants within the meaning of the pollution exclusions.30
We recognize an insurer owes a duty to defend any claim that would be covered if true, even if the claim is groundless. Thus, if plaintiffs' complaints alleged only that they were injured by unidentified harmful working conditions, the insurers would be required to defend.31 But that is not this case. Plaintiffs plainly alleged their injuries arose from exposure to toxic substances, and identified no other harmful working conditions, except Bechtel's failure to protect them from such exposure. It is well-established that “ ‘the ultimate question is whether the facts alleged do fairly apprise the insurer that plaintiff is suing the insured upon an occurrence which, if his allegations are true, gives rise to liability of insurer to insured under the terms of the policy.’ ” (Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 275 n. 15, 54 Cal.Rptr. 104, 419 P.2d 168, quoting Ritchie v. Anchor Casualty Co. (1955) 135 Cal.App.2d 245, 251, 286 P.2d 1000 [emphasis added in Gray ].) Neither the facts alleged in the complaints, nor the extrinsic facts asserted in the plaintiffs' questionnaires and interrogatory responses, apprise the insurer of any facts which, if true, would give rise to coverage under the policy. As for the expert declaration, its purport is plainly that Sweaney's death was caused by chemical exposure, not, as Bechtel claims, by “heat.”
Finally, we give no credence to the eleventh hour declaration from the attorney for the underlying plaintiffs, stating plaintiffs sought recovery for injuries caused by toxic exposure “and/or for injuries caused by non-toxic causes, such as harmful and/or unsanitary working conditions.” The declaration was executed several years after the underlying complaints were filed, but like the interrogatory answers and questionnaires, fails to allege the nature of any harmful working conditions other than toxic exposure. Moreover, as Gray v. Zurich Ins. Co. stated, albeit in the opposite context, “we should hardly designate the third party as the arbiter of the policy's coverage.” (Gray v. Zurich Ins. Co., supra, 65 Cal.2d at p. 276, 54 Cal.Rptr. 104, 419 P.2d 168 [finding a duty to defend based on nonintentional conduct despite the third party pleading alleging only intentional conduct].) 32 The point applies here too. (See Hurley Construction Co. v. State Farm Fire & Casualty Co. (1992) 10 Cal.App.4th 533, 538-539, 12 Cal.Rptr.2d 629 [a corollary to the rule that a third party is not the arbiter of the policy's coverage is that “the insured may not speculate about unpled third party claims to manufacture coverage”; no duty to defend action charging insured with participation in a conspiracy to engage in fraudulent billing practices under a policy limiting coverage to claims for bodily injury and damage to tangible property].)
The duty to defend is broad, but an insurer is not obligated to defend its insured “where the basis for claiming potential liability under the policy is ․ tenuous and far-fetched.” (Giddings v. Industrial Indemnity Co. (1980) 112 Cal.App.3d 213, 220, 169 Cal.Rptr. 278.) 33 The bottom line is that Bechtel was entitled to a defense only if the third parties' actions potentially sought recovery for bodily injuries not arising from exposure to toxic substances or other pollutants, contaminants or irritants. Contrary to Bechtel's contention, neither the complaints nor the other information made available to the insurers reveals any claim that can reasonably be construed as seeking recovery for bodily injuries arising from any other cause. Accordingly, no duty to defend arose, either at the time Bechtel tendered the complaints or later.
IV. Bechtel's argument that the pollution exclusions in the Royal and Continental policies do not apply because the work sites were not “occupied” by either Bechtel or the subcontractors is without merit.
The pollution exclusions in the Royal and Continental policies contain an occupancy limitation. Some apply, for example, only when the dispersal or release of the pollutant occurs “[a]t or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured. ․” Bechtel argues the trial court erred in finding that Bechtel and/or the subcontractors (the named insureds) “occupied” the Reserve. Bechtel says that occupancy requires possession and control of property, and that neither Bechtel nor the named insureds possessed or controlled the entire 78 square mile Reserve, which is owned by the federal government, and neither loaned nor rented to Bechtel or any of the subcontractors. Bechtel also says the terms “premises,” “site,” “location” and “occupied” are all ambiguous under the circumstances of this case. We disagree.
We are aware of no California cases specifically construing the term “occupied” in a pollution exclusion clause. However, we find no error in the trial court's sensible conclusion that Bechtel and its subcontractors occupied the site “in that they controlled and did business in significant portions of the site for a significant period of time.” 34 Under California law, terms in an insurance policy are read in their ordinary and popular sense. (Bank of the West v. Superior Court, supra, 2 Cal.4th 1254, 1265, 10 Cal.Rptr.2d 538, 833 P.2d 545.) The ordinary dictionary definition of the word “occupy” includes, for example, “to take up (a place or extent in space)” as well as “to take or hold possession or control of ․” (Webster's 9th New Collegiate Dictionary (1989) p. 817; see also The Oxford English Dictionary (2d ed.) [definition includes “[t]o take up, use up, fill (space or time); also in weakened sense, [t]o be situated or stationed in, to be in or at (a place or position)”].)
We have no difficulty concluding that contractors and subcontractors continuously performing operations at various areas of a site over a period of years have “occupied” the “premises, site or location” within the ordinary meaning of the terms in the clause. (See Redevelopment Agency v. Superior Court (1970) 13 Cal.App.3d 561, 569, 91 Cal.Rptr. 886 [noting definitions of the term “occupy” as including “to do business in”].) 35 Bechtel's claim of ambiguity is without merit.
The judgments are affirmed. Respondent insurers are to recover their costs on appeal.
1. Since we conclude no duty to defend existed because of the absolute pollution exclusions, we need not consider the trial court's conclusions that (1) Royal had no duty to defend Bechtel in three of the underlying lawsuits under the terms of the endorsements adding Bechtel as an additional insured, and (2) Royal had no duty to defend three other underlying lawsuits because the plaintiffs in those suits were employees, or spouses of employees, of Royal's named insured (subcontractor Westside Oilfield Construction, Inc.), and the policies exclude coverage for bodily injury to employees of the insured.
2. The six underlying lawsuits are denominated the Trehern, Johnson, Fanska, Sweaney, Kight and Montgomery lawsuits. The Trehern and Sweaney lawsuits were brought by the survivors of William Trehern and Randy Sweaney. The Fanska and Montgomery suits each include numerous plaintiffs, both workers and family members. The Kight suit likewise includes numerous plaintiffs, all of them family members of workers.
3. The allegations of the complaints include the following:-Bechtel “caused, allowed and failed to prevent the purchase, delivery, manufacture, transportation, distribution, use, storage, release, spillage, discharge, loading, unloading, generation, disposal and dumping of harmful, dangerous, unsafe toxic substances into and/or onto the air, land, soils and general environment of” the Reserve, and [¶] “caused, allowed and failed to prevent the contamination of the air, land, soils and general environment of [the Reserve] with said toxic substances.”-Bechtel “failed to timely and properly evaluate, test and/or monitor the land, air, soils and general environment of [the Reserve]; failed to timely and properly adopt and enforce policies, procedures, protocols and/or practices relative to the health and safety of the Plaintiffs and others at [the Reserve]; failed to timely and properly provide and/or communicate to the Plaintiffs and others knowledge, information and/or warnings about the existence, nature and/or extent of said toxic substances or their use at [the Reserve]; actively and purposefully concealed from the Plaintiffs and others the existence, nature and/or extent of said toxic substances at [the Reserve]; purchased, delivered, manufactured, transported, distributed, used, stored, released, spilled, discharged, loaded, unloaded, generated, disposed and dumped said toxic substances into and/or onto the land, air, soils and general environment of [the Reserve]; all of which caused allowed and failed to prevent exposure of the Plaintiffs to said toxic substances.”-Bechtel fraudulently concealed the existence, nature and/or extent of the toxic substances by giving no information to the subcontractors that would indicate that “in the course of providing the services called for in their contracts, the workers would be exposed to conditions which were unsanitary, hazardous or dangerous to their health; no information was given to the [subcontractors] which would indicate that protective safety equipment was necessary to safely perform the services called for in the contract; no information was given to the [subcontractors] which would indicate that in the course of providing the services called for in the contract, the workers would be exposed to hazardous or toxic substances. In fact, during the course of providing services called for under his employer's [the subcontractor's] contract, plaintiff was exposed to working conditions which were unsanitary, hazardous and dangerous to his health, was exposed to toxic substances, and was never provided with appropriate protective equipment, which would have prevented his injuries.” The causes of action for fraudulent concealment included allegations that plaintiffs relied on Bechtel “to do pre-job surveys to determine if any hazardous or unsafe conditions existed, including the potential for exposure to toxic substances, in areas where” plaintiffs would be working.-Because Bechtel allowed plaintiffs and plaintiffs' decedents to work without any protective gear, plaintiffs and their clothing, at the end of their work days, “were covered with toxic substances and dust and other residue from said toxic substances” which were then unknowingly taken into plaintiffs' homes, exposing their families “to said toxic substances residue and dust ․”
4. Section 25249.6 of the Health and Safety Code provides “[n]o person in the course of doing business shall knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual ․” The Sweaney and Kight complaints also asserted causes of action for intentional infliction of emotional distress and unfair business practices, and the Fanska and Kight lawsuits asserted claims for loss of consortium.
5. Bechtel also sued Superior National Insurance Company, Americas Insurance Company, Classic Syndicate, Inc. and Classic Fire & Marine Insurance Company. Litigation against Superior National is stayed due to its insolvency, and the other insurers are not parties to this appeal.
6. Royal joined in Continental's motion on the ground there were no material differences in the absolute pollution exclusion language in the Continental policies and the two Royal policies at issue. Royal also brought a separate motion for summary judgment on the grounds that the additional insured endorsements and employee exclusions in the two Royal policies precluded any potential for coverage of the underlying claims. As previously noted, we do not consider these issues in light of our interpretation of the pollution exclusions.
7. Steadfast's pollution exclusion reads as follows:“This insurance does not apply: [¶] (e) to ultimate net loss arising out of or in connection with the discharge, dispersal, release, escape or seepage of oil, petroleum substances or derivatives (including any oil, refuse or oil mixed with wastes), smoke, vapors, soot, fumes, acid, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon the land, the atmosphere, or any water course, body of water, bog, marsh, swamp or wetland and including but not limited to hazardous substances in the ground water, the subsoil or anything contained therein. This exclusion shall also apply to ultimate net loss arising from or in connection with the clean-up costs incurred with anything contained in the preceding sentence.”Continental issued three policies. The pollution exclusion in Policy No. 93-CBP-06157048-94 states in pertinent part:“This insurance does not apply to: [¶] (1) ‘Bodily injury’ or ‘property damage’ arising out of the actual, alleged or threatened emission, discharge, dispersal, seepage, migration, release or escape of ‘pollutants': [¶] (a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured;․”The term “pollutants” is defined as follows:“any noise, solid, semi-solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, mists, acids, alkalis, chemicals, biological and etiologic agents or materials, electromagnetic or ionizing radiation and energy, genetically engineered materials, teratogenic, carcinogenic and mutagenic materials, ‘waste’ and any irritant or contaminant.”The exclusion in Continental's Policy No. 93-CBP-06081721-91 is identical. The exclusion in Continental's third policy, No. 93-CBP-605-38-28-90, reads in part as follows:“This insurance does not apply to: [¶] (1) ‘Bodily injury’, ‘property damage’ or injury or damage of any nature or kind to persons or property arising out of the actual, alleged or threatened emission, discharge, dispersal, seepage, release or escape of ‘pollutants'; [¶] (2) Any loss, cost or expense incurred as a result of any ‘clean-up’ of ‘pollutants'; or [¶] (3) The investigation, settlement or defense of any claim, ‘suit’ or proceeding against the insured, including any payments, costs or expenses associated therewith, alleging such injury, damage, loss, cost or expense as described in (1) and (2) above.”The definition of “pollutants” is substantially the same as in the other Continental policies.Royal's Policy No. PYAK 96001 provides, in pertinent part, that the policy does not apply:“(1) to bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants: [¶] (a) at or from premises owned, rented or occupied by the named insured;․”The term “pollutants” is defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.” Royal's Policy No. PSP-124252 contains substantially the same language.
8. The court said: “It may be that Bechtel should retender because of what they learned later in answers to these interrogatories. But that's another story. We have to look at the complaints.”
9. On November 23, 1999, Bechtel filed a second lawsuit against the insurers, seeking the same relief as in this case (Bechtel II). The complaint in Bechtel II recites Bechtel's re-tender to the insurers, and their refusal to defend, based on the additional evidence that the trial court refused to consider in Bechtel I. Bechtel II includes allegations that the underlying actions are pled in broad and general terms, identify no precise cause of the alleged injuries, and take no absolute position “as to whether the cause of injury was from toxic exposure or nontoxic causes or which or whose operations were involved.” The insurers advise Bechtel II has been stayed pending resolution of this appeal.
10. In addition to the judgments entered in favor of Royal, Continental and Steadfast, Bechtel appealed from judgments in favor of Superior National Insurance Company, Americas Insurance Company and The Home Insurance Company. Superior is insolvent and litigation against it is stayed. Americas filed a cross-appeal, seeking review of an order denying its motion for summary adjudication of issues concerning a health hazard exclusion. Americas did not pursue its cross-appeal, which was eventually dismissed, and has not filed a brief in Bechtel's appeal; Bechtel's brief does not refer to any Americas policies. Bechtel and Home entered into a stipulated judgment in favor of Home, on the same basis as the judgment in favor of Steadfast, since Home's pollution exclusion was virtually identical to Steadfast's exclusion. Home joined in the brief filed by Steadfast. At oral argument, the court was advised that Home is no longer a party to this appeal.
11. The Insurance Environmental Litigation Association filed an application for leave to file an amicus brief in support of the insurers. That application was denied, as was the Association's motion for reconsideration of the court's denial.
12. On December 11, 2000, Bechtel's counsel filed a complaint on behalf of Chevron U.S.A., Inc., against Royal and the other insurers, seeking coverage for the same underlying claims at issue in this case. In the Chevron case, Royal issued a subpoena for the production of the Industrial insurance policy, under which both Bechtel and Chevron were insured. Bechtel and Chevron objected to production of the policy by Industrial on grounds it was a trade secret and irrelevant. According to a declaration from Royal's counsel, Bechtel's counsel admitted in conversations on this subject that all of Bechtel's defense fees were paid by Industrial and that the Bechtel suit was “really in the nature of a subrogation/contribution action” on behalf of Industrial. Royal also relies on Bechtel's opposition to Royal's motion to consolidate the Chevron case with Bechtel II (see footnote 9 supra ). In that opposition, Bechtel stated that Bechtel, “while responsible for the defense payments of the litigation in Bechtel I and II, did not pay directly for its defense. It must reimburse an insurer which paid on its behalf.”
13. Royal claims the evidence presented with its motion to dismiss Industrial's payment of Bechtel's fees is dispositive; however, Royal asks this court to allow it to take additional evidence in the event this court disagrees.
14. Royal argues Bechtel has not provided any agreements which Bechtel claims are confidential between it and Industrial that demonstrate the nature of its reimbursement obligation. From this, Royal says we should conclude Bechtel was fully defended by Industrial and therefore has no claim against Royal. At best, Royal's evidence is merely that Industrial paid the fees in the first instance; Royal submitted no evidence that Bechtel is not, as it avers, liable for the fees. Instead, Royal essentially takes the position that Bechtel must prove it is liable for the fees by producing the agreements it refers to in its declaration, and which are the subject of discovery disputes in the Chevron case. However, it is Royal's burden to prove it is entitled to dismissal, and this it has not done.
15. Bechtel argues the mere fact that different jurisdictions reached different conclusions on the scope of the exclusion establishes more than one reasonable construction of the exclusion. That notion has been rejected in California. (ACL Technologies v. Northbrook Property & Casualty Ins. Co. (1993) 17 Cal.App.4th 1773, 1787 n. 39, 22 Cal.Rptr.2d 206 [“mere fact that judges of diverse jurisdictions disagree does not establish ambiguity under the particular principles which govern the interpretation of insurance contracts in California”].)
16. For a summary of the history of the pollution exclusion clause, see, e.g., Nationwide Mut. Ins. Co. v. Richardson (D.C.Cir.2001) 270 F.3d 948, 952, and American States Ins. Co. v. Koloms (1997) 177 Ill.2d 473, 489-492 [, 227 Ill.Dec. 149, 156-58, 687 N.E.2d 72, 79-81]. According to Nationwide Mutual, before 1966, standard comprehensive general liability policies provided coverage for property damage and bodily injury caused by “accident,” and were often interpreted to cover injuries related to environmental pollution. Then the industry changed the policy language to cover “occurrences,” and tried to define occurrences to exclude long-term environmental pollution. When courts continued to interpret the language to provide coverage, the insurers began to add an endorsement to the standard-form policy, excluding coverage for damage arising out of the discharge or escape of pollutants “into or upon land, the atmosphere or any water course or body of water.” The exclusion contained an exception for discharges that were “sudden and accidental,” and in 1973 was incorporated into the standard-form policy. The “sudden and accidental” exception spawned extensive litigation, and insurance companies adopted a new version of the exclusion in the mid-1980's. The new version, referred to as the “absolute” or “total” pollution exclusion, eliminated the “sudden and accidental” exception, and also eliminated the requirement that the discharge was “ ‘into or upon land, the atmosphere or any water course.’ ” (Nationwide Mut. Ins. Co. v. Richardson, supra, 270 F.3d at p. 952.) Some cases say the amended clause “was intended by the insurance industry to bar coverage for the costs of environmental cleanups.” (Ibid. [citing cases].)
17. ACL Technologies rejected the insureds' contention the “sudden and accidental” exception to the pollution exclusion, contained in the 1973 version of the standard comprehensive general liability insurance policy, allowed for coverage for a claim for expenses to clean up pollutants which leaked gradually from underground storage tanks. The court rejected arguments that the drafting history showed the insurance industry intended only to restrict coverage to “unintended and unexpected” pollution, even if it occurred gradually. (ACL Technologies v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at pp. 1790-1792, 22 Cal.Rptr.2d 206.) ACL Technologies also pointed out that the “drafting history” argument “assumes that individual insurers should be bound by statements made by ‘industry spokesmen’ years before.” (17 Cal.App.4th at p. 1792, 22 Cal.Rptr.2d 206.)
18. Unlike the Continental and Royal exclusions, Steadfast's exclusion, although broad in its description of the substances subject to the exclusion, requires a discharge or dispersal of the “irritants, contaminants or pollutants into or upon the land, the atmosphere, or any water course, body of water, bog, marsh, swamp or wetland. ․” We see no substantive difference for purposes of this case, however, as the underlying claims of injury from exposure to toxic substances necessarily require a dispersal of the toxic substance into “the atmosphere.”
19. After this case was argued, the Fourth Appellate District concluded that a similar pollution exclusion applied to bar coverage. The court held the insurer had no duty to defend its insured in a lawsuit alleging that a tenant in an apartment building died as a result of exposure to insecticide sprayed at the building to exterminate yellow jackets. (MacKinnon v. Truck Ins. Exchange (2002) 95 Cal.App.4th 235 [115 Cal.Rptr.2d 369].) The court concluded, as we do, that the pollution exclusion was clear and unambiguous, and declined to consider the history of the exclusion. (Id. at p. 244 [115 Cal.Rptr.2d at p. 376].) Other California precedents cited by the insurers are not of particular assistance in resolving the applicability of the absolute pollution exclusion under the circumstances. However, the other cases, which involve typical forms of environmental contamination, also refer to the scope of the pollution exclusion in expansive terms. In the most pertinent of those cases, a federal district court granted summary judgment to the insurer, concluding the pollution exclusion endorsement barred coverage for claims of bodily injury and property damage arising from pollution and contamination of surface, soil or groundwater by fecal coliform and other bacteria. (East Quincy Services Dist. v. Continental Ins. Co., supra, 864 F.Supp. 976.) The court, referring to the “clarity and expansiveness of the exclusion's language,” rejected the contention that the language was ambiguous as applied to the circumstances, and found that fecal coliform and other sewage-borne bacteria were pollutants. (864 F.Supp. at p. 979; see also Legarra v. Federated Mutual Ins. Co. (1995) 35 Cal.App.4th 1472, 1481, 42 Cal.Rptr.2d 101 [finding the pollution exclusion applied and the insurer had no duty to defend the insureds in connection with a demand by the California Regional Water Quality Control Board for certain response costs for groundwater contamination from fuel releases on the insureds' property; the court observed that the pollution exclusion “does not limit pollutants to hazardous substances; pollutants include ‘any solid, liquid, gaseous or thermal irritant or contaminant’ ”]; Titan Corp. v. Aetna Casualty & Surety Co. (1994) 22 Cal.App.4th 457, 468-470, 27 Cal.Rptr.2d 476 [absolute pollution exclusion unambiguously excluded coverage for costs associated with injuries from or cleanup of TCE (trichloroethylene, classified as a hazardous substance under federal law) groundwater contamination]; Lakeside Non-Ferrous Metals, Inc. v. Hanover Ins. Co. (9th Cir.1999) 172 F.3d 702 [pollution exclusion clearly barred coverage for claims against the insured for contamination of land and surrounding waters; nuisance and trespass claims in the underlying complaint were rooted in pollution-based property damage, expressly excluded from coverage by the pollution exclusion]; Hydro Sys., Inc. v. Continental Ins. Co. (9th Cir.1991) 929 F.2d 472 [pollution exclusion unambiguously barred coverage for defense of the city's actions against insured relating to emission of styrene gas in the manufacturing process; on appeal insured did not deny emission fell within the pollution exclusion clause, but unsuccessfully relied on an exception to the pollution exclusion clause].)
20. Other cases finding absolute pollution clauses ambiguous include, for example, Doerr v. Mobil Oil Corp. (La.2000) 774 So.2d 119, 135 [total pollution exclusion “was neither designed nor intended to be read strictly to exclude coverage for all interactions with irritants or contaminants of any kind”; purpose is to exclude coverage for environmental pollution, and clause will not be applied to all contact with substances that may be classified as pollutants; case involved injuries suffered following consumption of contaminated water]; Westview Associates v. Guaranty Nat. Ins. Co. (2000) 95 N.Y.2d 334 [740 N.E.2d 220, 717 N.Y.S.2d 75] [pollution exclusion clause does not exclude coverage for injuries due to ingestion of lead paint by infant tenant]; Keggi v. Northbrook Property and Cas. Ins. (Ct.App.2000) 199 Ariz. 43, 13 P.3d 785, 791-792 [pollution exclusion clause was intended to exclude coverage for causes of action arising from traditional environmental pollution; court declined to interpret “pollutants” to include “bacteria” and thereby negate coverage, especially where there was no evidence that contamination of water with bacteria was caused by traditional environmental pollution]; Byrd ex rel. Byrd v. Blumenreich (App.Div.1999) 317 N.J.Super. 496, 500, 504-505 [722 A.2d 598, 600, 602] [while New Jersey courts have generally found pollution exclusion clause clear and unambiguous in context of toxic pollutants released into the outdoor environment, the clause is ambiguous in the context of indoor residential ingestion of lead paint chips and dust over a period of years]; American States Ins. Co. v. Koloms, supra, 177 Ill.2d at pp. 492-493 [, 227 Ill.Dec. at p. 158, 687 N.E.2d at p. 81] [absolute pollution exclusion does not bar coverage for claims of carbon monoxide poisoning caused by an allegedly defective furnace; court's review of history of exclusion showed predominant motivation for exclusion was avoidance of enormous expense and exposure from environmental litigation; “[w]e would be remiss, therefore, if we were to simply look to the bare words of the exclusion, ignore its raison d' etre, and apply it to situations which do not remotely resemble traditional environmental contamination”]; American States Ins. Co. v. Kiger (Ind.1996) 662 N.E.2d 945, 948-949 [absolute pollution exclusion clause required interpretation because it “cannot be read literally as it would negate virtually all coverage,” including a visitor's slip on a grease spill; policy issued to a garage that is intended to exclude coverage for damage caused by leakage of gasoline must be explicit]; Sargent Const. Co. v. State Auto. Ins. (8th Cir.1994) 23 F.3d 1324, 1327 [fumes from muriatic acid at job site caused property damage; definition of “pollutants” is ambiguous because phrase “irritant or contaminant” is susceptible of more than one meaning; applying Missouri law]; Lumbermens Mut. Cas. Co. v. S-W Industries, Inc. (6th Cir.1994) 39 F.3d 1324, 1336 [exclusion is intended to shield insurer from insured's liabilities to outsiders (neighboring landowners or governmental entities enforcing environmental laws) rather than injuries caused by toxic substances still confined within area of their intended use; exclusion does not bar coverage for employee exposure to toxic chemicals in confined workspace; applying Ohio law]; West American Ins. Co. v. Tufco Flooring East, Inc. (1991) 104 N.C.App. 312, 323-325 [409 S.E.2d 692, 699-700] [historical purpose of exclusion limits its scope to environmental damage; discharge of vapors or fumes from floor resurfacing material, which damaged chicken stored in a cooler within a chicken processing plant, was not a discharge “into the environment”], overruled on other grounds by Gaston County Dyeing Machine Co. v. Northfield Ins. Co. (2000) 351 N.C. 293, 303 [524 S.E.2d 558, 565].
21. Nonetheless, the court in Pipefitters found no duty to defend a suit arising from the discharge of 80 gallons of PCB-laden oil, concluding the discharge could not be characterized as anything but pollution. (976 F.2d at p. 1044.) The court distinguished between pollution and non-pollution, admitting the distinction was practical, not scientific, and observed that the bond linking cases holding the pollution exclusion inapplicable was:“All involve injuries resulting from everyday activities gone slightly, but not surprisingly, awry. There is nothing that unusual about paint peeling off of a wall, asbestos particles escaping during the installation or removal of insulation, or paint drifting off the mark during a spraypainting job. A reasonable policyholder, these courts apparently believed, would not characterize such routine incidents as pollution.” (Ibid.)
22. The underlying complaints do not identify the toxic substances that allegedly caused plaintiffs' injuries. Bechtel argues, citing Pipefitters Welfare Educ. Fund v. Westchester Fire, supra, 976 F.2d 1037, that not every substance is an “irritant or contaminant” within the definition of the pollution exclusion. However, Bechtel does not and cannot argue that “toxic substances” do not come within the definition of pollutants. Indeed, the dictionary definition of “toxic” is “of, relating to, or caused by a poison or toxin,” and a toxin is defined as “a colloidal proteinaceous poisonous substance. ․” (Webster's 9th New Collegiate Dict. (1989) p. 1248.)
23. See note 3 supra for an example of the allegations in the complaints.
24. Bechtel argues the complaints may be read to allege that plaintiffs' injuries were caused by ordinary dust. (In response to the insurers' denial of its tender, Bechtel advised the insurers of its belief that plaintiffs were injured, “if at all, by the pure dusty condition of the site.”) The references to “dust” in the underlying complaints, however, uniformly refer to toxic dusts. The complaints allege, for example, that plaintiffs and their clothing “were covered with toxic substances and dust and other residue from said toxic substances ․” Moreover, the complaints of those plaintiffs who are spouses of workers and allege secondary exposure by virtue of the dust carried on their spouses' clothing cannot conceivably be construed as referring to ordinary dust.
25. Paragraph 31 of the Johnson cause of action for fraudulent concealment, for example, alleges Bechtel's full knowledge and awareness of the toxic substances present where plaintiff worked and the likelihood of harm to plaintiff as a result of working “in and about” such toxic substances, and asserts Bechtel's purposeful suppression and concealment of “the existence, nature and/or extent of said toxic substances and the risks to health and safety attendant to the performance of the Defendant's [sic] job duties” at the Reserve. The immediately following paragraph 32 the only paragraph referring to “working conditions which were unsanitary, hazardous and dangerous” then states:“For example, at the time plaintiff's employers entered into contracts with defendants, no information was given to the employers which would indicate that in the course of providing the services called for in their contracts, the workers would be exposed to conditions which were unsanitary, hazardous or dangerous to their health; no information was given to the employers which would indicate that protective safety equipment was necessary to safely perform the services called for in the contract; no information was given to the employers which would indicate that in the course of providing the services called for in the contract, the workers would be exposed to hazardous or toxic substances. In fact, during the course of providing services called for under his employer's contract, plaintiff was exposed to working conditions which were unsanitary, hazardous and dangerous to his health, was exposed to toxic substances, and was never provided with appropriate protective equipment, which would have prevented his injuries.”
26. See also Madison Const. v. Harleysville Mut. Ins., supra, 735 A.2d at pp. 109-110 [claim of negligent failure to warn was not independent of insured's use of a pollutant; injuries arose out of release of irritating fumes at construction site and pollution exclusion therefore precluded coverage for those injuries]; Nat. Elect. Mfrs. v. Gulf Underwriters Ins., supra, 162 F.3d at p. 825 [theory of liability has no impact on cause of injury; applicability of pollution exclusion depends only on whether the injury arose from dissemination of a pollutant; pollution exclusion relieves insurer of duty to defend class action claims by welders for injuries from exposure to manganese fumes].
27. The insurers argue they were entitled to make their decisions on potential coverage based on information available to them at the time of tender. The trial court agreed, as do we. (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295, 24 Cal.Rptr.2d 467, 861 P.2d 1153 [existence of duty to defend turns on facts known by the insurer at the inception of a third party lawsuit]; see Gunderson v. Fire Ins. Exchange, supra, 37 Cal.App.4th 1106, 1117, 44 Cal.Rptr.2d 272 [once an insurer determines, on the basis of the complaint and facts known to it at the time, that there is no potential for coverage, there is no continuing duty to investigate or monitor the lawsuit].) Therefore the insurers would not be liable for breach of contract for their refusal to defend at that time. Nonetheless, a duty to defend may arise at a later point, when insurers are informed of facts giving rise to possible coverage under the policy. (See Lipson v. Jordache Enterprises, Inc. (1992) 9 Cal.App.4th 151, 154-155, 11 Cal.Rptr.2d 271 [amended complaint with new tort causes of action transmitted to insurer two days before trial].) While the trial court refused to consider the extrinsic facts later presented to the insurers, effectively requiring Bechtel to file a new lawsuit (Bechtel II), Bechtel argues the trial court erred in that refusal. Since the extrinsic evidence relied on by Bechtel was before the trial court and is a part of the appellate record, we see no reason not to resolve the issue.
28. Bechtel asked the court to take judicial notice of the declaration, submitted by Dr. Megan Shields on behalf of underlying plaintiff Carol Sweaney. Dr. Shields stated she was informed that nine named workers, including decedent Randy Sweaney, had various described symptoms; she was informed one of the workers (not Sweaney) “[t]hrew up dust and dirt,” among many other symptoms. Dr. Shields concluded all of the symptoms exhibited by the nine workers “can be indicative of neurologic and other physical deficits which have been determined in many cases to be the result of exposure to various chemical substances, all of which I am informed are present at [the Reserve].” Dr. Shields opined the nine workers “exhibit symptoms consistent with chemical exposure.”
29. In support of this contention, the responses specified, for example, the following facts: “From approximately July 1985 through approximately 1998 [Bechtel], among other things, failed to timely, properly and adequately design, institute, draft, promulgate, communicate and enforce policies, procedures and/or protocols which would prevent Plaintiff and/or Plaintiff's spouse and/or decedent from being exposed to toxic substances and harmful working conditions at [the Reserve]; ․ failed to timely, properly and adequately provide warnings about toxic substances and harmful working conditions at [the Reserve]; failed to timely, properly and adequately conduct appropriate inspections of the facilities, premises, properties, processes, work and working conditions at [the Reserve]; failed to timely, properly and adequately provide appropriate personal protective equipment. ․ [Bechtel] caused, allowed and failed to prevent injuries sustained by Plaintiff arising out of the operations of each Defendant herein, each employer of Plaintiff and/or Plaintiff's spouse and/or decedent at [the Reserve] and the agent of the Defendants herein including but not limited to the [Reserve] employer of each of the other Plaintiffs in the actions consolidated herewith; said Defendant caused, allowed and failed to prevent sudden, unexpected, accidental, unplanned inhalation, ingestion and/or absorption of excessive dusts, liquids, solids, gasses, vapors and/or fumes; Said Defendant caused, allowed and failed to prevent sudden, unexpected, unplanned, accidental oil spills, chemical spills, gaseous releases, oil fires and blowouts; Said Defendant caused, allowed and failed to prevent unsanitary working conditions; Said Defendant caused, allowed and failed to prevent excessive noise.” The responses also said Bechtel was aware of and failed to timely, properly and adequately disclose “the fact the although certain substances had a regulatory classification as being ‘nonhazardous,’ such substances were indeed hazardous and harmful to human safety and health, that personal protective equipment was not necessary, required and/or beneficial; persons such as the Plaintiff and/or Plaintiff's decedent were being exposed to toxic substances and harmful working conditions at [the Reserve].”
30. Notably, the verified questionnaires prepared by the underlying plaintiffs do not assert they were harmed by “non-toxic” dust. When asked to state the “[t]ype of dust, fume, solvent, chemical, pesticide or herbicide” plaintiffs or their decedents came into contact with in their employment, the following substances were listed: “Petroleum hydrocarbons, drilling fluids, hydrochloric acid, hydrofloric acid, nitric acid, potassium chloride, chromium, barium sulfate, lead, corrosion inhibitors, demulsifiers, solvents, biocides, herbicides, pesticides, fungicides, polymers, clays, thinners, gums, lime, sodium hydroxide, chlorine, phenols, oxidants, aldehydes, defoamers, friction reducers, retardants, caustics, cleaning agents, hydrogen sulfide.”
31. Of course, the underlying suit would be quickly concluded as groundless if the plaintiffs never alleged the nature of the harmful working condition.
32. This is not a case, as in Gray, where the policy led the insured reasonably to expect a defense, and where the exclusionary clause was unclear. (Gray v. Zurich Ins. Co., supra, 65 Cal.2d at pp. 272-273, 54 Cal.Rptr. 104, 419 P.2d 168.)
33. In Giddings, the court concluded third-party actions seeking recovery of monies paid for worthless capital notes, for loss of minority shareholders' investments and for economic losses resulting from waste and misappropriation of corporate assets did not potentially seek recovery for property damage covered by insurance policies. (112 Cal.App.3d at pp. 219-220, 169 Cal.Rptr. 278.) We recognize this case differs from Hurley and Giddings, where the insureds sought coverage for types of damages that were clearly not of the “nature and kind” covered by the policies. Here, Bechtel seeks coverage for a type of damage (bodily injury) ordinarily covered by the policy, but specifically excluded when arising from circumstances described in the pollution exclusions. However, we see no fundamental distinction. Gray tells us we “cannot absolve the carrier from the duty to defend an insured for loss of the nature and kind against which it insured.” (65 Cal.2d at p. 275, 54 Cal.Rptr. 104, 419 P.2d 168.) Here, the insurers did not insure against bodily injuries arising from dissemination of pollutants, irritants or contaminants. To find a potential for coverage based on the possibility that the third-party injuries and deaths were not caused by exposure to toxic substances, but by some other unspecified, “non-toxic” harmful working condition, would be as “tenuous and far-fetched” as the claims for potential coverage in Giddings and Hurley.
34. The trial court pointed to a number of undisputed facts supporting its conclusion. Bechtel was the general contractor at the site for 15 years, managed oil operations at the site, occupied business offices at the site and identified the site as its mailing address. Subcontractors Bob Morton Construction and Gilliam & Sons performed operations continuously at the site for three to five years, used their own equipment and labor and managed their own work at the site. Westside continuously operated at the site for approximately three years under its contract with Bechtel, with certain equipment dedicated to particular areas of the site. All three subcontractors were allowed under their contracts to erect temporary buildings at the site.
35. Bechtel cites U.S. Fidelity & Guar. v. B & B Oil Well Service, Inc. (S.D.Miss.1995) 910 F.Supp. 1172, in which the court concluded that a subcontractor's work on property operated and controlled by another did not amount to occupancy. In that case, however, the subcontractor only did “occasional, limited work” at the property. The court noted its agreement with the principle that a contractor or subcontractor can “occupy” a site without owning or holding any other property interest in the premises. (910 F.Supp. at p. 1178.)
BOLAND, J.* FN* Justice of the Court of Appeal, Second Appellate District, Division Eight, assigned to Division Seven by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
We concur: JOHNSON, Acting P.J., and WOODS, J.