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Court of Appeal, Second District, Division 1, California.


No. B048757.

Decided: February 27, 1992

Latham & Watkins, David L. Mulliken, Richard A. Conn, Jr., Kristine L. Wilkes, L. Susan Odell and Dorn G. Bishop, San Diego, for plaintiff and appellant. Hill Wynne Troop & Meisinger, Kirk A. Pasich and Martin D. Katz, Los Angeles, Heller, Ehrman, White & McAuliffe, Barry S. Levin, Wondie Russell, David B. Goodwin and Sharon C. Corda, San Francisco, Mid–America Legal Foundation and Martha Churchill, Thomas & Porrazzo and Michael H. Porrazzo, San Jose, Anderson Kill Olick & Oshinsky, Eugene R. Anderson, Jerold Oshinsky, Jordan S. Stanzler and Paul L. Friman, New York City, as amici curiae on behalf of plaintiff and appellant. Wilson, Kenna & Borys, Lawrence Borys and Jeffrey Burt, Los Angeles, for defendant and respondent. Gibson, Dunn & Crutcher, Fred F. Gregory and Kurt L. Schmalz, Los Angeles, Peterson & Ross, Richard L. Blatt, Robert W. Hammesfahr and Bruce M. Engel, Chicago, Ill., Crosby, Heafey, Roach & May, Raoul D. Kennedy, Peter W. Davis and James C. Martin, Oakland, Coudert Brothers, Pamela G. Ostrager, Seth A. Ribner, Edward T. Schorr and Julie N. Mack, New York City, Hufstedler, Kaus & Ettinger, John P. Olson and Margot A. Metzner, Los Angeles, Wiley, Rein & Fielding, Thomas W. Brunner, James M. Johnstone and James P. Anasiewicz, Washington, D.C., Mindlin, Tigerman & Holtzman and Michael Holtzman, Los Angeles, Drinker Biddle & Reath, John Chesney and Paul H. Saint–Antoine, Philadelphia, Pa., Carroll, Burdick & McDonough and Donald T. Ramsey, San Francisco, as amici curiae on behalf of defendant and respondent.

We are called upon to decide whether four comprehensive general liability (CGL) policies issued by Admiral Insurance Company to Montrose Chemical Corporation obligate Admiral to defend Montrose in lawsuits seeking damages for personal injuries and property damage allegedly caused by Montrose's disposal of hazardous wastes at times predating the inception of Admiral's policies.   We hold that Admiral's CGL policies provide coverage for bodily injuries and property damage which “occurred” during each policy period and that bodily injuries and property damage which are continuous and progressive throughout successive policy periods are covered by all policies in effect during those periods.   We therefore reverse a summary judgment granted in favor of Admiral.


Montrose, a defunct chemical company, manufactured DDT for use in pesticides from 1947 until 1982.   It has been covered since 1960 by comprehensive general liability insurance policies purchased from seven different carriers, ending with Admiral.   Admiral issued four separate CGL policies to Montrose, covering the period from October 13, 1982, to March 20, 1986.1

Admiral's policies obligate it to “pay on behalf of [Montrose] all sums which [Montrose] shall become legally obligated to pay as damages because of ․ bodily injury, or ․ property damage to which this insurance applies, caused by an occurrence․”  “Occurrence” is defined as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of [Montrose].”

Five actions are pending against Montrose, all alleging property damage (and one alleging bodily injuries) resulting from the contamination of certain sites where Montrose manufactured its product or disposed of its hazardous wastes.

1. In United States of America, et al. v. J.B. Stringfellow, Jr., et al. (Civ. No. 83–2501 (HLH) C.D.Cal.), the United States seeks reimbursement for costs incurred pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, 42 U.S.C. § 9601 et seq.) in investigating, removing and remediating alleged contamination at and near the Stringfellow Acid Pits in Riverside County.   The government also seeks damages for “injury to natural resources,” abatement of conditions and clean-up at and near the Stringfellow site.   According to the complaint, the property damage allegedly occurred beginning in 1956 and continues to the present time.   No bodily injury is alleged.

2. In Newman, et al. v. J.B. Stringfellow, Jr., et al. (Super.Ct. Riverside County, No. 165994MF), a private party toxic tort action, the plaintiffs seek damages for personal injuries and property damage alleged to have occurred beginning in 1956 and continuing to the present time.   This is the only action in which damages are sought for bodily injuries.2

3. Parr–Richmond Terminal Co., et al. v. Levin Metals Corp., et al. (No. C 85–4776 SC, N.D.Cal.), Levin Metals Corp., et al. v. Parr–Richmond Terminal Co., et al. (Nos. C 84–6273 SC and 84–6324 SC, N.D.Cal.), and Levin Metals Corp. v. Parr–Richmond Terminal Co., et al. (Super.Ct. Contra Costa County, No. 255836) all arise out of a state court action brought by Levin Metals against Parr–Richmond, alleging that real property sold by Parr–Richmond to Levin Metals in 1981 was contaminated with hazardous waste and seeking damages for fraud based on Parr–Richmond's failure to disclose the alleged contamination.   According to Levin Metals' complaint, it discovered the contamination in August 1982 (a date prior to the inception of Admiral's initial policy).   Parr–Richmond cross-complained against Montrose and others for contribution and indemnity.   Although the Levin Metals Cases were further complicated by Parr–Richmond's efforts to avoid CERCLA liability and other related federal actions, all that matters here is that Montrose was being sued for indemnity and contribution for allegedly contaminating the United Heckathorn site in Contra Costa County during a period beginning in 1947 and continuing to the present time.3

Montrose tendered defense of these actions to its seven CGL carriers, including Admiral, and all but one agreed to defend subject to a reservation of rights.   In 1986, Montrose sued the carriers, seeking a declaration that Admiral and the other insurers had a duty to both defend and indemnify in all five actions.   In 1989, Admiral filed motions for summary judgment and summary adjudication of issues, asking the trial court to find (1) that it had no duty to defend or indemnify in the Levin Metals Cases because the alleged injuries did not “occur” during Admiral's policy periods, and (2) that it had no duty to defend or indemnify in the Stringfellow Cases because the contamination alleged in those actions was an uninsurable “known loss” prior to the effective date of the first policy issued by Admiral (October 13, 1982).   The evidence submitted in support of and in opposition to Admiral's motion established the following undisputed facts.

The Stringfellow Cases

Although the Stringfellow site opened in 1956 and closed in 1972, chemical wastes generated by Montrose were deposited there only between 1968 and 1972.   As early as 1970, toxic wastes were observed seeping from the site and in 1975 the Santa Ana Regional Water Quality Control Board declared the site to be a public nuisance.4

According to the plaintiffs in Newman v. Stringfellow, 27 wrongful deaths occurred between 1982 and 1986 (the period Admiral's policies were in effect) and property damage occurred during that same period.   According to the plaintiffs in both Stringfellow Cases, between February 1982 and February 1983, the concentration of Trichloroethylene (a suspected human carcinogen) tripled in the ground water located between the Stringfellow site and the town of Glen Avon.   Unquestionably, Montrose knew, during the period the Admiral policies were in effect, that something was wrong at the Stringfellow site.   For example, on August 31, 1982, Montrose was notified by the United States Environmental Protection Agency (EPA) that it considered Montrose a potentially responsible party (PRP) for money expended for response activities at the Stringfellow site.   At about the same time, Montrose notified its environmental impairment liability (EIL) carrier, International Insurance Company, of the Stringfellow “claim” but did not notify Admiral.5

The Levin Metals Cases

All chemical processing at the Parr–Richmond Terminal site ceased in 1964 or 1965 and, according to the plaintiffs in the Levin Metals Cases, the environmental contamination at that site manifested itself no later than August 1982.  (This is the sum total of the evidence presented on these cases.)

Admiral's motion for summary judgment was granted and this appeal followed.


In the trial court, Admiral advanced two theories to defeat coverage.   Relying on the “manifestation of loss” rule articulated by our Supreme Court in a first-party insurance case (Prudential–LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674, 274 Cal.Rptr. 387, 798 P.2d 1230), Admiral argued that injury and damage “occurred” when, prior to the effective date of Admiral's policies, Montrose discovered (or should have discovered) the problem at the Stringfellow site.   Alternatively, Admiral contended the risks for which Montrose now seeks coverage were known to it at the time the Admiral policies were purchased and that, therefore, the “known loss” doctrine bars coverage.  (Ins.Code, § 22 [an insurance contract is an agreement to indemnify against loss, damage or liability “arising from a contingent or unknown event”].) 6  On this appeal, Admiral's first argument remains unchanged but its second argument has been refined (or, in Montrose's view, impermissibly expanded) to rely not so much on the Insurance Code but rather on the language of Admiral's policy defining an “occurrence” as an accident resulting in injury or damage “neither expected nor intended” by the insured.7



We begin our analysis, as always, with the language of the contract of insurance.  (Garriott Crop Dusting Co. v. Superior Court (1990) 221 Cal.App.3d 783, 790, 270 Cal.Rptr. 678.)   Admiral agreed to “pay on behalf of [Montrose] all sums which [Montrose] shall become legally obligated to pay as damages because of ․ bodily injury, or ․ property damage to which this insurance applies, caused by an occurrence․” 8  Applied to the duty to defend, this means Admiral is obligated (unless otherwise excused) to defend Montrose if Montrose's demand for a defense is based upon an injury or damage alleged to have “occurred” during the period of coverage provided by Admiral's policies.  (CNA Casualty of California v. Seaboard Surety Co. (1986) 176 Cal.App.3d 598, 605–607, 222 Cal.Rptr. 276 [insurer must defend if it appears from the complaint or other sources available at the time defense is tendered that there is a potential of liability under the policy].)   Conversely, if the injury or damage allegedly “occurred” either before or after the period of coverage, Admiral has no duty to defend.  (11 Couch on Insurance (2d ed. 1982) § 44:8, p. 193.)   The difficulty, of course, is determining just what it is that constitutes an “occurrence” so that we can pinpoint the date it happened.

“Occurrence” is defined by Admiral's policies as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of [Montrose].”   This is the standard language used in contemporary liability policies.  (11 Couch on Insurance, supra, at § 44:285, p. 437.)   Virtually uniform reliance on this language has not, unfortunately, resulted in consistent construction or application.  (Gottlieb v. Newark Ins. Co. (1990) 238 N.J.Super. 531, 570 A.2d 443, 445 [describing the “bewildering plethora of authority which has developed in recent years, particularly as the result of the increasing number of toxic tort cases”].)

 To begin with, some courts are oblivious to the distinction between first and third party policies, applying rules developed under the language of one indiscriminately to the other.9  Some courts fail to distinguish between the rules of interpretation applicable to a dispute between insured and insurer and those controlling a dispute between carriers to allocate a loss already paid to the insured.  (Compare Snapp v. State Farm Fire & Cas. Co. (1962) 206 Cal.App.2d 827, 24 Cal.Rptr. 44 with Home Ins. Co. v. Landmark Ins. Co. (1988) 205 Cal.App.3d 1388, 253 Cal.Rptr. 277.)   The interpretation may also differ depending upon whether the issue concerns coverage for bodily injury or property damage or both,10 and depending upon whether the court is addressing a single event resulting in immediate injury (an explosion), a single event resulting in delayed or continuing injury (a chemical spill), or a continuing event resulting in single or multiple injuries (exposure to asbestos or toxic wastes).11

In their efforts to determine whether coverage is available under a particular policy, courts have developed several “triggers of coverage” to identify the act or condition which constitutes an “occurrence” or “loss” (depending on which is covered under the policy).   In the case before us, Montrose urges our adoption of the “continuous injury” trigger.   Admiral, in turn, supports application of the “manifestation of loss” trigger.

 Under the “continuing injury ” analysis, the timing of the cause of the bodily injury or property damage (the insured's negligent act) is immaterial (it doesn't matter if it was before or during the policy period), as is the date of discovery of the injury or damage (which may not be contemporaneous), and it is only the effect (the bodily injury or property damage) which matters.   Under this theory, if injury or damage is continuous or progressive throughout successive policy periods, coverage is triggered under the policies in effect for all periods.

Under the “manifestation of loss ” analysis, the critical date is that point in time when appreciable damage occurs and is or should be known to a reasonable insured.   Where the loss is continuous and progressive throughout successive policy periods but is not discovered until after expiration of some of the policies, only the policy in effect at the time of manifestation affords coverage.   Under this analysis, a policy commencing after manifestation (discovery) affords no coverage, notwithstanding that the injury or damage may continue into the effective period of the post-discovery policy.  (Prudential–LMI Com. Insurance v. Superior Court, supra, 51 Cal.3d at p. 699, 274 Cal.Rptr. 387, 798 P.2d 1230.)

The Supreme Court articulated three reasons supporting application of the “manifestation of loss” rule in the first party context.   First, “the reasonable expectations of the insureds are met because they look to their present carrier for coverage.”  (Ibid.)  Second, “the underwriting practices of the insurer can be made predictable because the insurer is not liable for a loss once its contract with the insured ends unless the manifestation of loss occurred during its contract term.”  (Ibid.)  Third, since the insured is required under a standard first party policy to file suit against the insurer within 12 months after “inception of the loss,” and since in that context “inception of the loss” means the date on which appreciable damage occurs and is or should be known to the insured, the definition of “manifestation of loss” must be the same as the definition of “inception of the loss”—“that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered.”  (Id. at pp. 686–687, 699, 274 Cal.Rptr. 387, 798 P.2d 1230.)

Although the Supreme Court unequivocally limited its holding to first party progressive property loss cases in the context of homeowners' insurance policies and, based on the “substantial analytical differences between first party property policies and third party liability policies,” intimated “no view as to the application of [their] decision in either the third party liability or commercial liability (including toxic tort) context”(id. at p. 679, 274 Cal.Rptr. 387, 798 P.2d 1230), Admiral invites us to apply this trigger in the third party context.   For the reasons we now explain, we decline.12



 If the language of an insurance policy is clear, leaving no doubt about the extent of coverage, reference to that language is both the beginning and the end of the analysis, without regard to the insured's expectations or any other consideration.  (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807, 180 Cal.Rptr. 628, 640 P.2d 764.)   Where clarity is lacking, however, any ambiguity or uncertainty will be resolved against the insurer and, if semantically permissible, the policy will be construed in favor of coverage.  (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822, 274 Cal.Rptr. 820, 799 P.2d 1253;  Crane v. State Farm Fire & Cas. Co. (1971) 5 Cal.3d 112, 115, 95 Cal.Rptr. 513, 485 P.2d 1129.)   The dozens of judicial definitions attributed to “occurrence” leave little room for argument about whether we are dealing with an ambiguity.


Expectations Under a Third Party Policy

In AIU, where our Supreme Court held that property damage coverage under a CGL policy includes coverage for clean-up and other response costs incurred by an insured pursuant to CERCLA, the Court reaffirmed the established rule that coverage clauses are interpreted broadly to protect the “objectively reasonable expectations of the insured.”  (AIU Ins. Co. v. Superior Court, supra, 51 Cal.3d at p. 822, 274 Cal.Rptr. 820, 799 P.2d 1253.)   In this context, the Court explained that “[a]lthough our focus is the expectations of the insured at the time the policy is made, this emphasis does not preclude coverage of forms of liability—such as those at issue here—created after the formation of the policy.   Because the policies in question here are ‘comprehensive,’ it was within the insured's reasonable expectation that new types of statutory liability would be covered, as long as they were within the ambit of the language used in the coverage provision.”   (Id. at p. 822, fn. 8, 274 Cal.Rptr. 820, 799 P.2d 1253.)

Because we too are concerned with the reasonable expectations of an insured under a “comprehensive” third party liability policy, we believe it was reasonable for Montrose to expect coverage (and certainly a defense) for continuous and progressive bodily injuries and property damage under more than one policy.   To begin with, we note that the fact that more than one of several policies may be obligated to provide a defense does not result in a windfall to the insured.   Leaving to one side excess policies and “other insurance” clauses, and absent policy language decreeing the manner of apportionment, the court will apply equitable considerations to spread the cost among the several policies and insurers.  (See, e.g., CNA Casualty of California v. Seaboard Surety Co., supra, 176 Cal.App.3d at pp. 619–620, 222 Cal.Rptr. 276;  Olympic Ins. Co. v. Employers Surplus Lines Ins. Co. (1981) 126 Cal.App.3d 593, 601–602, 178 Cal.Rptr. 908.)

First party coverage is typically purchased in an amount sufficient to cover the insured's known maximum potential loss (e.g., fire insurance covers the value of the property insured) and, typically, there is no reason for an insured to look to more than one policy in the event of loss (the policy in effect at the time of the fire).   Third party coverage differs substantially.   At best, the insured makes an educated guess about its potential exposure to third parties.   At worst, the insured's best guess falls far short of the mark.   It is natural, therefore, for an insured to anticipate coverage under more than one policy—particularly where, as here, coverage under successive policies for damage and injury occurring within each policy's period is within the ambit of the language used in the coverage provisions of the policies.

Admiral's policies do not impose as a condition of coverage a requirement that the damage or injury be discovered at any point in time.   Instead, they provide coverage for injuries and damage caused by an “occurrence” and define “occurrence” as an accident, including a continuous or repeated exposure to conditions, which results in bodily injury or property damage.   Nothing about this language suggests a manifestation or discovery requirement and nothing about it persuades that an expectation of coverage for a continuing injury under successive policies is unreasonable.  (See Trizec Properties, Inc. v. Biltmore Constr. Co., Inc. (11th Cir.1985) 767 F.2d 810, 813 [there is no requirement in the standard CGL policy that damages “manifest” themselves during the policy period];  13 J.A. Appleman & J. Appleman, Insurance Law and Practice (1976) § 7403, p. 324 [“in evaluating the insurer's claim as to the meaning of the language used, the courts necessarily consider whether alternative or more precise language, if used, would have put the matter beyond reasonable question”].)

There is yet another difference between first and third party policies and the concomitant expectations of the insureds under each.   First party policies require the insured to bring any action against the insurer within 12 months next after “inception of the loss.”  (Prudential–LMI Com. Insurance v. Superior Court, supra, 51 Cal.3d at pp. 682–687, 274 Cal.Rptr. 387, 798 P.2d 1230.)   Before an action is filed, there must be a dispute.   Before there is a dispute, the insured must (or should) know he has suffered a “loss.”  (Id. at pp. 686–687, 274 Cal.Rptr. 387, 798 P.2d 1230.)   The Supreme Court's secondary holding in Prudential–LMI is simply a corollary to this rule—that in a first party progressive loss case, the policy triggered is the one in effect when the damage occurs and is or should be known to the insured.  (Id. at p. 699, 274 Cal.Rptr. 387, 798 P.2d 1230.)

But third party policies do not include a 12 month limitation on actions against the carrier.   The period of limitations is four years and that four year period is tolled until the date on which a final judgment is entered in the underlying lawsuit, thus giving the insured substantially more than four years in most cases.  (Cf. Lambert v. Commonwealth Land Title Ins. Co. (1991) 53 Cal.3d 1072, 1080, 282 Cal.Rptr. 445, 811 P.2d 737;  Israelsky v. Title Ins. Co. (1989) 212 Cal.App.3d 611, 623, 261 Cal.Rptr. 72.)   There is no “inception of the loss” language in a standard CGL policy and no corollary need to apply the definition of “loss” articulated in Prudential–LMI.   There is no reason for an insured to expect a discovery limitation to be read into a third party policy.


“Occurrence” v. “Claims Made” Policies

Admiral's policies are not “claims made” policies which, by their nature, provide coverage only for claims made against the insured during the policy period.   These are “occurrence” policies which, by their nature, provide coverage for pre-policy occurrences (acts) which cause injury or damage during the policy period.

The distinction between “claims made” and “occurrence” policies supports Montrose's position.  “Claims made” policies sometimes include coverage for acts which occurred prior to the effective date of the policy, in which event the policy will include a “retroactive date.”   Coverage is then afforded for claims made during the policy period based on acts which occurred after the retroactive date.   Conversely, if a claim is made based on an act which occurred prior to the retroactive date, there is no coverage notwithstanding that the claim is made during the policy period.   (1 The Attorney's Umbrella Book (Griffin Comm., Inc. rev. ed. 1991) Underlying Coverage, pp. 71, 73;  R. Keeton & A. Widiss, Insurance Law (1988) § 5.10(d)(3), pp. 598–601, & App. J(2), pp. 1252–1262;  Kroll, The Professional Liability Policy “Claims Made” (1978) 13 Forum 842, 843.)   Under all “claims made” policies, the critical fact is that the claim must be asserted during a precise period identified by dates within the policy.

Beginning in about 1986, liability insurers attempted to expand dramatically the use of “claims made” policies to risks beyond the professional liability areas in which such coverage came into extensive use in the 1970s.13  Corporate purchasers did not respond with enthusiasm—they recognized the increased cost of additional coverage to protect against risks from long-term future occurrences.  (See Keeton & Widiss, Insurance Law, supra, at § 5.10(d)(3), p. 599.)

We agree with Montrose that application of the “manifestation of loss” rule to a CGL “occurrence” policy would transform it into a “claims made” policy.   “Claims made” coverage was developed to limit a carrier's risk by restricting coverage to the single policy in effect at the time a claim was asserted against the insured, thus permitting the carrier to establish reserves without regard to possibilities of inflation, upward-spiraling jury awards or enlargments of tort liability after the policy period.  “Claims made” and other “discovery” policies thus beneficially permit insurers to more accurately predict the limits of their exposure and the premium needed to accommodate the risk undertaken, resulting in lower premiums than are charged for an “occurrence” policy.  (Pacific Employers Ins. Co. v. Superior Court (1990) 221 Cal.App.3d 1348, 1359–1360, 270 Cal.Rptr. 779;  Sparks v. St. Paul Ins. Co. (1985) 100 N.J. 325, 495 A.2d 406, 408–409 [another name for a “claims made” policy is a “discovery” policy];  see also Comment, The “Claims Made” Dilemma in Professional Liability Insurance, supra, at p. 928;  7A J.A. Appleman, Insurance Law and Practice (1991 pocket supp.) § 4504.01, p. 94.)

To read an occurrence policy to afford coverage only when the injury or damage becomes manifest during the policy period and thus to preclude coverage under successive policies—notwithstanding that the insured has paid a premium higher than that which would have been charged for a “claims made” policy—unfairly transforms the more expensive occurrence policy into a cheaper claims made policy.  (See Keeton & Widiss, Insurance Law, supra, at § 5.10(d)(3), p. 598.)   Notwithstanding Admiral's hectoring (that we are about to single-handedly cause “the demise of the insurance industry”), we refuse to rewrite its contracts of insurance.  (Snapp v. State Farm Fire & Cas. Co., supra, 206 Cal.App.2d at p. 831, 24 Cal.Rptr. 44 [“To permit the insurer to terminate its liability while the fortuitous peril which materialized during the term of the policy was still active would not be in accord either with applicable precedents or with the common understanding of the nature and purpose of insurance;  it would allow an injustice to be worked upon the insured by defeating the very substance of the protection for which his premiums were paid”].)


“Occurrence” Does Not Mean “Accident”

Standard CGL policies have been revised from time to time.   Prior to 1966, the policies covered bodily injuries and damages caused by “accidents.”   (American Home Prod. v. Liberty Mut. Ins. Co. (S.D.N.Y.1983) 565 F.Supp. 1485, 1501.)   In 1966, the National Bureau of Casualty Underwriters, the predecessor of the Insurance Services Office (ISO), changed the standard policy from an “accident-based” to an “occurrence-based” format.  (Ibid;  New Castle County v. Hartford Acc. and Indem. Co. (1991) 933 F.2d 1162, 1181;  Pasich, Insurance Coverage for Environmental Claims (Jan.1989) L.A.Law., at p. 23, fn. 12.) 14  The insurance industry knew precisely what the change entailed.

In comments addressing the question of coverage under the new CGL policies for progressive personal injury or property damage resulting over an extended period of time, one of the draftsmen explained that “in some exposure type cases involving cumulative injuries it is possible that more than one policy will afford coverage.”  (Elliott, The New Comprehensive General Liability Policy (S. Schreiber ed. 1968) Practicing Law Institute, Liability Insurance Disputes, 12–3 to 12–5;  see also Obrist, The New Comprehensive General Liability Insurance Policy—A Coverage Analysis (Defense Research Inst. Monograph 1966) p. 6 [“it is possible that more than one policy will afford coverage, each to apply to bodily injury or property damage occurring during the policy period ”];  Nachman, The New Policy Provisions for General Liability Insurance (1965) 18 The CPU Annals 197, 200 [in “cases involving cumulative injuries, more than one policy contract may come into play in determining coverage and its extent under each policy”];  Maryland Casualty Co. v. Reeder (1990) 221 Cal.App.3d 961, 968, 270 Cal.Rptr. 719 [the presence of standard ISO provisions and the availability of interpretative literature are of considerable assistance in determining coverage].)

By 1966, the insurance industry also knew about the potential coverage issues concerning long-term, delayed-manifestation injuries caused by pollutants.   As Richard H. Elliott, Secretary of the National Bureau of Casualty Underwriters, wrote regarding the adoption of the “occurrence” form, there are many instances of injuries taking place over an extended period of time before they become evident.   For example, slow ingestion of foreign substances or inhalation of noxious fumes.   In cases such as these, “the definition of occurrence serves to identify the time of loss for the purpose of applying coverage—the injury must take place during the policy period.”   (Elliott, The New Comprehensive General Liability Policy, supra, at 12–5.)

As these comments demonstrate, the drafters of the “occurrence” policy and experts advising the industry regarding its interpretation contemplated coverage under successive policies for progressive continuing injuries and damage.   Any suggestion that an insured's identical interpretation is unreasonable is absurd.15


Applied to the cases before us, the “continuous injury” rule means that coverage under Admiral's policies has been triggered by both the Stringfellow Cases and the Levin Metals Cases —the former because they allege that property damage and personal injuries “occurred” beginning in 1956 and “continuing” to the present time (which includes the periods of Admiral's policies) and the latter because they allege that property damage “occurred” beginning in 1947 and “continuing” to the present time (which also includes the periods of Admiral's policies).

Because this case comes before us on appeal from a summary judgment based on the trial court's application of the wrong trigger, our analysis stops here.   But identification of the appropriate trigger does not necessarily mean that Admiral is required to defend or indemnify Montrose in all of these actions.   For example, Admiral asserts that an “absolute pollution exclusion” in its 1985 policy absolves it of all obligations to Montrose under that policy, and also asserts that it has no duty at all to defend Montrose in the Stringfellow Cases because Montrose failed timely to communicate its knowledge about these claims to Admiral.   These issues were not adjudicated on Admiral's motion and they remain to be decided by the trial court.

Our holding is simply this—that the appropriate trigger of coverage in this case is the “continuing injury” trigger and that if, after considering the policies' exclusions and limitations, the facts alleged in the underlying actions, and defenses to coverage asserted in this action, the trial court concludes there is a potential for coverage in one or more of the actions under one or more of Admiral's policies, then Admiral is obligated (along with the six other carriers) to provide a proportionate defense to Montrose in those actions specified by the trial court.  (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 275–277, 54 Cal.Rptr. 104, 419 P.2d 168.) 16



Relying on the “known loss” rule, Admiral also contends there was no coverage for (and thus no duty to defend) the Stringfellow Cases.   We disagree.17

 Section 22 defines “insurance” as a “contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.”   Section 250 explains that “any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this code.”   Accordingly, when a loss is “known or apparent” before a policy of insurance is issued, there is no coverage.   (Prudential–LMI Com. Insurance v. Superior Court, supra, 51 Cal.3d at p. 695, 274 Cal.Rptr. 387, 798 P.2d 1230.)   But all that is required is that there be some contingency and, however inevitable an event might be, an “inevitable” event is still a contingency or risk within the meaning of sections 22 and 250.  (Sabella v. Wisler (1963) 59 Cal.2d 21, 34, 27 Cal.Rptr. 689, 377 P.2d 889;  but see Liberty Mut. Ins. Co. v. Triangle Industries, Inc. (N.D.W.Va.1991) 765 F.Supp. 881, 885–886.)

 According to Admiral, Montrose's knowledge of the problems at the Stringfellow site defeats coverage.   In this context, Admiral points to the facts recited at the beginning of this opinion, emphasizing Montrose's receipt of the EPA's PRP notice on August 31, 1982.   Admiral misses the point.   The PRP notice is just what its name suggests—notice that the EPA considered Montrose a “potentially ” responsible party.   While it may be true that an action to recover clean-up costs was inevitable as of that date, Montrose's liability in that action was not a certainty.   There was still a contingency and the fact that Montrose knew it was more probable than not that it would be sued (successfully or otherwise) is not enough to defeat coverage.  (Sabella v. Wisler, supra, 59 Cal.2d at p. 34, 27 Cal.Rptr. 689, 377 P.2d 889.)

Relying on Advanced Micro Devices, Inc. v. Great American Surplus Lines Ins. Co. (1988) 199 Cal.App.3d 791, 245 Cal.Rptr. 44, Admiral and its amici contend the rule is otherwise—that when an insured knew or should have known that there was a problem, the loss is known and there is no risk.  Advanced Micro Devices, Inc. is inapposite.   It involves interpretation of an express exclusionary clause disavowing coverage of losses arising from “any known pre-existing conditions.”  (Id. at p. 794, 245 Cal.Rptr. 44;  emphasis added.)   Although Admiral's policies define “occurrence” as an accident resulting in bodily injury or property damage “neither expected nor intended from the standpoint of [Montrose],” this language is part of the coverage clauses and not an exclusion.   As such, we interpret it broadly, in favor of coverage and consistent with the rule announced in Sabella.   In any event, Admiral did not rely on the “neither expected nor intended” language in the trial court and it cannot now raise the issue on appeal.  (Cramer v. Morrison (1979) 88 Cal.App.3d 873, 887, 153 Cal.Rptr. 865.)

And although it is true that the “known loss” rule applies to third as well as first party policies (Home Ins. Co. v. Landmark Ins. Co., supra, 205 Cal.App.3d at p. 1395, fn. 4, 253 Cal.Rptr. 277), the distinctions inherent in the two types of coverage necessarily result in a different analysis when the rule is applied in the third party context.18  As we have explained, first party policies provide coverage for damage to the insured's own property.   In that context, insurance cannot be obtained for damage which has already occurred because the absence of risk precludes coverage.  (§§ 22, 250.)   Third party policies, however, afford coverage for “sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage.”   In this context, insurance cannot be obtained for a “known liability.”

Where, as here, there is uncertainty about the imposition of liability and no “legal obligation to pay,” there is an insurable risk under a third party policy.  (Austero v. National Cas. Co., supra, 84 Cal.App.3d at pp. 27–29, 148 Cal.Rptr. 653, original italics omitted and new italics added [“The fundamental contractual duty of the insurer in the third party case is to pay such judgments as shall be recovered against the insured․  In the usual first party case the promise of the insurer is to pay money, due under the policy, to the insured upon the happening of the event, the risk of which has been insured against”];  Keene Corp. v. Ins. Co. of North America (D.C.Cir.1981) 667 F.2d 1034, 1041, cert. den., 455 U.S. 1007, 102 S.Ct. 1645, 71 L.Ed.2d 875 (1982) [in a CGL policy, “the uncertain loss is the possibility of incurring legal liability”];  City of Johnstown, N.Y. v. Bankers Standard Ins. (2d Cir.1989) 877 F.2d 1146, 1152;  Aetna Cas. & Sur. Co. v. Condict (S.D.Miss.1976) 417 F.Supp. 63, 73;  see also Chu v. Canadian Indemnity Co. (1990) 224 Cal.App.3d 86, 97, 274 Cal.Rptr. 20.)

 We do not go so far as to say that issuance of a CGL policy while litigation is pending against the insured gives rise to a duty to defend or indemnify in that litigation.   Our holding is simply that where, as here, the insured is under no legal obligation to pay and no lawsuits were filed at the time the policies were purchased, there is an insurable risk within the meaning of sections 22 and 250.   Reference to the PRP letter does not affect this conclusion.   That notice did no more than formally assert the government's position and initiate proceedings which would result in subsequent findings and orders.  (See Spangler Const. v. Indus. Crankshaft (1990) 326 N.C. 133, 388 S.E.2d 557, 559.)   Moreover, the PRP letter referred only to the CERCLA clean-up of the Stringfellow site and it did not refer in any way to the injuries or damage the plaintiffs in Newman v. Stringfellow allege to have occurred off site.

We hasten to emphasize, however, that resolution of this issue in Montrose's favor is not the end of the inquiry.   An insured must make all required disclosures at the time it applies for coverage and the fact that the “known loss” rule does not defeat coverage has nothing to do with issues of fraudulent concealment.  (§ 331 [“Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance”];  §§ 332–337;  § 338 [“An intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind”].)   We express no view concerning what, if anything, ought to have been disclosed by Montrose to Admiral at the time of each renewal.


For the foregoing reasons, the summary judgment is reversed.   Montrose is to recover its costs on appeal.


1.   There are six other carriers involved in this litigation, none of which are parties to this appeal.   The other carriers and dates of coverage are:(a) Insurance Company of North America (January 1, 1960, to January 1, 1969, and January 15, 1981, to January 15, 1986);(b) American Motorists Insurance Company (January 1, 1969, to March 1, 1971);(c) The Travelers Indemnity Company (March 1, 1971, to July 1, 1977);(d) National Union Fire Insurance Company of Pittsburgh, PA (July 1, 1977, to January 15, 1981);(e) Canadian Universal Insurance Company, Ltd. (March 20, 1980, to March 20, 1982);  and(f) Centaur Insurance Company (March 20, 1982, to October 13, 1982).As will appear, the broad issue before the trial court was whether all or some of the carriers, including Admiral, were obligated to defend Montrose in five pending actions.   The trial court found there was no coverage under Admiral's policies (and thus no duty to defend) but that all of the other carriers were obligated to provide a defense.

2.   When it is necessary to distinguish between the two cases involving the Stringfellow acid pits, we will refer to them as U.S. v. Stringfellow and Newman v. Stringfellow.   References to the Stringfellow Cases are intended to apply to both actions.

3.   We refer to these cases collectively as the Levin Metals Cases.

4.   Ironically, the Stringfellow site was selected by the State of California, which designed the waste disposal facilities and convinced J.B. Stringfellow he would be performing a needed service to his country by making his property available for waste disposal, principally by defense contractors.  (See Lathrop, Environmental Insurance Coverage Litigation and Issues (CJA/TRG 1989) Insurance Litigation Syllabus, p. 26, fn. 13.)

5.   For reasons not explained in the record, sometime prior to October 13, 1982, Montrose's parent, Stauffer Chemical Company, notified all of Montrose's carriers, except Admiral, of the PRP letter.   Montrose first advised Admiral about the Stringfellow claims at the time Montrose submitted an application for insurance dated February 15, 1985.

6.   Unless otherwise stated, all section references are to the Insurance Code.

7.   In addition to the parties' briefs, we have considered amicus curiae briefs filed in support of both sides.Mid–America Legal Foundation's amicus brief in support of Montrose explores Admiral's impressive ability to advocate inconsistent positions, altering its appellate argument as the chameleon does its color, to suit whatever terrain it inhabits at the moment.  (Aerojet–General Corp. v. Superior Court (1989) 211 Cal.App.3d 216, 240, 258 Cal.Rptr. 684;  see also Comment, Precluding Inconsistent Statements:  The Doctrine of Judicial Estoppel (1986) 80 Nw.U.L.Rev. 1244 [the “doctrine of judicial estoppel prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken by him in the same or some earlier legal proceeding”].)   Although we agree, this is not the basis for our decision.A joint amicus brief filed by Atlantic Richfield Corporation, NEC Electronics, Inc., Martin Marietta Corporation, Northrop Corporation, Syntex (USA), Inc. and Univar Corporation supports Montrose on both issues.An amicus brief from Pacific Indemnity Company and an amicus letter from Continental Casualty Company, both supporting Admiral, suggest we ought to defer our decision indefinitely, to await an anticipated ruling from Division One of the First District in the Asbestos Insurance Coverage Cases, Nos. A049419, et al. and another anticipated decision from Division Three of the First District in Shell Oil Company v. Accident and Casualty Co. of Winterthur, Case No. A045544.   Unfettered by the facts of this case and uninhibited by a review of the record, Pacific Indemnity suggests the trigger issue is not properly before us.   Undeterred by our obligation to decide cases in a timely fashion, neither amicus offers a clue about how long we ought to wait.   The issues are properly before us, they have been fully briefed by the parties, the case has twice been argued and we therefore deny these requests.The Travelers Indemnity Company's amicus brief in support of Admiral urges adoption of the “manifestation of loss” rule, at least in property damage cases.   We give to this brief all the weight it deserves when it is juxtaposed with Travelers' own Claim Department's Liability Coverage Manual's explanation that, under the standard 1966 CGL occurrence policies used by it and Admiral, the “injury must occur during the policy period because coverage is triggered by the injury, not the accident or the wrongful act․  When the injury is gradual, resulting from continuous or repeated exposures, and occurs over a period of time, coverage may be afforded under more than one policy—the policies in effect during the period of injury.”  (Emphasis added.)American Motorists Insurance Company's amicus brief in support of Admiral urges adoption of an “actual discovery” trigger.Two amicus briefs filed in support of Admiral—one by the Insurance Environmental Litigation Association and the other by Ayliffe and Companies—address the “known loss” rule and assert there was no insurable risk at the time Montrose purchased its policies from Admiral.

8.   “Property damage” is defined as “(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.”  “Bodily injury” is defined as “bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom.”

9.   A “first party” policy provides coverage for loss or damage sustained by the insured (e.g., life, disability, health, fire, theft and casualty insurance).   A “third party” policy provides coverage for liability of the insured to another (e.g., CGL, directors and officers liability and errors and omissions insurance).  (See Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 399, fn. 2, 257 Cal.Rptr. 292, 770 P.2d 704.)   In the usual first party policy, the insurer promises to pay money to the insured upon the happening of an event, the risk of which has been insured against.   In the typical third party policy, the carrier assumes a contractual duty to pay judgments recovered against the insured arising from the insured's negligence.  (Id. at pp. 406–407, 257 Cal.Rptr. 292, 770 P.2d 704;  see also Austero v. National Cas. Co. (1978) 84 Cal.App.3d 1, 27–29, 148 Cal.Rptr. 653, disapproved on other grounds in Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 824, fn. 7, 169 Cal.Rptr. 691, 620 P.2d 141.)

10.   Indeed, even within the limited arena of asbestos litigation, there is no consistency (compare Fireman's Fund Ins. Cos. v. Ex–Cell–O Corp. (E.D.Mich.1987) 662 F.Supp. 71 with Clemco Industries v. Commercial Union Ins. Co. (N.D.Cal.1987) 665 F.Supp. 816, aff'd 848 F.2d 1242 (9th Cir.1988)) and hazardous waste disposal and other pollution claims have created a sometimes separate, sometimes overlapping body of law.  (Compare Mraz v. Canadian Universal Ins. Co. Ltd. (4th Cir.1986) 804 F.2d 1325 with Continental Ins. v. N.E. Pharm. & Chem. Co. Inc. (8th Cir.1987) 811 F.2d 1180, rev'd on other grounds en banc 842 F.2d 977 (8th Cir.1988);  State of Idaho v. Bunker Hill Co. (D.Idaho 1986) 647 F.Supp. 1064.)   Latent bodily injury or property damage claims caused by exposure to a single substance may, for some purposes, differ from claims resulting from contamination at a hazardous waste disposal site by several pollutants deposited at different times by numerous parties.   Without expressing a view about whether our holding in this case would apply in other contexts, we feel compelled to note for the record the obvious—that we are dealing here with claims of bodily injury and property damage arising from hazardous waste contamination.

11.   Although Montrose and Admiral agree that the proper analysis in this case can result in only one rule applicable to both bodily injuries and property damage (because Admiral's policies define “occurrence” without any distinction based on the nature of the harm), two amici (Travelers and American Motorists) have suggested that different rules could and should be applied to property damage.   According to Travelers, in property damage cases there is no distinction between claims involving the discovery of latent conditions and “boom” type accidents (e.g., an explosion which occurs at only one point in time) because the discovery of the pollution or other latent defect is the “boom.”   Without expressing a view about whether this argument could be anything other than pure sophistry in any context, we hold that, at least on the facts before us, the language of the policies mandates a single definition.

12.   There are other “triggers” but no one suggests they ought to be applied in this case.   For example, some courts carry the “manifestation of loss” trigger one step further, holding that “manifestation” requires actual discovery, a date which may be later than the date on which the damage reasonably should have been discovered.   Other courts look to cause rather than effect and fix the date of occurrence at the time of the insured's negligent act.   See cases cited in footnote 16, post.

13.   All professional liability policies were at one time “occurrence” policies.  (Comment, The “Claims Made” Dilemma in Professional Liability Insurance (1975) 22 UCLA L.Rev. 925, 926.)   Underwriters soon realized, however, that “occurrence” policies were unrealistic in the context of professional malpractice because the injury and the negligence that caused it were often not discoverable until years after the delictual act or omission.  (See Kroll, “Claims Made”—Industry's Alternative:  “Pay as You Go” Products Liability Insurance (Feb.1976) Insurance Law Journal 63, 65.)   With the advent of toxic torts and CERCLA clean-up actions, the same effort was made for CGL coverage.

14.   The ISO is a trade association that provides rating, statistical, actuarial and policy drafting services to about 3,000 insurers.   Policy forms developed by the ISO are approved by its constituent insurance carriers and then submitted to state agencies for review.  (New Castle County v. Hartford Acc. and Indem. Co., supra, 933 F.2d at p. 1181.)   In 1986, after the latest of Admiral's policies was purchased by Montrose, the standard CGL policy was revised and euphemistically renamed the “Commercial General Liability” policy.  (See Insurance Handbook for Reporters (Allstate Ins. Group, 2d ed. 1985) pp. 168, 170.)

15.   In Fireman's Fund Ins. Co. v. Aetna Casualty & Surety Co. (1990) 223 Cal.App.3d 1621, 273 Cal.Rptr. 431, a dispute between two carriers, the court concluded otherwise.   Relying on the industry's view ten years after the change from “accident” to “occurrence” and ignoring contemporaneous comments, the court held that the language was intended “ ‘to relate coverage to only the one policy period in which the onset of the condition happened.’  (Tinker, Comprehensive General Liability Insurance—Perspective and Overview, 25 Fed'n Ins.Coun.Q. (1975) 217, 241–242.)”  (Id. at p. 1629, 273 Cal.Rptr. 431.)  Fireman's Fund was decided before the Supreme Court's decision in Prudential–LMI and we question its continuing validity.   To the extent Fireman's Fund remains good law, we conclude it must be limited to a dispute between carriers and hold that it is inapplicable to a dispute between an insured and its carrier.Another problem with attempts to apply a discovery analysis to third party coverage involves identification of the discoverer.   In the first party context, attention focuses on discovery by the insured (who has discovered or should discover that his pool is leaking).   In third party cases, the insured's discovery may occur substantially later than the injured party's discovery—such as in the Levin Metals Cases.   Adoption of the continuous injury trigger avoids existential discussions about whether an injury manifests itself if no one is there to discover it.

16.   Virtually every California case which on its face appears inconsistent with our holding is factually distinguishable.   For example, Home Ins. Co. v. Landmark Ins. Co., supra, 205 Cal.App.3d 1388, 253 Cal.Rptr. 277, involves an action between two first party carriers.   Remmer v. Glens Falls Indem. Co. (1956) 140 Cal.App.2d 84, 295 P.2d 19, predates the change from “accident-based” to “occurrence-based” CGL policies.   Of course, there are cases consistent with our holding, notwithstanding that they too can be distinguished on their facts.  (See, e.g., California Union Ins. Co. v. Landmark Ins. Co. (1983) 145 Cal.App.3d 462, 193 Cal.Rptr. 461 [dispute between two carriers];  Snapp v. State Farm Fire & Cas. Co., supra, 206 Cal.App.2d 827, 24 Cal.Rptr. 44 [first party policy].)As noted at the outset, toxic tort litigation and CERCLA clean up actions have generated a “bewildering plethora of authority” (Gottlieb v. Newark Ins. Co., supra, 570 A.2d at p. 445) and the federal and out-of-state cases are legion.  (See e.g., Sandoz, Inc. v. Employer's Liability Assur. Corp. (D.N.J.1983) 554 F.Supp. 257, 265 [trigger date is wrongful act];  Dow Chemical Co. v. Associated Indem. Corp. (E.D.Mich.1989) 724 F.Supp. 474 [trigger date is first occurrence of damage];  Eagle–Picher Industries v. Liberty Mut. Ins. Co. (D.Mass.1981) 523 F.Supp. 110, 118 [trigger date is manifestation of injury];  Mraz v. Canadian Universal Ins. Co., Ltd., supra, 804 F.2d at p. 1328 [trigger date is actual discovery of injury];  American Home Assur. v. Libbey–Owens–Ford Co. (1st Cir.1986) 786 F.2d 22, 30 [trigger date is when a reasonable person would discover the damage];  Appalachian Ins. Co. v. Liberty Mut. Ins. Co. (3d Cir.1982) 676 F.2d 56, 61–62 [trigger date is time “when the injurious effects of the occurrence took place” which is the date “when the injuries first manifest themselves”].)   Fortunately, our task is simply to identify and apply California law and we make no attempt to reconcile decisions from other jurisdictions.

17.   The concept we discuss in this section is sometimes referred to as the “known loss” rule and other times as the “loss in progress” rule.   Because references to the “loss in progress” rule are too often tied to the conceptual underpinning of the “manifestation of loss” trigger, we prefer to define this concept as “known loss.”  (See Croskey, Insurance Litigation (Cal.Judges Assn./The Rutter Group 1989) pp. 65–72.)

18.   The history of sections 22 and 250 supports this conclusion.   When the statutes on which sections 22 and 250 are based (former Civ.Code, §§ 2527, 2531) were drafted in 1872, all insurance was first-party—third party liability policies did not become available in California until the 1880's and liability insurance was not identified by statute in California as a classification of insurance until 1907.  (Stats.1907, ch. 119, § 141;  see C. Kulp & J. Hall, Casualty Insurance (4th ed. 1968) 21–22.)   Accordingly, the mere fact that sections 22 and 250 have since been held to apply in the third party context does not mean the result will be the same.

VOGEL, Associate Justice.

SPENCER, P.J., and ORTEGA, J., concur.

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