SYNTEX CORPORATION v. LOWSLEY WILLIAMS AND COMPANIES (1998)

Appellants, certain syndicates at Lloyd's of London and 71 London market and foreign insurance companies (London Insurers), appeal the judgment following a jury trial determining that they were responsible for the environmental cleanup costs incurred by Syntex Corporation and its subsidiaries (Syntex).   London Insurers contend that the trial court erred by:  (1) misinterpreting the pollution exclusion clauses of the 1973-1984 insurance policies providing coverage to Syntex and subsequently denying London Insurers' motion for judgment notwithstanding the verdict (JNOV) based on the pollution exclusion clauses;  (2) instructing the jury that the 1970-1973 insurance policy was “triggered” as a matter of law based on allegations in the underlying complaints and claims, and by failing to instruct the jury on Syntex's burden to prove property damage;  (3) instructing the jury that Syntex did not expect damage under the 1970-1973 policy unless those persons in Syntex “with the power to bind the corporation” expected property damage;  (4) refusing to instruct the jury that property damage is expected under the 1970-1973 policy if Syntex “expected” any degree of damage;  and (5) determining that the insurers are obliged to pay “all sums” for the damages resulting from a covered “occurrence” under the 1970-1973 policy, even those damages arising beyond the policy period.   We agree with London Insurers that the trial court erred by denying the motion for a JNOV with respect to the pollution exclusion clauses in the 1973-1984 policies, and that the trial court erred by its trigger and burden of proof instructions, its “power to bind” instruction, and its degree of damage instruction.   We find no error in the “all sums” ruling.   We reverse the judgment against London Insurers with respect to the 1973-1984 policies, and remand for entry of judgment in their favor on these policies.   We reverse the judgment against London Insurers with respect to the 1970-1973 policy, and remand for a new trial on the factual issues relating to that policy.¹

BACKGROUND

I. The Insurance Policies

London Insurers issued excess umbrella insurance policies to Syntex, a California pharmaceutical company, from August 1970 to August 1984.   All of the insurance policies contained “occurrence clauses,” which provided that London Insurers would, subject to certain limitations and conditions, “indemnify [Syntex] for all sums which [Syntex] shall be obligated to pay by reason of the liability [¶] ․ imposed upon [Syntex] by law ․ [¶] ․ [¶] for damages, direct or consequential and expenses on account of ․ [¶] ․ [¶] ․ Property Damage, [¶] ․ [¶] caused by or arising out of each occurrence happening anywhere in the world, and arising out of the hazards covered by and as defined in the Underlying Umbrella Policies․”  “Occurrence” was defined in most of the policies ² as “an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period.”

From 1973 through 1984, all of the London Insurers' policies contained exclusions barring coverage for pollution-related liability.   From August 1973 until August 1981, the policies barred recovery for personal injury, property damage, or the costs of clean up attributed to “seepage, pollution or contamination” except where the “seepage, pollution or contamination is caused by a sudden, unintended and unexpected happening during the period of this insurance.”  (Italics added.)   From August 1981 to August 1984, the policies barred recovery for personal injury or property damages “arising out of the discharge, dispersal, release or escape of ․ toxic chemicals, liquids or gases, waste materials or other ․ contaminants or pollutants ․, but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.”  (Italics added.)

II. The Missouri Pollution

In 1969, Syntex acquired Hoffman-Taff, Inc. (Hoffman-Taff), a Missouri chemical company that produced Agent Orange for the United States government for use in the Vietnam war.   Also in 1969, after Hoffman-Taff stopped producing Agent Orange, Northeastern Pharmaceutical & Chemical Co. (NEPACCO) leased part of a building in Verona Missouri and equipment belonging to Hoffman-Taff that had been used for Agent Orange production.   NEPACCO began manufacturing hexachlorophene, a disinfectant widely used as an antibacterial agent by hospitals and in soap.   NEPACCO's process for making hexachlorophene involved many of the same steps used in producing Agent Orange.   The process produced waste residues, called “still bottoms,” which contained dioxin, an extremely toxic chemical.

In 1971, NEPACCO hired Independent Petrochemical Corp. (IPC) to dispose of the toxic still bottoms.   IPC in turn arranged for Russell Bliss to collect the still bottoms and dispose of them.   Bliss was in the waste oil business, collecting used oil from gas stations and other locations and selling it to refineries or using it as a dust suppressant on roads, parking lots, and horse arenas.   Bliss removed six 3,000-gallon loads of still bottoms from the NEPACCO plant in 1971.   Part of the first load of still bottoms was sold to a refinery, but a portion of it was sprayed directly from the hauling truck onto an indoor horse arena, killing horses, dogs, cats, and birds, and injuring several people.   Bliss mixed portions of subsequent loads of the still bottoms with other waste oil and sprayed roads, horse arenas, and parking lots throughout eastern Missouri during the summers of 1971 and 1972, including the streets in the town of Times Beach.

During 1971, Dewey Vanderhoof was a Hoffman-Taff area supervisor working in the Verona, Missouri, building Hoffman-Taff shared with its lessee, NEPACCO.   At some point in 1971, while Bliss was engaged in removing still bottoms from NEPACCO, Vanderhoof learned from a conversation with a NEPACCO plant manager that Bliss was collecting NEPACCO's still bottoms, mixing them with waste oil, and using the mixture as a dust suppressant on roads.   Vanderhoof did not report this information to anyone else at Hoffman-Taff, and he thought Bliss's activities were generally known.   Although Vanderhoof understood that contact with still bottoms should be avoided, as with any chemical, he did not think that the still bottom mixture was so toxic that spraying roads or parking lots with the substance was wrong or dangerous.   Richard Bagby, Hoffman-Taff's plant manager in Verona, was responsible for the premises and was the liaison between Hoffman-Taff and NEPACCO.   He did not know about Bliss collecting still bottoms from NEPACCO before 1974.   Bagby knew in August 1971 that NEPACCO produced toxic waste containing chlorinated hydrocarbons, including dioxin.   Godfrey Moll, Hoffman-Taff's vice president of operations, knew that NEPACCO was producing toxic still bottoms as waste, but he did not know what they were doing with the still bottoms.

Bliss's sprayings contaminated more than two dozen different locations, including three sites where soil was dumped after it was excavated from locations Bliss had previously sprayed or where previously contaminated soil migrated due to erosion and rain run-off.

III. The Underlying Claims and Proceedings in the Trial Court

Bliss's release of dioxin-laden material caused property damage and bodily injury, and resulted in scores of personal injury lawsuits involving claims by more than 2,500 people seeking more than $15 billion in damages from Syntex.   Syntex settled these lawsuits for $29 million.   The State of Missouri and the United States also sued Syntex, contending that Syntex was liable for the clean up of the soil contaminated by Bliss.³  Syntex settled these lawsuits also, and agreed to pay the United States $10 million and help clean up Times Beach and the other contaminated sites.

Hartford Insurance Company, Syntex's primary insurer, filed this action in 1985 seeking declaratory relief with respect to Syntex and its other insurers.   Syntex answered the complaint in 1990 and filed a cross-complaint against all its primary and excess insurers, including London Insurers.   Syntex sought a judicial declaration that London Insurers were obligated to indemnify Syntex for settling the environmental clean-up claims by the federal government and the State of Missouri, and the personal injury claims based on the Bliss dioxin contamination.   The trial court bifurcated the trial.   Phase I was a bench trial in which the court heard evidence and interpreted the terms of the insurance contracts.   The trial court's legal determinations in phase I were incorporated into the jury instructions for the next phase of the proceedings.   Phase II was a jury trial to adduce evidence pertinent to the issues raised in this appeal.   Following phase I, Syntex settled with nearly all insurers except London Insurers, and Syntex also dropped any allegations that London Insurers were obligated to indemnify Syntex for the private personal injury claims.   Thus, at the beginning of phase II, Syntex sought a judicial declaration that London Insurers were obligated to indemnify Syntex only for the government environmental clean-up claims.   Following the presentation of evidence, the jury returned special verdicts on various factual issues.   The trial court subsequently entered judgment in Syntex's favor, holding that London Insurers must indemnify Syntex for its payments of the judgments or settlements from the government environmental clean-up claims.   After London Insurers unsuccessfully moved for a new trial and for a JNOV, this appeal followed.

MEANING OF “SUDDEN AND ACCIDENTAL”

The jury returned a special verdict for Syntex, finding, among other things, that Bliss's release of dioxin-laden oil was “sudden and accidental” under the terms of the 1973-1984 policies, thus rendering inapplicable the pollution exclusion clauses in those policies.   London Insurers filed a motion for a JNOV, contending that insufficient evidence supported the jury's verdict as to the 1973-1984 policies.   The trial court denied the motion.

London Insurers contend that the trial court misinterpreted the terms of the pollution exclusion clauses by holding, during phase I, that whether the release of pollutants or a contaminant is “sudden, unintended and unexpected” or “sudden and accidental” ⁴ is to be viewed from the perspective of the insured, Syntex.   London Insurers further contend that its JNOV motion as to the 1973-1984 policies should have been granted because no substantial evidence supports the jury's finding that Bliss's release of contaminated oil was sudden and accidental.   We agree with both of London Insurers' contentions.

I. Standards of Review

We review the trial court's interpretation of the insurance contracts de novo.  (Truck Ins. Exchange v. Pozzuoli (1993) 17 Cal.App.4th 856, 859, 21 Cal.Rptr.2d 650.)   We review a JNOV under the same standard the trial court uses in ruling on a motion for a JNOV:  viewing the entire record in the light most favorable to the jury's verdict, we must determine if there is substantial evidence supporting the verdict, resolving all conflicts and drawing all inferences in favor of that verdict.  (Trujillo v. North County Transit Dist. (1998) 63 Cal.App.4th 280, 284, 73 Cal.Rptr.2d 596.)   Only if the record contains no substantial evidence or reasonable inferences from the evidence that support the verdict will we reverse the denial of the JNOV. (Osborn v. Irwin Memorial Blood Bank (1992) 5 Cal.App.4th 234, 259, 7 Cal.Rptr.2d 101.)

II. The Pollution Exclusions

A. Construction of Contracts

Like all contracts, insurance policies are governed by the mutual intent of the parties, which is found, if possible, solely in the contract's written provisions.  (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-822, 274 Cal.Rptr. 820, 799 P.2d 1253 (AIU).)   We will give effect to the clear and explicit meaning of the words, interpreted in their ordinary and popular sense, unless the parties gave the words a technical or special meaning.  (Id. at p. 822, 274 Cal.Rptr. 820, 799 P.2d 1253.)  “Thus, if a layperson would give the contract language an unambiguous meaning, we apply that meaning.”   (Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 737, 15 Cal.Rptr.2d 815 (Shell ).)

B. The Meaning of “Sudden and Accidental” Is Unambiguous

The trial court, in phase I, determined that the language of the 1973-1981 pollution exclusions, which provided coverage for pollution where it is caused by a “sudden, unintended and unexpected happening,” and the 1981-1984 pollution exclusions, which provided coverage where the “discharge, dispersal, release or escape is sudden and accidental,” was ambiguous.   The trial court found that the language was ambiguous because it did not specify whether the polluting event should be considered “sudden and accidental” from the perspective of the insured, the third-party polluter, or the insurer.   The court then reviewed parol evidence in phase I to determine the sense in which London Insurers believed Syntex understood the pollution exclusions at the time the insurance policies were formed.   The court found that the evidence conflicted, construed the ambiguity against London Insurers, and held that the pollution exclusions should be interpreted from the perspective of the insured, Syntex.  (See AIU, supra, 51 Cal.3d at p. 822, 274 Cal.Rptr. 820, 799 P.2d 1253 [holding that ambiguity in insurance contract is generally resolved against insurer and in favor of coverage].)

 California, unlike other jurisdictions (see Quaker State Minit-Lube v. Fireman's Fund Ins. (10th Cir.1995) 52 F.3d 1522, 1527-1528 [discussing views of state and federal courts] ), has determined that the term “sudden and accidental” in the pollution exclusions of insurance policies is unambiguous, if we give the words their full significance.  (A-H Plating, Inc. v. American National Fire Ins. Co. (1997) 57 Cal.App.4th 427, 435-436, 67 Cal.Rptr.2d 113 (A-H Plating );  Shell, supra, 12 Cal.App.4th at p. 755, 15 Cal.Rptr.2d 815.)   The word “sudden” describes an event that is abrupt or immediate, and also unexpected.  (A-H Plating, supra, 57 Cal.App.4th at p. 435, 67 Cal.Rptr.2d 113;  Shell, supra, 12 Cal.App.4th at p. 755, 15 Cal.Rptr.2d 815.)   Because “accidental” is synonymous with the phrase unexpected and unintended, “the plain language of the phrase ‘sudden and accidental’ discharge of pollutants means an abrupt, unintended, and unexpected discharge of pollutants.”  (Travelers Casualty & Surety Co. v. Superior Court (1998) 63 Cal.App.4th 1440, 1455, 75 Cal.Rptr.2d 54 (Travelers ).)

 We hold that the phrase is not ambiguous.   The pollution exclusions provide coverage for pollution caused by either a “sudden, unintended and unexpected happening” or a “sudden and accidental” discharge.   Neither exclusion requires or specifies that the insured cause the relevant discharge or happening.   Analyzing the grammatical structure of the pollution exclusions, the phrase “sudden, unintended and unexpected” modifies “happening,” while “sudden and accidental” modifies “discharge.”   The modifiers do not refer to any specific actor or cause of the polluting event.   The pollution exclusions thus focus on the polluting event itself or the actual release of pollutants into the environment.  (Standun, Inc. v. Fireman's Fund Ins. Co. (1998) 62 Cal.App.4th 882, 890-891, 73 Cal.Rptr.2d 116 (Standun ).)   Looking at the actual release of pollutants, the most natural interpretation of the pollution exclusions is that the discharge of pollutants is covered if the polluting event itself can be described as sudden and accidental.   Thus, in order to determine if the pollution exclusion applies, we ask whether the circumstances surrounding the polluting event are sudden and accidental as those terms have been defined by case law.⁵  (See Shell, supra, 12 Cal.App.4th at pp. 754-755, 15 Cal.Rptr.2d 815 [defining “sudden and accidental”].)

Our conclusion is bolstered by Standun and Travelers.   In both cases, the insured arranged to have its hazardous wastes removed from its property by a third party.   The third party dumped the wastes into a landfill.   The Second Appellate District in Standun held, “It is irrelevant for purposes of the pollution exclusion that the insured complied with all applicable regulations and licensing requirements at the time of the disposal of the hazardous waste.  [Citation.]  It is also irrelevant that the insured did not intend to contaminate the environment.  [Citations.]  The relevant discharge is the disposal and that discharge is neither sudden nor accidental;  it is purposeful and regular.”  (Standun, supra, 62 Cal.App.4th at p. 891, 73 Cal.Rptr.2d 116;  see Travelers, supra, 63 Cal.App.4th at pp. 1458-1459, 75 Cal.Rptr.2d 54.)

 Although both Standun and Travelers involve insureds who knew that the third party was dumping waste into a landfill, this knowledge does not appear to be dispositive in the courts' determination that the pollution exclusions applied.   Both courts emphasized the fact that the release of pollutants into the environment was the result of regular, purposeful, and routine disposal of wastes in the normal course of business.   (Travelers, supra, 63 Cal.App.4th at pp. 1458-1460, 75 Cal.Rptr.2d 54;  Standun, supra, 62 Cal.App.4th at p. 891, 73 Cal.Rptr.2d 116.)   We agree with the view that routine and purposeful dumping of pollutants into the environment is neither sudden nor accidental.  (Ibid.;  see A-H Plating, supra, 57 Cal.App.4th at p. 441, fn. 11, 67 Cal.Rptr.2d 113.)

 The trial court's determination that the term “sudden and accidental” was ambiguous was error.   We hold that the pollution exclusions in the 1973-1984 policies excluded coverage for any polluting event that was gradual or intentional, even if Syntex had no knowledge of the precise circumstances of the discharge.

C. Denial of JNOV Was Error Because Bliss's Actions Were Neither Sudden Nor Accidental

 Viewed within the proper legal framework, the judgment must be reversed as to the 1973-1984 policies.   Bliss intentionally sprayed dioxin-laden wastes onto roads, horse arenas, and parking lots.   As previous California decisions have held, these sprayings are the relevant “discharge” or “happening” for determining whether the pollution exclusions apply.  (Travelers, supra, 63 Cal.App.4th at pp. 1458-1459, 75 Cal.Rptr.2d 54;  Standun, supra, 62 Cal.App.4th at p. 891, 73 Cal.Rptr.2d 116.)

Bliss's methodical and purposeful sprayings were not sudden.   The evidence undisputedly showed that each spraying consisted of an intentional, systematic, and continuous discharge of contaminated waste oil from the tank of a truck through spray nozzles, lasting anywhere from five to ten minutes to an hour.   Such a deliberate process cannot be considered abrupt, unexpected, or unintended under any view of the evidence.   Furthermore, we will not microanalyze Bliss's sprayings in order to find one spraying or one moment that can be considered a sudden polluting event.⁶  (See Travelers, supra, 63 Cal.App.4th at p. 1459, 75 Cal.Rptr.2d 54.)   It would be illogical to isolate each of Bliss's sprayings from the others because his entire pattern of conduct during the summers of 1971 and 1972 showed a methodical business practice of discharging contaminated oil in order to suppress dust.   Nothing about this practice was abrupt, unexpected, or unintentional.   We agree with the conclusion of the Federal District Court for the District of Columbia, which held that Bliss's sprayings were not “sudden” as a matter of law because they “were not isolated, discrete events because each was done within the regular course of Bliss'[s] business․”  (Independent Petrochemical v. Aetna Cas. and Sur. (D.D.C.1994) 842 F.Supp. 575, 583-584;  see Travelers, supra, 63 Cal.App.4th at pp. 1458-1460, 75 Cal.Rptr.2d 54;  Standun, supra, 62 Cal.App.4th at p. 891, 73 Cal.Rptr.2d 116;  A-H Plating, supra, 57 Cal.App.4th at p. 441, fn. 11, 67 Cal.Rptr.2d 113.)

Bliss's actions were certainly not accidental.   Although substantial evidence may show that he did not know that he was discharging a toxic substance, that is irrelevant, because the evidence was undisputed that he or his employees deliberately sprayed oil on the ground.   Because that act of releasing pollutants to the environment was intentional, the discharge or happening was not accidental.  (Travelers, supra, 63 Cal.App.4th at pp. 1458-1459, 75 Cal.Rptr.2d 54;  Standun, supra, 62 Cal.App.4th at p. 891, 73 Cal.Rptr.2d 116.)

No substantial evidence supports the jury's finding that Bliss's discharge of contaminated oil was sudden or accidental.   We reverse the trial court's judgment as to the 1973-1984 policies and order the trial court to vacate its order denying London Insurers' motion for JNOV on these policies, enter a new order granting London Insurers' motion for JNOV, and enter judgment in favor of London Insurers on the 1973-1984 London Insurers' policies.   (Code Civ. Proc., § 629.)

JURY INSTRUCTIONS ON PROPERTY DAMAGE AND BURDEN OF PROOF

I. Background

In Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 654-655, 42 Cal.Rptr.2d 324, 913 P.2d 878 (Montrose ), our Supreme Court interpreted standard comprehensive general liability (CGL) policies such as those in the present case, and concluded that, in third party liability insurance cases involving continuous or progressively deteriorating losses, a “continuous injury” trigger of coverage should be adopted.   Under the theory of continuous injury trigger of coverage, “bodily injuries and property damage that are continuous or progressively deteriorating throughout successive policy periods are covered by all policies in effect during those periods.   The timing of the accident, event, or conditions causing the bodily injury or property damage, e.g., an insured's negligent act, is largely immaterial to establishing coverage;  it can occur before or during the policy period.   Neither is the date of discovery of the damage or injury controlling:  it might or might not be contemporaneous with the causal event.   It is only the effect -the occurrence of bodily injury or property damage during the policy period, resulting from a sudden accidental event or the ‘continuous or repeated exposure to conditions'-that triggers potential liability coverage.”  (Id. at p. 675, 42 Cal.Rptr.2d 324, 913 P.2d 878.)

Both before and during phase I of the trial, the parties had differing views about the standard of proof Syntex bore in order to prove coverage for the bodily injury and property damage claims.   Syntex maintained that it needed only to prove that the underlying claims alleged bodily injury or property damage during a policy period.⁷  Various insurers, including London Insurers, instead asserted that Syntex bore the burden of proving that actual injury or damage occurred during a policy period in order to invoke coverage.

Following the presentation of evidence at phase I, the trial court issued a tentative ruling that the plaintiffs in the underlying lawsuits and government agency claims alleged that exposure to dioxin resulted in long-term and cumulative injury.   The court also held, “The underlying property [damage] claims by the government agencies alleged that dioxin was released into the environment by successive acts and its presence posed a threat to human health.   The claimants alleged continuous and repeated exposure to a continuing series of loss-causing events which began in December 1969 and continued into 1972.   None of the evidence presented during Phase I contradicted these characterizations of the damages.  [¶] ․ [T]his Court holds that all carriers who were on the risk from the inception of harm to the time when the loss was no longer contingent are liable to the insured for the loss.”  (Fn.omitted.)  London Insurers sought clarification of the trial court's ruling, asserting that the issue of when soil contamination occurred is a matter of proof at trial and that London Insurers intended to prove that soil contamination was no longer contingent after Bliss stopped spraying dioxin.   The trial court issued a final decision on phase I that was unchanged with respect to the occurrence or property damage issues.

Before phase II, both parties submitted proposed jury instructions.   Syntex's proposed instruction stated, in relevant part, “The term ‘Occurrence’ wherever used herein shall mean an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period.  [¶] I have already determined that the underlying lawsuits involved claims of continuous or progressively deteriorating personal injury and property damage and that each policy period involved in this lawsuit is therefore potentially liable to Syntex for the underlying lawsuits.  [¶] You must determine whether such personal injury and property damage was expected or intended by Syntex.”  (Italics added.)   London Insurers submitted a proposed instruction which stated that Syntex must prove each element of an occurrence, including property damage.   London Insurers also proposed an instruction that stated in relevant part, “If you find that an occurrence has caused personal injury or property damage, you then must determine when that injury or damage took place.  [¶] Syntex has the burden to prove that an occurrence caused new tangible, appreciable personal injury or property damage to result during the time period when each policy was in effect.  [¶] If personal injury or property damage continues to occur or worsens progressively over a period of time, you may find that each policy during that entire ongoing damaging process applies.”

At the hearing on the proposed jury instructions, the trial court specifically rejected the instruction proposed by London Insurers on property damage and continuous trigger, “because the court finds it is contra to the law of this case as set forth in the decision on phase I issues.   The insured is not required to prove how much damage occurred during a particular policy period.  [¶] ․ [C]onsistent with the continuous trigger approach, the damage which is ultimately discovered after a pollution accident was a direct result of the initial contamination.   All insurance coverage existent during the period that the contamination proliferates should be utilized to indemnify the insured․  [¶] ․ The court holds that under continuous trigger, since it may be impossible to ascribe damage to any particular policy year and the damage proliferation process, the entirety of insurance coverage existent during the years of proliferation should be available, and as stated [in the court's decision following phase I], ‘All carriers who were on the risk from the inception of harm to the time when the loss was no longer contingent are liable to the insured for the loss.’  [¶] Now, ․ [Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 42 Cal.Rptr.2d 324, 913 P.2d 878] left clear the issue of factual proof;  that is, whether in fact there were injuries and damages which were continuous that had yet to be established․  [¶] The insured, however, must show that there were occurrences under the policies;  that these occurrences were an accident, happening or event for which the insured became liable and that as a result there were subsequent continuing damages and injuries for which the insured then did become liable.   [¶] This court held that an occurrence was an act of spraying of dioxin by Russell Bliss.   Since each of the sprayings ․ is an occurrence, it remains only to be established when the sprayings ․ began.   Thus, plaintiff must factually establish an occurrence, the nature of the contaminated material and the nature of the injuries, i.e., dioxin was released into the environment and its presence posed a threat to human health․  [¶] Those are the concepts the court believes that the court must set forth as the duties on that issue;  namely, that the plaintiff has to have factually established an occurrence and the nature of the contaminated material and the nature of spoilation of the environment to make sure they were liable then for certain․”

The “occurrence” instruction finally given to the jury was a slight variation on Syntex's proposed instruction:  “Syntex has the burden of proving by a preponderance of the evidence, separately for each policy period, that any property damage for which it seeks coverage was caused by an occurrence.   The term ‘occurrence’ means an accident or a happening or an event, or a continuous or repeated exposure to conditions which results during the policy period in property damage that Syntex did not expect or intend.  [¶] During an earlier phase of this case, I determined that the underlying lawsuits involved claims of continuous or progressively deteriorating property damage, and that each policy period involved in this lawsuit is therefore potentially liable to Syntex for the underlying lawsuits.   You must determine whether or not any such property damage was expected or intended by Syntex.”   (Italics added.)

The jury did not return a general verdict.   Instead, they were given special verdict forms, requiring them to answer 11 questions with regard to 5 specific factual issues.   Four of the questions are relevant to our discussion.   The first, on expected damage, asked, “Was the kind of property damage for which Syntex seeks coverage expected by Syntex at any of the Bliss sites at any time prior to August 1, 1983?”   The second and third asked, “Was the release of a pollutant or contaminant from which property damage arose both sudden and accidental ․ ?” The fourth question, on the number of occurrences, stated, “Separate occurrences may be combined insofar as the damage constituted ‘exposure to [certain conditions].’  ” Following the jury's verdict making findings in favor of Syntex, London Insurers made a motion for a new trial, and argued that the trial court erred by determining after phase I that all carriers' policies were triggered, by failing to permit London Insurers to adduce evidence on property damage, and by failing to put the issue of property damage before the jury.   The trial court denied the motion.

II. Discussion

London Insurers contend that the trial court erred by determining, in phase I, that London Insurers' indemnity obligations under the 1970-1973 insurance policy were “triggered” as a matter of law based only on the allegations in the underlying complaints and claims by the state and federal government.   As a result of this fundamental error, continues London Insurers, the trial court further erred by determining that Syntex was not required to, and did not, prove that property damage occurred during the period of any insurance policy, and by failing to instruct the jury that they must determine if and when property damage occurred from Bliss's sprayings.   London Insurers conclude that the trial court erred by denying its motion for a new trial based on the erroneous property damage ruling and jury instructions.

Syntex contradicts London Insurers' version of the trial court's phase I decision, contending that the trial court did not preclude evidence on the nature and extent of property damage.   While not actually disputing London Insurers' claim that the jury was improperly instructed, Syntex asserts that it proved the existence of property damage sufficient to trigger the policies and that London Insurers never disputed this evidence.   We hold that the trial court erred in its instructions to the jury.   We further hold that the special verdict forms did not require a finding on the timing, nature, or extent of property damage and that the jury did not make such a finding.   Reviewing the trial court's denial of the motion for a new trial for an abuse of discretion, we conclude that reversal is warranted.  (Mosesian v. Pennwalt Corp. (1987) 191 Cal.App.3d 851, 858, 236 Cal.Rptr. 778 (Mosesian ).)

A. Instruction on Property Damage

 London Insurers first contend that the trial court prejudicially erred by failing to instruct the jury on whether property damage occurred during the 1970-1973 policy period.   We agree that the trial court erred, but find that the error was harmless.

The Montrose court, in conjunction with its discussion of trigger of coverage, observed, “Whether coverage is ultimately established in any given case may depend on the consideration of many additional factors, including the existence of express conditions or exclusions in the particular contract of insurance under scrutiny, the availability of certain defenses that might defeat coverage, and a determination of whether the facts of the case will support a finding of coverage.”  (Montrose, supra, 10 Cal.4th at p. 655, 42 Cal.Rptr.2d 324, 913 P.2d 878, italics added.)   Furthermore, “[w]hether the damages and injuries alleged were in fact ‘continuous' is itself a matter for final determination by the trier of fact.”  (Id. at p. 694, 42 Cal.Rptr.2d 324, 913 P.2d 878.)   This statement of law is a refinement of the requirement placing “[t]he burden ․ on an insured to establish that the occurrence forming the basis of its claim is within the basic scope of insurance coverage.”  (Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1188, 77 Cal.Rptr.2d 537, 959 P.2d 1213 (Aydin ).)

 The trial court has a duty to instruct the jury on the controlling legal issues so that they have an understanding of the law applicable to the facts, even if the parties submit faulty or inadequate instructions.  (Paverud v. Niagara Machine & Tool Works (1987) 189 Cal.App.3d 858, 863, 234 Cal.Rptr. 585 (Paverud ).)   Instructional error is reversible if it seems probable that the error prejudicially affected the verdict.  (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 580, 34 Cal.Rptr.2d 607, 882 P.2d 298 (Soule ).)

 Syntex had the burden of proving that property damage occurred during 1970-1973 in order to establish coverage by the policy in effect during that time.  (Aydin, supra, 18 Cal.4th at p. 1188, 77 Cal.Rptr.2d 537, 959 P.2d 1213;  Montrose, supra, 10 Cal.4th at pp. 659, fn. 9, 694, 42 Cal.Rptr.2d 324, 913 P.2d 878.)   Syntex concedes that the jury was responsible for making this determination in phase II, and that the trial court did not determine in phase I the nature or extent of the damage from dioxin.   The jury, however, was not instructed on the meaning of “property damage,” when property damage occurred at any of the sites Bliss sprayed, or whether the property damage was continuous.   Instead, the jury was instructed that “[d]uring an earlier phase of this case, [the court] determined that the underlying lawsuits involved claims of continuous or progressively deteriorating property damage and that each policy period involved in this lawsuit is therefore potentially liable to Syntex for the underlying lawsuits.   You must determine whether or not any such property damage was expected or intended by Syntex.”   A rational interpretation of this instruction is that the trial court previously made a determination that the property damage was continuous, that it occurred during each policy period and, if the jury found that the damage was not expected or intended by Syntex, then the potential for coverage under the policies becomes actual coverage.   Because the jury was not instructed on a controlling legal issue which was necessary for their understanding of the law as applied to the facts, the trial court erred.  (Paverud, supra, 189 Cal.App.3d at p. 863, 234 Cal.Rptr. 585.) ⁸

 Syntex argues that they met their burden of proving property damage because evidence was presented during phase II showing property damage at all sites sprayed by Bliss during all relevant policy periods, especially the 1970-1973 period.⁹  Syntex implies by this argument that any instructional error was harmless.  (See Soule, supra, 8 Cal.4th at pp. 580-581, 34 Cal.Rptr.2d 607, 882 P.2d 298.)   London Insurers counter that Syntex failed to present evidence at trial that property damage occurred during the 1970-1973 policy period at each site that Bliss allegedly contaminated.

The record reflects that Syntex proved property damage at most of the 27 sites, including Times Beach.   Although we have not combed the record in an effort to discover whether evidence of property damage was presented at each site, London Insurers all but conceded at trial or on appeal that all 27 sites were contaminated as a result of Bliss's sprayings during 1970-1973.   Because London Insurers cannot dispute that property damage results from environmental contamination (see AIU, supra, 51 Cal.3d at p. 843, 274 Cal.Rptr. 820, 799 P.2d 1253), they also cannot dispute that property damage occurred during the 1970-1973 policy period.   We have no doubt that a jury, properly instructed to determine whether and when property damage occurred, would have found property damage at each site during the 1970-1973 policy period.   The instructional error was harmless, because it is improbable that the error prejudicially affected the verdict.  (Soule, supra, 8 Cal.4th at p. 580, 34 Cal.Rptr.2d 607, 882 P.2d 298.)

B. Lack of Special Verdict on Property Damage

 In conjunction with their discussion of the court's error in failing to instruct the jury regarding property damage, London Insurers argue that the error was prejudicial, in part, because the jury did not return a special verdict on the issue of property damage.   We find that the failure to return a special verdict on this issue is, in itself, fundamental or structural error requiring reversal.

“Unlike a general verdict (which merely implies findings on all issues in favor of the plaintiff or defendant), a special verdict presents to the jury each ultimate fact in the case.   The jury must resolve all of the ultimate facts presented to it in the special verdict, so that ‘nothing shall remain to the court but to draw from them conclusions of law.’  (Code Civ. Proc., § 624.)”  (Falls v. Superior Court (1987) 194 Cal.App.3d 851, 854-855, 239 Cal.Rptr. 862.)   A judgment on a cause of action cannot be sustained if the jury has failed to return a special verdict making factual findings necessary for that cause of action.  (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 960-961, 17 Cal.Rptr.2d 242 (Myers Building Industries ).)

By omitting a special verdict form that required the jury to determine when and what type of property damage occurred, the trial court prevented the jury from deciding these crucial issues.   The jury returned special verdicts on five specific factual issues, and none of the jury's answers to the special verdict questions can be construed as determining that property damage occurred during the 1970-1973 policy period.   The special verdict question on expected damage asked, “Was the kind of property damage for which Syntex seeks coverage expected by Syntex at any of the Bliss sites at any time prior to August 1, 1983.”   Similarly, the “sudden and accidental” special verdict question asked in part, “Was the release of a pollutant or contaminant from which property damage arose both sudden and accidental ․ ?” Finally, the special verdict question on the number of occurrences stated, “Separate occurrences may be combined insofar as the damage constituted ‘exposure to [certain conditions].’  ” In all of the special verdict questions the fact that continuing property damage occurred during the relevant policy period is assumed.   The jury was not required to determine if or when property damage occurred at any one site in order to answer the questions the way they did.   Thus, regardless of the fact that substantial evidence may appear in the record that continuing property damage occurred in the relevant policy period, the absence of a jury finding on property damage renders the judgment in Syntex's favor invalid.  (Myers Building Industries, supra, 13 Cal.App.4th at pp. 960-961, 17 Cal.Rptr.2d 242.)   The trial court abused its discretion by denying the motion for a new trial, the verdict in favor of Syntex on the 1970-1973 London Insurer policies must be reversed, and the matter must be retried.  (Soule, supra, 8 Cal.4th at p. 580, 34 Cal.Rptr.2d 607, 882 P.2d 298;  Mosesian, supra, 191 Cal.App.3d at p. 858, 236 Cal.Rptr. 778.)

JURY INSTRUCTIONS ON EXPECTED DAMAGE

 In order for the London Insurers' policies to provide coverage for property damage caused by an occurrence, the damage must be neither expected nor intended from the standpoint of the insured.  (See Shell, supra, 12 Cal.App.4th at p. 743, 15 Cal.Rptr.2d 815.)   London Insurers contend that the trial court prejudicially erred by:  (1) instructing the jury that Syntex did not expect or intended damage unless those persons in Syntex “with the power to bind the corporation” expected or intended property damage;  and (2) refusing to instruct the jury that property damage is expected if Syntex expected any degree of damage from Bliss's sprayings.   We agree that the trial court erred and that the errors were prejudicial.

I. Instruction on Employees' Knowledge of Damage Imputed to Syntex

London Insurers contend that the “power to bind” jury instruction is incorrect, and that the jury should have been instructed that the jury may consider the collective knowledge of the corporation's employees, not simply that of a single person.   We agree.

London Insurers proposed the following jury instruction, which stated in relevant part, “Certain parties in this action are corporations or business entities and as such can act only through their officers and employees or other representatives․  [¶] Knowledge of an officer, employee or other representative within the scope of his or her authority or employment is in law the knowledge of such corporation or business entity.  [¶] The corporation or business entity is considered to have acquired the collective knowledge of its employees.”   The trial court rejected this proposed instruction and held during phase I that “Syntex can only be charged with the knowledge and acts of those executives and officials having the power to bind the corporation.”   The trial court instructed the jury during phase II, “For purposes of determining whether Syntex expected or intended to cause property damage, you must determine what Syntex actually expected or intended, not what Syntex should have expected or intended.  [¶] ․ [¶] Property damage was intended if Syntex acted with the aim or intention of causing the kind of damage for which it seeks coverage.   Syntex did not expect or intend any damage unless individuals in the Syntex corporate structure with the power to bind the corporation expected or intended the damage to occur.  [¶] The power to bind the corporation may result from a person's position or authority within the corporation or that person's specific delegation of such power to another.”

“A party is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him which is supported by substantial evidence.”  (Soule, supra, 8 Cal.4th at p. 572, 34 Cal.Rptr.2d 607, 882 P.2d 298.)   As set out above, instructional error is reversible if it seems probable that the error prejudicially affected the verdict.  (Id. at p. 580, 34 Cal.Rptr.2d 607, 882 P.2d 298.)   Relevant considerations in determining prejudice include:  the state of the evidence;  the effect of other instructions;  counsel's argument;  and indications that the jury was misled, including requests for a repeat of the instruction or a close verdict.  (Id. at pp. 580-581, 34 Cal.Rptr.2d 607, 882 P.2d 298;  LeMons v. Regents of University of California (1978) 21 Cal.3d 869, 876, 148 Cal.Rptr. 355, 582 P.2d 946 (LeMons ).)

We begin with the problem that the trial court tried to solve:  how can Syntex subjectively expect or intend property damage?   A corporation cannot know, believe, intend, or expect anything.  “[I]ts knowledge, belief, or intent must ultimately be the knowledge, belief, or intent of the people-the officers, managers, and employees-who link the corporate abstraction to the real world.”  (FMC Corp. v. Plaisted & Companies (1998) 61 Cal.App.4th 1132, 1212, 72 Cal.Rptr.2d 467 (FMC ).)

 Under the doctrine of imputed knowledge, “[a] principal is chargeable with and is bound by the knowledge of, or notice to, his agent received while the agent is acting within the scope of his authority and which is with reference to a matter over which his authority extends.”  (Columbia Pictures Corp. v. DeToth (1948) 87 Cal.App.2d 620, 630, 197 P.2d 580 (Columbia Pictures );  see Civ.Code, § 2332;  Northern Natural Gas Co. v. Superior Court (1976) 64 Cal.App.3d 983, 992, 134 Cal.Rptr. 850.)   Similarly, a corporation, as the principal, is charged with the knowledge of its current agents and of information actually contained in its records.  (San Diego Hospice v. County of San Diego (1995) 31 Cal.App.4th 1048, 1056, 37 Cal.Rptr.2d 501 (San Diego Hospice );  Sanfran Co. v. Rees Blow Pipe Mfg. Co. (1959) 168 Cal.App.2d 191, 205, 335 P.2d 995.)   The fact that the agent does not communicate the knowledge to the principal is irrelevant;  the knowledge is imputed by law.  (Columbia Pictures, supra, 87 Cal.App.2d at p. 630, 197 P.2d 580.)   It is similarly irrelevant that no one employee possesses all of the information constituting the knowledge chargeable to the corporation;  the knowledge is imputed.  (Sanders v. Magill (1937) 9 Cal.2d 145, 154, 70 P.2d 159;  People v. Forest E. Olson, Inc. (1982) 137 Cal.App.3d 137, 140, 186 Cal.Rptr. 804.)

In the context of what a corporation subjectively expects or intends under Shell, a jury should be informed, upon a party's request, that the collective knowledge of a corporation's employees which they receive while acting within the scope of their authority and which is with reference to a matter over which their authority extends is the knowledge of the corporation.  (See FMC, supra, 61 Cal.App.4th at pp. 1212-1213, 72 Cal.Rptr.2d 467.)   The trial court erred by failing to give London Insurers' instruction upon request.   The court compounded this error when it incorrectly instructed the jury that Syntex's knowledge consists only of the knowledge of those individuals with the power to bind the corporation.

Syntex argues, and the trial court agreed with this reasoning, that a “long line of cases” establishes that the only relevant expectation or knowledge of a corporation is that of its management, directors, or executives.   Syntex contends that imputing the knowledge of lower ranking employees to the corporation confuses issues of vicarious liability-by which Syntex refers to the doctrine of respondeat superior-with insurance coverage.   We disagree.   It is Syntex who has dragged the red herring of vicarious liability through this issue.   We are not relying on principles of vicarious liability to hold that the knowledge of the employees of a corporation may, under appropriate circumstances, be imputed to the corporation, but on general principles of agency.   None of Syntex's authorities hold that a special rule of imputed knowledge applies in the insurance coverage arena.

 Syntex also argues that London Insurers' reliance on the imputed knowledge doctrine of Civil Code section 2332 ¹⁰ is misplaced because the rule applies only when objectively reasonable knowledge is at issue, and not when the issue is the subjective, actual knowledge of a corporation.   First, the two California cases that Syntex cites, Snook v. Netherby (1954) 124 Cal.App.2d 797, 802, 269 P.2d 195, and Harte v. United Benefit Life Ins. Co. (1967) 66 Cal.2d 148, 153, 56 Cal.Rptr. 889, 424 P.2d 329, analyzed problems of an individual's bad or good faith based on the knowledge of that person's agent.   These cases are inapposite because they do not analyze or discuss what constitutes a corporation's knowledge.   Second, the California cases that have examined the issue of a corporation's actual knowledge apply or approve of the imputed knowledge doctrine.  (See FMC, supra, 61 Cal.App.4th at pp. 1212-1213, 72 Cal.Rptr.2d 467;  San Diego Hospice, supra, 31 Cal.App.4th at pp. 1054-1056, 37 Cal.Rptr.2d 501.)   In fact, FMC specifically approved of jury instructions such as London Insurers proposed on the imputed knowledge of a corporation where the issue was whether, under a CGL insurance policy, a corporation subjectively expected or intended property damage from a polluting event.  (FMC, supra, 61 Cal.App.4th at pp. 1212-1213, 72 Cal.Rptr.2d 467.)   Third and finally, the very nature of a corporation's knowledge, intentions, or beliefs is a fiction.   Only through a corporation's officers, employees, and documents, can a corporation know something or ought to know something.   If persons within the corporation acting as its agents actually know a thing (or documents show knowledge of a thing), then the corporation actually knows a thing.   The corporation can only know what is imputed to it.   On the other hand, if persons or documents within the corporation indicate that an objective, reasonable person possessing such information would know or should have known a thing, then the corporation objectively knows that thing.  (See Shell, supra, 12 Cal.App.4th at pp. 743-745, 15 Cal.Rptr.2d 815 [discussing difference between objective and subjective expectation] ).  Civil Code section 2332 does not impose an objective standard on a corporation's expectations or intentions;  it simply provides a practical way to determine whether and what a corporation knows.   We reject Syntex's argument.

We hold that the trial court's instructional errors were prejudicial.   The trial court's incorrect instruction limiting the jury's consideration of relevant corporate knowledge to high level Syntex officials “with the power to bind” rendered Vanderhoof's knowledge of Bliss's sprayings irrelevant.   Vanderhoof's testimony was significant because the jury could have imputed his knowledge to Syntex to establish that Syntex knew of Bliss's activities sometime during the summer of 1971.   The jury could have considered both his knowledge and Bagby and Moll's knowledge of the toxic nature of still bottoms to conclude that Syntex expected property damage of some form to result from Bliss's sprayings.   The jury was unable to do so, however, because the power to bind instruction made his testimony, and knowledge, inapplicable to Syntex.   Moreover, Syntex's attorneys exploited the “power to bind” instruction in their closing argument by contending that the relevant expectations were those of a “certain level of management,” and that Vanderhoof “did not have responsibilities for binding Syntex or Hoffman-Taff with respect to NEPACCO.”   Consequently, Syntex's attorneys argued that Syntex did not know or expect Bliss's activities to cause damage.   Finally, the jury asked for copies of the erroneous instruction, and returned a nonunanimous verdict on the expected damage issue.   These combined factors establish the probability that the erroneous instructions prejudicially affected the verdict.  (Soule, supra, 8 Cal.4th at pp. 580-581, 34 Cal.Rptr.2d 607, 882 P.2d 298;  LeMons, supra, 21 Cal.3d at p. 876, 148 Cal.Rptr. 355, 582 P.2d 946.)

II. Instruction on Degree or Kind of Damage Expected by Syntex

 London Insurers contend that the trial court erred by failing to instruct the jury that property damage is expected if Syntex expected any degree of damage from Bliss's sprayings.   Syntex does not dispute London Insurers' contention that the trial court erred by failing to give London Insurers' proposed instruction.   Instead, Syntex argues that, because no substantial evidence exists showing that Syntex expected any damage, London Insurers were not entitled to the instruction.   We disagree.

Before phase II, London Insurers proposed an instruction stating that, in order for a policy to provide coverage, Syntex had the burden of proving that it did not expect or intend any injury or property damage to result in that policy period from each occurrence.   The instruction also stated, “If Syntex expected or intended any kind of damage, it does not matter that the actual damage caused is of a different character or magnitude than that expected or intended.”   The trial court instead instructed the jury, “Property damage was expected if Syntex knew or believed the kind of damage for which it seeks coverage was substantially certain or highly likely to result.  [¶] Property damage was intended if Syntex acted with the aim or intention of causing the kind of damage for which it seeks coverage.”

 As noted above, the 1970-1973 policy provides coverage for an occurrence that results in property damage only if it is neither expected nor intended from the standpoint of the insured.   Under this policy provision, the settled law is that there is no coverage for property damage if an insured intends or expects property damage from an occurrence;  it is immaterial whether the insured expected or intended the nature or extent of property damage that results.  (FMC, supra, 61 Cal.App.4th at pp. 1174, 1176, 1179-1180, 72 Cal.Rptr.2d 467;  United States Fid. & Guar. Co. v. American Employer's Ins. Co. (1984) 159 Cal.App.3d 277, 290-291, 205 Cal.Rptr. 460 (USF & G ).)

Vanderhoof testified that he knew that Bliss was spraying still bottoms on roads as a dust suppressant.   Bagby and Moll testified that they knew that NEPACCO's still bottoms were toxic.   Imputing this knowledge to Syntex, one could conclude that Syntex knew that Bliss was spraying toxic chemicals on roads.   A jury could reasonably infer that Syntex expected property damage of some sort to result.   Because substantial evidence supports the instruction, the trial court erred by failing to instruct the jury that, if Syntex expected any property damage, coverage is precluded, even though Syntex did not expect the nature or extent of damage that actually resulted.  (FMC, supra, 61 Cal.App.4th at pp. 1174, 1176, 1179-1180, 72 Cal.Rptr.2d 467;  USF & G, supra, 159 Cal.App.3d at pp. 290-291, 205 Cal.Rptr. 460;  Soule, supra, 8 Cal.4th at p. 572, 34 Cal.Rptr.2d 607, 882 P.2d 298.)

 Syntex also contends that no instruction was warranted because Syntex's attorneys did not argue that they expected a different type of property damage than actually occurred, but instead argued that “[t]here was no expectation of property damage by the people at Hoffman-Taff or Syntex at any point in time․”  (Emphasis added.)   Syntex's argument does not pertain to the instructional error, however, but to whether that error was harmless.   Analyzing the relevant considerations under Soule, supra, 8 Cal.4th at pages 580-581, 34 Cal.Rptr.2d 607, 882 P.2d 298, and LeMons, supra, 21 Cal.3d at page 876, 148 Cal.Rptr. 355, 582 P.2d 946, we conclude that the error was prejudicial.

As discussed above, substantial evidence existed at trial from which the jury could find that Syntex expected damage to result from some of Bliss's sprayings.   The instructional error here was compounded by the trial court's failure to instruct the jury that the knowledge of Syntex's employees could be imputed to Syntex.   Because the jury was told, in essence, to disregard Vanderhoof's testimony, it was precluded from determining whether his knowledge of Bliss's sprayings resulted in Syntex's expectation of damage from the sprayings.   No other instructions cured the failure to instruct on the extent of expected damage.   Although Syntex's attorneys argued to the jury that they expected no harm, this consideration does not outweigh the other factors indicating that the instructional error was prejudicial.   We conclude that all of the factors together establish the probability that the erroneous instructions prejudicially affected the verdict.  (Soule, supra, 8 Cal.4th at pp. 580-581, 34 Cal.Rptr.2d 607, 882 P.2d 298;  LeMons, supra, 21 Cal.3d at p. 876, 148 Cal.Rptr. 355, 582 P.2d 946.)   London Insurers is entitled to a new trial with respect to the 1970-1973 policy with correct instructions on expected damage.

RULING ON “ALL SUMS”

 London Insurers raise one final issue with which we find no merit.¹¹  All of the insurance policies state in relevant part that London Insurer was obligated to “indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability [¶] ․ imposed upon the Assured by law ․ [¶] ․ [¶] for damages, direct or consequential and expenses on account of ․ [¶] ․ [¶] ․ Property Damage, [¶] ․ [¶] caused by or arising out of each occurrence․”  (Italics added.)   The trial court interpreted the “all sums” clause in phase I as follows:  “[O]nce a policy is triggered by an occurrence resulting in damages during the policy term, the scope of the insurers' obligation is to pay for all damages resulting from that occurrence, even those occurring beyond the policy period.”   London Insurers contend that this interpretation is incorrect, and that London Insurers was obligated only with respect to damage which occurs during the policy period.

After the initial briefs in this case were filed, but before we issued our initial decision in this matter and before the petition for rehearing was filed, our Supreme Court decided this issue.  Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 56-57, 70 Cal.Rptr.2d 118, 948 P.2d 909, held that the “all sums” clause in standard CGL policies obligate an insurer to indemnify an insured for “all specified harm caused by an included occurrence, even if some such harm results beyond the policy period.   [Citation.]  In other words, if specified harm is caused by an included occurrence and results, at least in part, within the policy period, it perdures to all points of time at which some such harm results thereafter.”  (See id. at p. 57, fn. 10, 70 Cal.Rptr.2d 118, 948 P.2d 909;  Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co. (1996) 45 Cal.App.4th 1, 50, 105, 52 Cal.Rptr.2d 690.)   Because the court's decision in Aerojet-General is binding on us, we reject London Insurers' argument and affirm the trial court on this issue.  (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.)

DISPOSITION

The order and judgment of the trial court denying London Insurers' motion for JNOV as to the pollution exclusion clauses in the 1973-1984 policies is reversed.   The trial court is directed to enter a new judgment finding that London Insurers has no duty to indemnify Syntex under the 1973-1984 policies for damage caused by Bliss's release of dioxin-tainted oil.   The judgment of the trial court determining that London Insurers must indemnify Syntex under the 1970-1973 policy is reversed, and the matter remanded to the trial court for further proceedings consistent with this decision, including retrial of those factual issues necessary for a declaration of London Insurers' indemnity obligations under the 1970-1973 policies as to the government clean-up claims.

London Insurers to recover costs on appeal.

FOOTNOTES

1.   Following our initial decision, we granted rehearing in order to consider issues relating to the 1970-1973 policy.

2.   Different definitions of “occurrence” contained in other policies were similar in all material respects to the most prevalent definition.

3.   The United States alleged that Syntex was liable for abatement and clean-up costs for the Bliss dioxin pollution based on their status as a past or present owner or operator of a facility that has generated, disposed of, arranged for disposal of, or contributed to the disposal of hazardous wastes under 42 United States Code sections 6903, 6973, 9606 and 9607.  (See U.S. v. Bliss (E.D.Mo.1987) 667 F.Supp. 1298, 1304-1314 [discussing theories of liability under CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. § 9601 et seq.)) and RCRA (Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.))].)

4.   The parties agree that the phrases “sudden, unintended and unexpected” and “sudden and accidental” in the two pollution exclusions have equivalent meanings.

5.   Syntex asserts that Shell and A-H Plating hold that the sudden or accidental nature of a polluting event is to be viewed from the insured's perspective.   However, those cases did not involve pollution that was caused by a third party.   In both cases, the insured either caused the pollution or the pollution occurred on the insured's property.   (See A-H Plating, supra, 57 Cal.App.4th at pp. 436-439, 67 Cal.Rptr.2d 113;  Shell, supra, 12 Cal.App.4th at pp. 732-734, 15 Cal.Rptr.2d 815.)  Shell and A-H Plating are factually inapposite, and therefore unhelpful to the precise issue discussed here.We agree with Syntex that an “accidental” event, because it is synonymous with an unexpected and unintentional event, is to be viewed from a subjective standpoint.  (See Shell, supra, 12 Cal.App.4th at pp. 745, 754-755, 15 Cal.Rptr.2d 815.)   But a subjective standard does not compel the conclusion that an event must be viewed from the insured's perspective.   One cannot determine whether an event was sudden or accidental without examining its cause.   If the event was caused by human agency, then we must look to the actor's state of mind to determine if the event was accidental.   That actor may or may not be the insured.

6.   We also will not unnaturally focus our inquiry on the moment at which the polluting substance is released into the environment in order to determine if the event is “sudden.”   Syntex is correct that, in Shell, supra, 12 Cal.App.4th at page 756, 15 Cal.Rptr.2d 815, we stated that the word “sudden” in a pollution exclusion “refers to the pollution's commencement and does not require that the polluting event terminate quickly or have only a brief duration.”   We also implied that a polluting event could continue unabated for some period of time and still be considered sudden and accidental.  (Ibid.) The precise issue that we decided in Shell was whether the trial court correctly defined the word “sudden” in jury instructions as containing a temporal element as opposed to simply meaning “unexpected.”  (Id. at p. 752, 15 Cal.Rptr.2d 815.)   We concluded that, if “sudden” were to have any significance in the phrase “sudden and accidental,” it must convey “the sense of an unexpected event that is abrupt or immediate in nature.”  (Id. at p. 755, 15 Cal.Rptr.2d 815.)   We therefore reject Syntex's argument.

7.   Before phase I, Syntex proposed a jury instruction, presumably for phase II of the trial, which stated that it was Syntex's burden to prove coverage by showing that bodily injury occurred during the policy period.   The proposed jury instruction stated that “Syntex is not required to prove that the underlying claimants were actually injured․  Rather, Syntex is required to demonstrate that ․ the settled claims asserted injury that was alleged by the underlying claimants to be cumulative or progressive in nature.”   Significantly, the trial court agreed with this portion of Syntex's proposed instruction in November 1993, holding, “Syntex's settlement of the underlying Missouri dioxin claims is presumptive evidence of the insured's liability towards those claims.   Should the insurers be successful in rebutting the presumption of liability, Syntex will carry the burden of persuasion for proving the facts necessary to demonstrate coverage.”   The court reserved for trial the question of what trigger of coverage theory should apply.

8.   Syntex asserts that the trial court was justified in rejecting London Insurers' proposed property damage instruction because it required the jury to find that “new[,] tangible, appreciable ․ property damage” occurred during each policy period.   We will assume without deciding that Syntex is correct that the instruction was partially incorrect because it required a finding that the property damage in each policy period was new, tangible, and appreciable.   The potentially faulty proposed instruction, however, did not relieve the trial court of its duty to correctly instruct the jury on controlling legal principles on material issues.  (Paverud, supra, 189 Cal.App.3d at p. 863, 234 Cal.Rptr. 585.)   We reject Syntex's justification for the court's failure to instruct.

9.   Syntex also contends that London Insurers were not prevented from presenting evidence on property damage by the trial court, and they therefore waive any error regarding their failure to present evidence on the issue.   We disagree.   Although the trial court's comments at the hearing on proposed jury instructions before phase II were somewhat contradictory concerning Syntex's burden of proof, the court specifically noted that Syntex “is not required to prove how much damage occurred during a particular policy period.”   London Insurers could only assume that the trial court's decision following phase I meant what it said;  that Syntex was not required to prove property damage.   Under those circumstances, London Insurers cannot be faulted for failing to present whatever evidence they might have mustered on the issue, and we will find no basis for waiver.  (Alexander v. Nextel Communications, Inc. (1997) 52 Cal.App.4th 1376, 1382, 61 Cal.Rptr.2d 293.)

10.   Civil Code section 2332 states:  “As against a principal, both principal and agent are deemed to have notice of whatever either has notice of, and ought, in good faith and the exercise of ordinary care and diligence, to communicate to the other.”

11.   London Insurers raised two further contentions that affect the 1973-1984 policies only:  The trial court erred by denying London Insurers' JNOV motion because no evidence contradicted the evidence showing that Syntex expected soil contamination no later than 1974, and by instructing the jury that Syntex had a duty to disclose information to London Insurers that it knew or believed was material to the coverage it sought.   We need not reach these issues because we have held that London Insurers are entitled to a JNOV on the 1973-1984 policies based on the pollution exclusion clauses in those policies.

WALKER, J.

CORRIGAN, Acting P.J., and PARRILLI, J., concur.