SERVICE CONTROL CORPORATION v. LIBERTY MUTUAL INSURANCE COMPANY (1996)

Service Control Corporation (SCC) and Diocese of San Diego Education and Welfare Corporation and Roman Catholic Bishop of San Diego (Diocese) jointly appeal a summary judgment in favor of Liberty Mutual Insurance Company (Liberty) and American National Fire Insurance Company (American).   The judgment was entered in SCC's and Diocese's consolidated actions for declaratory relief, breach of contract and related causes of action arising out of defendants' denial of liability insurance coverage to SCC for contaminating Diocese's property with pollutants leaked from underground storage tanks on SCC's property.   SCC and Diocese contend (1) Liberty and American breached their duty to defend SCC against Diocese's underlying action for damages because there were factual and policy-interpretive potentials for coverage;  (2) there is a triable issue of fact whether the discharge of pollutants from SCC's underground tanks was “sudden” and therefore covered under the “sudden and accidental” exception to the pollution exclusion contained in defendants' policies;  and (3) defendants had a duty to indemnify SCC because the term “sudden” as used in the exception to the pollution exclusions should be construed to mean “unexpected and unintended.”   We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Morrissons of San Diego, Inc. dba California Linen Supply (Morrissons) and its predecessor operated a commercial laundry and dry cleaning business on real property located at the corner of Sixteenth Street and Imperial Boulevard in San Diego from about 1905 until December 1985 when SCC acquired all of Morrissons' assets, including its insurance policies and the property on Sixteenth and Imperial.   From the early 1900's to the 1950's, several underground storage tanks were installed on SCC's property for the purpose of storing various liquids and solvents, including “Stoddard solvent,” a fluid used in dry cleaning.

Diocese operates the St. Vincent de Paul/Joan Kroc Center for the Homeless (the Center) on property it owns located cater-corner to SCC's property.   In 1985, an explosion occurred during excavation for the Center's foundation.   An ensuing investigation revealed the explosion was caused by the interaction of Stoddard solvent vapors with friction generated by excavation machinery drilling action.   The Stoddard solvent contaminant was traced to underground storage tanks on SCC's property.

When Diocese sued Morrissons and SCC,¹ SCC tendered its defense to the liability insurers who insured SCC or Morrissons during the relevant period, including American and Liberty.   Liberty insured Morrissons/SCC under a $500,000 primary policy and a $5 million excess policy, and American insured SCC under a $10 million umbrella policy.   Both policies contained nearly identical language excluding “property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water;  but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.” ²

Both Liberty and American rejected SCC's defense.   Liberty based its denial of SCC's tender on its review of the underlying complaint and a July 1989 report prepared by Woodward–Clyde Consultants concerning the underground tanks on SCC's property and submitted to Liberty by SCC.   Attached to the Woodward–Clyde report was a report by a representative from the San Diego County Department of Health Services (DHS) on the removal of two underground tanks which had been used to store Stoddard solvent on SCC's property in June 1986.   The DHS representative noted moderate rusting and corrosion and three holes on the bottom of the tank identified as tank number 6.   He further noted the soil beneath tank 6 was extensively contaminated with what proved to be Stoddard solvent.   The Woodward–Clyde report revealed tank 6 was installed in 1958.

Diocese's underlying action against SCC was tried in December 1989.   The court entered a directed verdict against SCC on the issue of liability, based largely on stipulated facts.   Following a bench trial on the issues of damages and contributory negligence, the court entered judgment in favor of Diocese in the amount of $15,825,000.

Diocese and SCC settled the underlying action and SCC assigned Diocese its indemnity rights against its insurers.   SCC retained the right to pursue claims against the insurers for recovery of defense costs, damages resulting from their refusal to settle, and punitive damages.

Diocese's suit against various insurers, including Liberty and American, to recover judgment under Insurance Code section 11580, subdivision (b)(2), declaratory relief and breach of contract, was consolidated with SCC's action against the insurers for declaratory relief, breach of contract, tortious breach of the implied covenant of good faith and fair dealing, deceit and punitive damages.

Liberty and American jointly moved for summary judgment, or summary adjudication based on the pollution exclusion in their policies, and a separate joint motion seeking summary adjudication of SCC's cause of action for breach of the implied covenant of good faith and fair dealing and claim for punitive damages.   Liberty additionally moved for summary adjudication of SCC's deceit cause of action.

The court granted summary adjudication against SCC on its deceit cause of action and claim for punitive damages.   However, the court denied Liberty's joint motion for summary judgment based on the pollution exclusion and motion for summary adjudication of SCC's bad faith cause of action, finding the phrase “sudden and accidental” in the pollution exclusion was capable of more than one reasonable interpretation.

Liberty then moved for reconsideration of its motion for summary judgment/adjudication of the “sudden and accidental” exception to the pollution exclusion and American filed a “joinder” in Liberty's motion.   The motion for reconsideration was based on the recent opinion in Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 15 Cal.Rptr.2d 815, in which the court held the word “sudden” as used in the standard pollution exclusion is unambiguous and means “abrupt or immediate in nature.”  (Id. at p. 755, 15 Cal.Rptr.2d 815.)   After additional briefing and submission of evidence by all parties, the court granted defendants' motion and summary judgment in their favor based on the pollution exclusion in their policies and the authority of Shell Oil Co.

DISCUSSION

I. Standard of Review

 On appeal from a ruling on a motion for summary judgment, the appellate court conducts its own independent review of the moving and opposition papers and applies the same standard as the trial court in determining whether there exists no triable issue of material fact and thus whether the motion was properly granted.  (California Aviation, Inc. v. Leeds (1991) 233 Cal.App.3d 724, 730–731, 284 Cal.Rptr. 687.)

II. Duty to Indemnify

A. “Sudden and Accidental” Exception to the Pollution Exclusion

 SCC and Diocese contend Liberty and American had a duty to indemnify SCC because the term “sudden and accidental” as used in the exception to the pollution exclusion should be construed to mean “unexpected and unintended.”

Courts nationwide are divided as to the meaning of “sudden” as that word is used in the exception to the pollution exclusion.  (See Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at pp. 752–756, 15 Cal.Rptr.2d 815;  ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co. (1993) 17 Cal.App.4th 1773, 1779–1783, 22 Cal.Rptr.2d 206.)   Some courts have held the word “sudden” is ambiguous in that it can reasonably be defined to mean either “abrupt” or “unexpected and unintended,” and therefore must be construed against the insurer to mean the latter.  (See ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at pp. 1780–1781, 22 Cal.Rptr.2d 206, fns. 14–22.)   Other courts hold the term “sudden,” as used in the pollution exclusion, necessarily has a temporal aspect.   These courts find the word “sudden” unambiguously means “abrupt” or “immediate,” as well as “unexpected.”  (Id. at pp. 1779–1780, 22 Cal.Rptr.2d 206, fns. 2–13.)

Shell Oil Co. interpreted “sudden and accidental” in accordance with two well-established rules of construction:

“(1) we interpret policy language in its ordinary and popular sense unless the parties expressed a contrary intent [citations];  and (2) ‘[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.’  [Citation.]   The way we define words should not produce redundancy, but instead should give each word significance.  [Citation.]”  (Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at p. 753, 15 Cal.Rptr.2d 815.)

Shell Oil Co. noted that while there is an element of unexpectedness to the meaning of “sudden,”

“saying that ‘sudden’ means ‘unexpected,’ and nothing more, strips the word of a significant facet of its ordinary meaning.   Sudden events derive an ‘unexpected’ quality both from being unforeseen and from having a comparatively quick onset.   We cannot reasonably call ‘sudden’ a process that occurs slowly and incrementally over a relatively long time, no matter how unexpected or unintended the process.   A ‘discharge, dispersal, release or escape’ of pollutants that happens gradually and continuously for years is not ‘sudden’ in the ordinary and popular sense of the word.  [Citation.]   Thus, ‘sudden’ necessarily contains a temporal element in addition to its connotation of the unexpected.

“This approach also avoids making ‘sudden’ and ‘accidental’ redundant.   Dictionaries define as ‘accidental’ unexpected and unintended events.   California law also equates ‘accident’ with unexpected and unintended events.  [Citations.]

“An ‘accidental’ event is both unintended and unexpected;  omitting either leaves an important part of the word's meaning unexpressed.   A ‘discharge, dispersal, release or escape’ of pollutants that is expected is not accidental, regardless of whether it was not intended.   Therefore, in the phrase, ‘sudden and accidental,’ ‘accidental’ conveys the sense of an unexpected and unintended event, while ‘sudden’ conveys the sense of an unexpected event that is abrupt or immediate in nature.  ‘Sudden and accidental’ is not ambiguous if we give the words their full significance.   A court should not make a phrase ambiguous by unreasonably truncating a word's meaning.”  (Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at pp. 754–755, 15 Cal.Rptr.2d 815, fn. omitted.)

Applying the rule that contract language is to be construed in the context of the instrument as a whole, ACL Technologies noted:

“[t]he most immediate ‘context’ for the word ‘sudden’ is its link, in the pollution exclusion, to the word ‘accidental.’   Plainly, for there to be coverage (i.e., for the exclusion not to apply), the release must be both ‘sudden and accidental.’   If, in the context of the pollution exclusion, ‘sudden’ meant merely ‘unexpected,’ then it would have no independent meaning, as the idea would also be subsumed within the word ‘accidental.’   The word would be reduced to surplusage.   In California, however, contracts—even insurance contracts—are construed to avoid rendering terms surplusage.  [Citations.]

“․

“Even if, for the sake of argument, there is some ‘abstract’ sense in which the word ‘sudden’ does not necessarily convey a temporal meaning, the context of its placement in the phrase ‘sudden and accidental’ necessarily conveys a temporal meaning.   In the context of that phrase, the word must, if it is to be anything more than a hiccup in front of the word ‘accidental,’ convey a ‘temporal’ meaning of immediacy, quickness, or abruptness.”  (ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at pp. 1785–1786, 22 Cal.Rptr.2d 206, italics in original.)

We believe Shell Oil Co., ACL Technologies, and the out-of-state cases discussed therein construing “sudden” to mean “abrupt” in the context of the pollution exclusion, are better reasoned than those out-of-state opinions finding the word “sudden” to be ambiguous.   We follow Shell Oil Co. and ACL Technologies and conclude the phrase “sudden and accidental” as used in the pollution exclusion unambiguously means abrupt and unexpected.  (Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at p. 755, 15 Cal.Rptr.2d 815.)

SCC and Diocese contend the drafting history of the pollution exclusion establishes “sudden” should be construed to mean “unexpected and unintended.”   This argument was thoroughly addressed and correctly rejected in ACL Technologies.   First, ACL Technologies pointed out the drafting history argument is inconsistent with the rule that contract language governs if it is clear and explicit and, therefore, extrinsic evidence is not considered in construing a contract unless an ambiguity is shown.  (ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at pp. 1790–1791, 22 Cal.Rptr.2d 206, citing Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 and AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822, 274 Cal.Rptr. 820, 799 P.2d 1253.)   As discussed above, the phrase “sudden and ambiguous” is not ambiguous.  “Second, reliance on extrinsic drafting history contradicts the basic rule that words in insurance policies should be interpreted as laypersons would interpret them.  [Citation.]”  (ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at pp. 1791–1792, 22 Cal.Rptr.2d 206.)   As Shell Oil Co. noted, the distinction between “sudden” and “unexpected” or “unintended” “lies in the temporal connotation inherent in the ordinary meaning of ‘sudden.’ ”  (Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at p. 753, 15 Cal.Rptr.2d 815, italics added.) ³

We agree with ACL Technologies the drafting history of the pollution exclusion is not relevant to the interpretation of the phrase “sudden and accidental” as used in that exclusion.⁴

B. The Evidence Fails to Raise a Triable Issue of Fact As To Whether the Release of Pollutants Was Sudden

 Preliminarily, we reject plaintiffs' contention defendants' burden in seeking summary judgment was to prove the discharge of pollutants from tank 6 could not have occurred abruptly under any hypothesis presented by plaintiffs.   Under the present law, as well as the law in effect in 1992 when defendants' motion for summary judgment was filed, the task of the trial court in ruling on a motion for summary judgment and the appellate court in reviewing such motion de novo is to determine whether the moving party establishes facts that negate the opposition's claim(s) and justify judgment in the moving party's favor.   If the motion prima facie justifies judgment in favor of the moving party, the court must determine whether the opposition shows a triable, material factual issue.  (Torres v. Reardon (1992) 3 Cal.App.4th 831, 836, 5 Cal.Rptr.2d 52.)

 In opposing Liberty and American's original joint motion for summary judgment based on the pollution exclusion, SCC and Diocese did not argue there was evidence of a “sudden” (i.e. abrupt) release of pollutants from SCC's property.   In their moving papers, Liberty and American contended it was undisputed the underground tanks used to store Stoddard solvent removed from SCC's property in June 1986 “contained [at the time of removal] numerous holes caused by corrosion.”  (Italics added.)   SCC and Diocese responded as follows:  “The characterization of ‘numerous' is disputed, however, the remainder of [the asserted fact] is undisputed.”   Thus, while they apparently felt it was an overstatement to say there were numerous holes in the Stoddard solvent tanks, they initially conceded the tanks (or at least one of them) contained holes caused by corrosion, and focused their argument regarding the pollution exclusion entirely on the issue of whether the word “sudden” is ambiguous and should be construed to mean unexpected and unintended.   Only after Liberty and American moved for reconsideration based on Shell Oil Co. did SCC and Diocese contend there was a triable issue of fact as to whether the release of pollutants was sudden in the sense of abrupt.

Thus, Liberty and American made a prima facie showing of entitlement to judgment based on the pollution exclusion by presenting uncontroverted evidence that holes caused by corrosion were observed in tank 6 when it was removed, and the contamination of Diocese's property occurred over a lengthy period of time.   The reasonable inference from this evidence is that the Stoddard solvent contaminating Diocese's property leaked out of tank 6 gradually.   As counsel for SCC conceded during oral argument on the motion for reconsideration, tank leakage due to corrosion is by definition gradual leakage.   Consequently, in opposing defendants' motion for reconsideration based on the holding in Shell Oil Co., it was plaintiffs' burden to present evidence raising a triable issue of fact as to whether the holes in tank 6 were formed abruptly by some cause other than corrosion, resulting in a sudden, as opposed to gradual, release of Stoddard solvent from the tank.   SCC and Diocese were unable to meet this burden.

Their principle evidence on the issue of whether there was a sudden release of Stoddard solvent from tank 6 was the declaration of Richard Bergeron, an engineer employed by SCC.   Bergeron declared he observed three holes in the bottom of tank 6 spaced about 24 inches apart in a straight line, each about the size of a half-dollar.   Bergeron further stated he had independent knowledge there were three standpipes on the inside of the tank, each of which was attached to a separate pump on the top of the tank that serviced a separate dry cleaning machine.   Bergeron averred the three standpipes came to within several inches of the bottom of the tank and lined up with the three holes he observed in the bottom of the tank.

SCC and Diocese also presented the declaration of metallurgist James F. Jenkins who, based on Bergeron's observations, opined:  “The proximity of the holes to the standpipes, and the regular pumping of solvents up the standpipes to the dry cleaning equipment and the kinetic energy generated by those liquids falling to the bottom of the tank when the pumps were turned off is a logical mechanism to have accelerated the internal breakdown of the tanks beyond the usual and normal wear of a tank.”   Jenkins further stated the arrangement of the holes was “not a typical pattern associated with the breakdown of a tank and strongly points to an unusual phenomena [sic],” there was a “high probability that all three holes were, timewise, created in close proximity to each other[,]” and that “the shift from one mode to the other mode would have been abrupt.”   SCC and Diocese contend these declarations raise a triable issue of fact as to whether the release of Stoddard solvent from tank 6 was sudden.   We disagree.

 Bergeron's declaration is the only evidence there were three holes of similar size and in a straight line on the bottom of tank 6.   However, Bergeron's declaration is of little evidentiary value because it directly contradicts deposition testimony he gave in the underlying action.   In his deposition in the underlying action, Bergeron testified he did not observe any holes in the bottom of tank 6 at the time it was removed and he did not know whether there were any holes in the tank.

“In determining whether any triable issue of material fact exists, the trial court may, in its discretion, give great weight to admissions made in deposition and disregard contradictory and self-serving affidavits of the party.  [Citations.]  ‘In reviewing motions for summary judgment, the courts have long tended to treat affidavits repudiating previous testimony as irrelevant, inadmissible, or evasive.  [Citation.]’  [Citation.]   The rule is equally applicable to a conflict between the affidavit and deposition testimony of a single [nonparty] witness.”  (Preach v. Monter Rainbow (1993) 12 Cal.App.4th 1441, 1451, 16 Cal.Rptr.2d 320, italics added;  see also Weil & Brown, Cal.Practice Guide:  Civil Procedure Before Trial (The Rutter Group 1995) §§ 10:157.2, 10:157.3 rev. # 1, 1994, pp. 10–43.)

Thus, while Bergeron's statement he observed three holes in tank 6 is corroborated by the report of the DHS representative who observed the removal of tank 6, his averments regarding the size and arrangement of the holes are properly disregarded in light of his earlier testimony he observed no holes in the tank.

 Even assuming there were three holes in the bottom of tank 6 spaced about 24 inches apart in a straight line, this fact and Jenkins's expert opinions do not raise a triable issue of fact as to whether there was a sudden discharge of pollutant from those holes.   Essentially, Jenkins concluded the operation of the standpipes inside the tank caused the three holes to be formed and the shift in “mode” (presumably from nonleaking to leaking) was abrupt.   The first conclusion does not indicate a cause of the holes other than corrosion;  it merely suggests the holes were the result of accelerated internal corrosion caused by the kinetic energy of liquids falling to the bottom of the tank through the standpipes.   As the trial court stated, “corrosion by any name, accelerated or not, is still corrosion․”

Jenkins's opinion regarding the abruptness of the creation of the holes is of no evidentiary value, as it is pure speculation based on the statements in Bergeron's declaration which contradict his earlier testimony.   “ ‘Opinions ․, even though uncontradicted, are worth no more than the ․ factual data upon which they are based.’  [Citations.]”  (Hoover Community Hotel Development Corp. v. Thomson (1985) 167 Cal.App.3d 1130, 1137, 213 Cal.Rptr. 750.)

In any event, Jenkins's opinion the tank's shift in mode was abrupt does not raise a triable issue of fact as to whether the discharge of pollution from tank 6 was sudden, because it addresses only the inception of the discharge and not its duration.   Relying on Shell Oil Co., SCC and Diocese contend the “sudden and accidental” exception to the pollution exclusion does not require the discharge of pollutants to be of only brief duration;  it only requires the pollution-causing event commenced abruptly.   We disagree with this interpretation of Shell Oil Co. and believe a careful reading of the opinion supports the conclusion the duration of the discharge of pollution is a factor to be considered in determining whether the “sudden and accidental” exception to the pollution exclusion applies.

Agreeing with an out-of-state opinion, Shell Oil Co. concluded “ ‘sudden’ refers to the pollution's commencement and does not require that the polluting event terminate quickly or have only a brief duration.  [Citation.]”  (Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at p. 756, 15 Cal.Rptr.2d 815, italics added.)   However, the Shell Oil Co. court further stated:

“If a sudden and accidental discharge continues for a long time, at some point it ceases to be sudden or accidental.  [Citations.]   Still, a sudden and accidental discharge of a dangerous pollutant could continue unabated for some period because of a negligent failure to discover it, technical problems or a lack of resources that delay curtailment, or some other circumstance.   Liability from such an event could well be covered.”  (Ibid., italics added.)

Shell Oil Co.'s statement “sudden” refers to the commencement rather than duration of the “polluting event” seems to contradict its following statement a sudden and accidental “discharge” that continues would at some point cease to be sudden or accidental.   However, the two statements harmonize if Shell Oil Co.' s reference to the “polluting event” is interpreted to include not only the discharge of the pollution, but also its later migration and contamination of surrounding environment.   That is, while the discharge of pollution must be “sudden” in the sense it commences abruptly and ends relatively quickly, the migration of pollution and environmental contamination resulting from the sudden discharge need not terminate quickly or be of brief duration for the “sudden and accidental” exception to apply.

The duration of a discharge must be considered in addition to the abruptness of its inception in order to prevent the exception from being rendered meaningless, as recently explained by a New York appellate court.   In Northville Industries v. Nat. Un. Fire Ins. (1995) 218 A.D.2d 19, 636 N.Y.S.2d 359, the court rejected the insured's “contention that a release of pollutants need only be sudden in its ‘inception’ but not in its ‘duration’ in order to qualify for the exception [to the pollution exclusion].”  (Id. 636 N.Y.S.2d at p. 366.)   The court stated:

“The fallacy of the argument is readily apparent, since every dispersal of pollution begins with the abrupt entry of molecules of the offending substance into the surrounding environment.   Hence, were we to accept [the insured's] strained construction of the exception, the suddenness requirement would be rendered meaningless because all discharges of pollutants are necessarily sudden at the time of their inception.”  (Ibid.)

As another New York court noted, “the ‘sudden and accidental’ exception was clearly intended to limit coverage for pollution-related damages to situations ‘where such damages are caused by sudden pollution incidents involving equipment malfunctions, explosions and the like and a reasonable insured with any degree of common sense would assume the word [sudden] to have that usual meaning․’ ”  (Technicon Electronics v. Am. Home Assur. (1988) 141 A.D.2d 124, 533 N.Y.S.2d 91, 99.)

 In short, a discharge of pollution that continues over a period of time must at some point be deemed to be gradual, and gradual is the opposite of sudden.  “The ordinary person would never think that something which happened gradually also happened suddenly.   The words are antonyms․   Accordingly, no objectively reasonable policyholder would expect the word ‘sudden’ to allow for coverage for gradual pollution.”  (ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at pp. 1788–1789, 22 Cal.Rptr.2d 206, fns. omitted.)

Here, the evidence points only to a gradual release of Stoddard solvent from tank 6 through holes caused by corrosion.   Even if we indulge the unsupported hypothesis that three half-dollar sized holes in tank 6 were formed abruptly at about the same time, the release of Stoddard solvent from those holes would necessarily have been gradual due to the density of the soil packed against the bottom of the tank.   Plaintiffs' evidence fails to raise a triable issue of fact as to whether the release of pollutants from SCC's property was sudden.

III. Duty to Defend

The principles governing an insurer's duty to defend are well-settled.

“ ‘[A] liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity.  [Citation.]․  “[T]he carrier must defend a suit which potentially seeks damages within the coverage of the policy.”  [Citation.]․’ ”  (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295, 24 Cal.Rptr.2d 467, 861 P.2d 1153.)

 In addition to the allegations of the complaint against the insured, “ ‘[f]acts extrinsic to the complaint ․ give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy.  [Citation.]’ ”  (Ibid.)   The insurer's defense duty continues “until it has been shown that there is no potential for coverage․”   (Ibid.)   Accordingly, where extrinsic facts conclusively establish at the outset that there is no potential for coverage, no duty to defend arises, regardless of the allegations of the complaint.  (Id. at pp. 298–299, 24 Cal.Rptr.2d 467, 861 P.2d 1153.)

 Here, the extrinsic facts ascertained by defendants at the outset established there was no potential for coverage.   It has never been disputed the pollution exclusion bars coverage unless the “sudden and accidental” exception to the exclusion applies.   We conclude it was SCC's initial burden as the insured to show its claim fell within the exception—i.e., to show the release of pollutants from its property was sudden and accidental.   This conclusion accords with the weight of authority deciding the issue of whether the policyholder has the burden of proving a claim is covered under an exception to an exclusion.  (See Aeroquip Corp. v. Aetna Cas. and Sur. Co. Inc. (9th Cir.1994) 26 F.3d 893, 894–895.)

Predicting how the California Supreme Court would decide the issue, the court in Aeroquip Corp. stated:

“This allocation aligns the burden with the benefit and is consistent with the general principle under California law that ‘ “[w]hile the burden is on the insurer to prove a claim covered falls within an exclusion, the burden is on the insured initially to prove that an event is a claim within the scope of the basic coverage.” ’  [Citations.]   The ‘sudden and accidental exception’ creates coverage where it would otherwise not exist and thus the insured's burden of proving coverage extends to proof of this exception.

“Moreover, if the burden were on the insurer, the property owner would have an incentive to avoid finding out whether pollutants are being gradually discharged, because preservation of ignorance would increase the likelihood of insurance coverage.   We do not think the California Supreme Court would adopt a rule creating such reverse incentives.

“This assignment to the insured is also consistent with the usual rules for allocating burdens of proof.   The rule places the burden on the party who will generally have access to facts that show the discharge of pollutants was sudden and unexpected.   If the discharge actually was sudden ․ the policy holder should be better able to prove the suddenness than the insurer would be able to prove its absence.”  (Aeroquip Corp. v. Aetna Cas. and Sur. Co. Inc., supra, 26 F.3d at p. 895.)

We believe Aeroquip Corp. is well reasoned and correctly decided.

Here, the extrinsic facts considered by Liberty and American pointed only to gradual leakage of contaminants from holes in tank 6 caused by corrosion.   SCC presented no evidence indicating there had been a sudden release of pollution from any of the tanks on its property.   SCC did not take the position there was evidence of a sudden discharge until Liberty and American moved for reconsideration of their summary judgment motion based on Shell Oil Co.   The allegations of SCC's complaint in the underlying action and the extrinsic facts known to Liberty and American conclusively established there was no potential for coverage at the outset.   Accordingly, Liberty and American did not breach their duty to defend.

 SCC and Diocese contend Liberty and American owed a duty to defend because there was a policy-interpretive potential for coverage created by the as-yet unresolved legal issue of whether the word “sudden” was ambiguous, and therefore properly construed against the insurers to mean “unexpected and unintended.”   This contention is without merit.

In State Farm Mut. Auto Ins. Co. v. Longden (1987) 197 Cal.App.3d 226, 242 Cal.Rptr. 726, the court held there is no duty to defend “where the only potential for liability turns on resolution of a legal question.”  (Id. at p. 233, 242 Cal.Rptr. 726;  accord McLaughlin v. National Union Fire Ins. Co. (1994) 23 Cal.App.4th 1132, 1151, 29 Cal.Rptr.2d 559.)   The California Supreme Court cited Longden and McLaughlin with approval, holding it has never been the law in California “that the insurer must always defend a third party lawsuit absent a published judicial opinion definitively construing the specific policy provision on which the insurer relies․”  (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 25, 44 Cal.Rptr.2d 370, 900 P.2d 619.)

Defendants did not owe SCC a duty to defend based on either a factual or a policy-interpretive potential for coverage.

DISPOSITION

The judgment is affirmed.

FOOTNOTES

1.   Although the caption of Diocese's complaint does not specifically name SCC, the judgment in the underlying action is against both Morrissons and SCC.   It is unclear whether SCC was substituted for a doe defendant after Diocese filed its complaint or was treated as a party defendant because Morrissons was merged into SCC.

2.   Except for the insertion of the word “both” before “sudden and accidental,” the pollution exclusion in American's umbrella policy contains language identical to that quoted above.

3.   Related to this last point, ACL Technologies noted the lack of authority for the proposition “insurers should be bound by statements made by ‘industry spokesmen’ years before.”  (ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at p. 1792, 22 Cal.Rptr.2d 206.)

4.   SCC and Diocese cite Maryland Casualty Co. v. Reeder (1990) 221 Cal.App.3d 961, 270 Cal.Rptr. 719 and Prudential–LMI Commercial Ins. Co. v. Reliance Ins. Co. (1994) 22 Cal.App.4th 1508, 27 Cal.Rptr.2d 841, which are opinions of this court, as authority for the proposition the intent of the drafters of standardized policy language is properly considered in construing the meaning of that language.   In those cases, we looked to evidence of the intent of the drafters to resolve ambiguities surrounding the interpretation and application of the “completed operations” and “property alienated” exclusions found in standard commercial general liability policies issued to developers of residential real property.   Consideration of insurance industry publications as interpretive aids in the resolution of such ambiguities is not inconsistent with our conclusion such extrinsic evidence is irrelevant to interpretation where the ordinary and popular meaning of policy language is unambiguous.

WORK, Acting Presiding Justice.

NARES and McDONALD, JJ., concur.