AMOCO CHEMICAL COMPANY v. CERTAIN UNDERWRITERS AT LLOYD OF LONDON (1996)

Amoco Chemical Company sued Certain Underwriters at Lloyd's of London and “Various British and European Insurance Companies” (collectively Lloyd's), its insurers, for compensatory and punitive damages, alleging bad faith in the handling of six related claims.   Following a five-week trial, the court directed verdicts in Amoco's favor on seven critical issues and the jury fixed Amoco's damages at $421 million ($35 million for compensatory damages plus $386 million in punitive damages).   The trial court reduced the punitive damages to $71 million and entered judgment for Amoco for $106 million.   Lloyd's appeals, raising numerous issues about the instructions based upon the directed verdicts and the manner in which damages were calculated.   We hold that one instruction based on one of the directed verdicts was so patently wrong and so prejudicial (it went to the heart of the coverage issue) that the entire judgment must be reversed and the matter retried on all issues.   For this reason, we do not reach Lloyd's other claims of error.

FACTS

The Insurance Policies

Amoco, one of the world's largest petrochemical corporations, has its own “risk management” department and the company decides annually which risks it will self-insure and which will be covered by commercial insurance.   During the policy periods relevant to this case (1973 to 1986), Amoco was self-insured for the first $5 million of each “occurrence” and self-insured for all products liability risks except those resulting from an “accident.”   Insofar as the issues in this case are concerned, all of the policies use the same language.

Under the heading “Coverage,” the policies obligate Lloyd's “to indemnify [Amoco] for ultimate net loss in excess of the retained limit [of $5 million], subject to the limitations, conditions and other terms of this Policy, which [Amoco] may sustain by reason of the liability imposed upon [Amoco] by law, or assumed by [Amoco] under contract or agreement ․ [¶] [f]or damages, direct or consequential, and expenses as more fully defined by the term ‘ultimate net loss,’ because of injury to or destruction of property.”  (Emphasis added.)   Under the heading “Limit of Liability-Retained Limit,” the policies provide that Lloyds' “limit of liability ․ shall be only for the ultimate net loss in excess of ․ $5,000,000.00 ultimate net loss in respect of each occurrence․”  (Emphasis added.)   Under the heading “Exclusions,” the policies provide:  “This policy shall not apply ․ with respect to Products Liability, except in the event of accident, to liability for improper or inadequate performance, design or specifications.”  (Emphasis added.)

The Claims and Lawsuits Against Amoco

In 1973, Amoco acquired United Technology Corporation (UTC), the manufacturer of Techite pipe (a patented type of fiberglass pipe).   Under the terms of the parties' option contract, Amoco first acquired UTC's technology and patents, and leased UTC's plant.¹  At the end of a two-year trial period, Amoco exercised its option, completed the purchase, and acquired the company outright.²  Thereafter, Amoco produced and sold “hundreds of miles” of Techite pipe to “hundreds of customers” worldwide, including (1) the Cawelo Water District, Tulare County, California (Cawelo);  (2) the County of Maui, Hawaii (Maui);  (3) College Utilities Corporation in Fairbanks, Alaska (College Utilities);  (4) the Square Butte Electric Cooperative, North Dakota (Square Butte);  (5) the City of Fairbanks, Alaska (City of Fairbanks);  and (6) the Westlands Water District, Fresno County, California (Westlands)-all of which installed Techite pipe products in underground irrigation and sewage systems.

Within a few years after the Techite pipe was installed by these customers, there were a series of problems variously described as “leaks,” “failures” and “breaks” which, over a period of several years, required repairs and replacement of Techite pipe products.   At Cawelo, there were “breaks” every year from 1976 to 1990 (61 separate incidents).   At Maui, there were “failures” and “breaks” in 1976, 1978, 1979, 1980, 1984 and 1986.   At Westlands, there were 128 separate “breaks” during the 15 years from 1976 to 1990.   At College Utilities, there were “failures,” “leaks” and “collapses” in 1978, 1979, 1981, 1982, 1983, 1984, 1985 and 1987.   At Square Butte, there were “failures,” “blowouts” and “breaks” beginning in 1979.

The first suit against Amoco was filed by Cawelo in 1983.   Cawelo's complaint (which is similar to those later filed by Maui, College Utilities, Square Butte, the City of Fairbanks and Westlands, perhaps because they were all represented by the same attorneys) sought compensatory and punitive damages on theories of products liability, fraud, breach of contract, breach of express and implied warranties, and negligence.   According to Cawelo and the other claimants, the Techite pipe's specifications were inaccurate, a fact allegedly known to Amoco at the time the product was sold, and defects known to Amoco caused numerous “failures,” “leaks” and “breaks” in the pipe.

The Insurance Claims

On December 2, 1987, Amoco notified Lloyd's that three Techite lawsuits had been filed against Amoco.   On December 29, Amoco wrote again to give notice that a fourth lawsuit had been filed.   Seven months later (on July 14, 1988) Lloyd's finally responded by letter, “not[ing] the captioned claim[s] without prejudice to all rights and defenses under any of the terms, conditions and limits” of the policies and stating that it would await details of Amoco's investigation and evaluation of the claims.   On July 21, Amoco sent Lloyd's a status report regarding the Techite cases, the names and addresses of the local attorneys representing Amoco in each of the cases, and a request that Lloyd's contact Amoco's in-house counsel if specific information was required.   Lloyd's did not respond.

On June 14, 1989, Amoco notified Lloyd's that a fifth Techite action had been filed.   On June 29, Lloyd's responded with a four-line memo assuring Amoco that this new matter was “receiving [Lloyd's] immediate attention.”   On September 11, Lloyd's sent a more detailed memo, again noting the claim without admitting liability and reserving all of its rights.   On November 10, Amoco notified Lloyd's that a sixth action had been filed.   On December 7, Lloyd's responded with its apparently standard four-line memo acknowledging receipt of the November 10 notice.   There were no further inquires from Lloyd's.

In 1990, the Cawelo action went to trial.   On May 30, a jury found Amoco liable for fraud, negligent misrepresentation, negligence and breach of warranty, and awarded Cawelo $6.2 million in compensatory damages, plus $6 million in punitive damages.   Amoco appealed.   Later in 1990, the Maui action went to trial.   There, Amoco presented a successful technical defense and on November 19, following a six-month trial, a jury returned a defense verdict.   To get to that point, however, Amoco had incurred more than $7 million in defense costs and fees.

By early 1991, the other four actions were still pending and Amoco's costs were mounting.   In the City of Fairbanks case, Amoco had incurred over $1.2 million in attorneys' fees and over $700,000 in defense costs.   In the College Utilities case, Amoco had incurred over $375,000 in attorneys' fees and over $100,000 in defense costs.   In the Westlands case, Amoco had incurred over $800,000 in attorneys' fees and over $130,000 in defense costs.   In the Square Butte case, Amoco had incurred over $340,000 in attorneys' fees and over $320,000 in defense costs.³

On February 8, 1991, Amoco submitted its first demand to Lloyd's, describing the results in the two cases that had gone to trial and itemizing the fees and costs summarized above, an amount exceeding $13.7 million (which of course did not include the adverse judgment in the Cawelo action).   Amoco demanded reimbursement for all amounts exceeding a single $5 million retained limit, explaining that (in its view) the claims raised in all six lawsuits constituted one (and only one) “occurrence” under the policies covering the years 1973 to 1986 (on the theory that the Techite pipe was the subject of all six lawsuits and all of the pipe had been manufactured at the same location “according to the same design manual and the same manufacturing procedures”).   What this meant to Amoco was that “once $5 million ha[d] been incurred with respect to these claims, Amoco ․ expect[ed] [Lloyd's] to provide indemnification for all monies spent or liabilities incurred in excess of that retention.”   As Amoco read its policies, payment was due within 30 days, and a request was therefore made that Lloyd's acknowledge its obligation “at the earliest possible time” but in no event later than March 8, 1991.⁴

On February 21, Lloyd's responded with another reservation of rights letter, separately specifying nine grounds on which coverage might be denied, including (1) there was no “fortuity” to the claims because Amoco knew prior to 1973 that the pipe was defective;  (2) the policies exclude coverage for the insured's own product, so that the replacement costs of the pipe itself would not be covered;  (3) at least $6 million of the judgment in the Cawelo action was for punitive damages and thus not covered;  (4) Amoco's definition of “occurrence” was not one recognized in any state involved in these actions;  and (5) the self-insured retention had not been exhausted.   Lloyd's said a further response would be forthcoming when the policies were reviewed in detail.

When a month went by without the promised further response, Amoco wrote again (on March 26), this time requesting payment of $9,876,224 “forthwith” for its defense costs incurred over the single $5 million retention amount.   Amoco explained that it was continuing to incur expenses and liabilities in connection with the Techite litigation, and it made it clear that it “expect [ed] a prompt response from its carriers.”   Lloyd's did not respond.

Amoco's Declaratory Relief Action

In June 1991, Amoco filed this action, alleging a single cause of action for declaratory relief.   Apparently this got Lloyd's attention and the parties met in August to discuss Amoco's claims.   At that meeting, Lloyd's insisted it could not discuss coverage because it “didn't have enough information.”   In September, Amoco's lawyers compiled all of their documents from the six Techite actions, placed them in a conference room in Los Angeles, and “basically said [to Lloyd's], ‘You may come over and examine that material to your heart's delight.’ ”   Over the course of the next three months, representatives from Lloyd's reviewed the documents but by January 1992, Lloyd's would say only that it needed more time to “digest the information.”

Meanwhile, in September 1991, Amoco settled the College Utilities action for $150,000.   Again, however, its costs and fees were substantial (about $2 million).   In September 1991, Amoco won the Square Butte litigation (by way of summary judgment) but only after spending more than $2 million in fees and costs.   Supplemental demands for reimbursement were submitted by Amoco to Lloyd's for these amounts, but the demands were ignored.

In March 1992 (at which time Amoco had not heard from Lloyd's about their earlier meetings or about Amoco's supplemental demands), an opportunity arose for Amoco to settle the Westlands case.   Of the six Techite actions, this one involved the greatest exposure for Amoco (because the project covered over a thousand square miles of Central Valley farmland, and because a portion of this system experienced a higher breakage rate than in the other cases, as a result of which the cost of replacing all of the Techite pipe in the Westlands system would have exceeded $50 million).   During negotiations, Amoco was able to persuade Westlands' directors that there was no need to replace all of the pipe and that, assuming any had to be replaced, “it was only a small portion in one section of the system” (which still would have cost $10 million).   Although Westlands' directors wanted to settle, one of their attorneys was recommending against it, and Amoco believed that a timely offer was critical.

On March 16, Amoco notified Lloyd's of the terms of the proposed settlement (approximately $8.5 to $10 million payable over “a few years”), requested a contribution from Lloyd's (whatever amount exceeded $5 million), and agreed that any such contribution would be without prejudice to Lloyd's right to assert all of its coverage defenses as to this payment as well as any other claimed amounts.   Amoco emphasized that “time [was] critical,” and that a response was needed by March 25.   On March 17, Lloyd's requested more information, reminding Amoco that the identity of the individual underwriters changed from year to year and that unless Amoco “place[ed] the loss into a particular policy year we would be unable to notify the responsible [u]nderwriter[s].  [¶] It should further be noted that if it is your contention that the loss is spread over more than one year then, of course, the anticipated settlement figure would not exceed the self-insured retention.”

On March 19, Amoco complied with Lloyds' request by specifying (without waiving its right to assert its continuous occurrence theory) “the June 1981 to June 1982 policy period as a source from which such funding could be drawn.”   Lloyd's did not respond, and on March 25 Amoco wrote to stress the urgency of the situation.   Lloyd's still did not respond, and on March 27 Amoco again wrote to explain that the delay was jeopardizing the settlement.   This time, Amoco stated that if it did not hear from Lloyd's by March 30, Amoco would assume that Lloyd's was “unwilling or unable” to commit to a settlement.   Lloyd's did not respond.

In early April 1992, Amoco settled the Westlands case for $9.5 million, by which time Amoco had incurred defense fees and costs of about $3.2 million.   On April 6, while the final Westlands settlement documents were being circulated, Amoco received a letter from Lloyd's stating that it had been “unable to comply” with Amoco's request because there had been “insufficient time” to contact the involved underwriters but that, “as always,” Lloyd's remained willing to discuss any settlement demand.   Amoco responded by sending Lloyd's a copy of the Westlands settlement agreement, a demand for full reimbursement under the policies, and a proposal that the parties arbitrate any dispute before a retired judge.   Lloyd's did not respond.

By the summer of 1992, at which time the appeal from the adverse judgment in the Cawelo action was still pending, post-judgment interest had increased the amount of that judgment to $15 million (with an anticipated increase to $18 million by the time the appeal was resolved).   From Amoco's perspective, a win on appeal (that is, a new trial) would be a mixed blessing since its last full trial on the merits had cost more than $7 million to defend.   Given the amount of the compensatory damage award, the post-judgment interest, and the cost of a retrial, Amoco agreed to settle with Cawelo for $11.6 million.   Under the terms of that settlement, Cawelo withdrew its claims for punitive damages and Amoco agreed to dismiss its appeal.   In October, Amoco sent the proposed settlement agreement to Lloyd's and requested confirmation of coverage.   Lloyd's did not respond and Amoco's repeated efforts to communicate with Lloyd's by telephone, faxes and letters all went unanswered.

Shortly after the Cawelo case settled, Amoco obtained a directed verdict in the City of Fairbanks case.   Again, however, Amoco's victory was tempered by its defense costs (just under $6 million).   A demand for reimbursement was submitted to Lloyd's but, again, no response was received.⁵  Between 1987 and 1992, Amoco had thus incurred more than $45 million to defend and settle the six Techite lawsuits, no part of which had been paid by Lloyd's.

Amoco's Bad Faith Claims Against Lloyd's

In November 1992, Amoco amended its complaint to add causes of action for breach of contract and breach of the duty of good faith and fair dealing.   In 1993, the case went to trial, with evidence of the facts summarized above presented to a jury.   As to the cause of the problems encountered by the plaintiffs in the Techite lawsuits, the uncontroverted evidence at trial established that the pipe was defectively designed and manufactured (and Amoco concedes on this appeal that all of the underlying lawsuits were based on “the defective manufacture of Techite pipe”).   As to damages, it appears that essentially no evidence was presented to show what “property damage” was caused by any of the “breaks,” “leaks” or “failures”-and the most Amoco has to say about this in its brief on appeal is that the “property damage” claimed in the Techite actions was “the damage to the pipeline systems and the surrounding land.” ⁶  It appears that Amoco tried this case on the theory that it was sufficient that it had spent $45 million to settle and defend the Techite lawsuits, and that it was unnecessary for it to show the actual nature of the damages resulting from any or all of the “breaks,” “leaks” or “failures” in order to claim insurance coverage for all the money it spent to replace broken pipe-and pipe that might break in the future.

At the end of the five-week trial, the court granted Amoco's motions for seven directed verdicts and, among other things, instructed the jury as follows:

“The Court has determined and you are instructed that the insurance policies ․ covering the period June 1, 1975 to June 1, 1976, are responsible for the covered damages and expenses resulting from the Techite pipe cases, if any, including the damage which began during the policies and the damage which continued after the policies expired.”

“The Court has determined and you are instructed that all of the Techite pipe cases constitute one occurrence under the policies issued by [Lloyd's] to Amoco.  [Lloyd's is] therefore entitled to deduct only one retained limit in the amount of $5,000,000 from the amounts paid by Amoco for the Techite pipe cases.”

“The Court has determined and you are instructed that the term ‘Ultimate Net Loss' as used in [Lloyd's] policies includes amounts reasonably spent by Amoco for the repair and replacement of Techite pipe in the underlying cases.”

“In determining whether there [is] coverage under [Lloyd's] policies for the Techite pipe cases, you should look to the allegations in the underlying complaints.   No finding of liability against Amoco is required for coverage.”

“The Court has determined and you are instructed that [Lloyd's has] failed to present sufficiently substantial evidence to support the following defenses:  (1) The defense of late notice;  (2) The defense that Amoco failed to disclose material information at the time it purchased the insurance from [Lloyd's];  and (3) The defense that Amoco expected and intended to cause the damage alleged in the underlying Techite pipe cases.”

“An accident is an unforeseen and unplanned event or circumstance.”  (All emphasis added.)

The jury returned a verdict in favor of Amoco and against Lloyd's, awarding Amoco $35 million in compensatory damages and $386 million in punitive damages.⁷  The trial court reduced the punitive damage award to $71 million, otherwise denied Lloyds' post-trial motions, and entered judgment accordingly.   Lloyd's appeals.

DISCUSSION

Under the plain language of the Lloyd's policies, they do “not apply ․ with respect to Products Liability, except in the event of accident, to liability for improper or inadequate performance, design or specification.”  (Emphasis added.)   Since it is undisputed that the problems with the pipe resulted from a defect in the product itself, Lloyd's was contractually bound to indemnify Amoco for its “ultimate net loss” in the underlying lawsuits if, and only if, the damage suffered by the claimants in the Techite actions was the result of an “accident.”   The trial court nevertheless rejected Lloyds' proposed instruction defining “accident” according to established case law and, over Lloyds' objection, instructed the jury only that “[a]n accident is an unforeseen and unplanned event or circumstance.”   Noticeably absent from this instruction is any suggestion that an event, to qualify as an accident, must be “sudden” or that it otherwise has a temporal nature.   Lloyd's contends the instruction, as given, effectively directed the jury to find that all of the “failures,” “breaks,” and “leaks” were “accidents” simply because they were not planned.   We agree, and we also agree that the error was prejudicial.

The policies do not define “accident.”   For that reason, Amoco was able to convince the trial court the word was ambiguous and that, therefore, a dictionary definition ought to be used.   The premise was wrong.   If a term used in an insurance policy “has been judicially construed, it is not ambiguous and the judicial construction of the term should be read into the policy unless the parties express a contrary intent.”  (Bartlome v. State Farm Fire & Casualty Co. (1989) 208 Cal.App.3d 1235, 1239, emphasis added;  see also Collin v. American Empire Ins. Co. (1994) 21 Cal.App.4th 787, 810 [a common law construction of a term used in an insurance contract “becomes part of the policy and precludes any assertion that the term is ambiguous”].) ⁸

Since the word “accident” has been defined by cases dating back to the last century, the simplistic dictionary definition adopted by the trial court was wrong.   For example, in Richards v. Travelers Ins. Co. (1891) 89 Cal. 170, the Supreme Court explained (over 100 years ago) that it was clear that the use in an insurance policy of the word “accident” was to show the need for “a casualty-something out of the usual course of events, and which happens suddenly and unexpectedly, and without any design on the part of the person injured.”  (Id. at p. 175, emphasis added.)   In Geddes & Smith, Inc. v. St. Paul Mercury Indemnity Co. (1959) 51 Cal.2d 558, a case factually indistinguishable from the one now before us (defective aluminum doors caused damage to the homes in which they were installed), there was coverage only for “injury to or destruction of property ․ caused by accident” (and no coverage for damage caused by injury to or destruction of the aluminum products sold by the insured).  (Id. at p. 563.)   This is how the Supreme Court addressed the carrier's contention that there was no injury caused by an “accident:”

“No all-inclusive definition of the word ‘accident’ can be given.   It has been defined ‘as “a casualty, something out of the usual course of events and which happens suddenly and unexpectedly and without design of the person injured.”  ․’ It ‘ “includes any event which takes place without the foresight or expectation of the person acted upon or affected by the event.” ’  ․ ‘Accident, as a source and cause of damage to property, within the terms of an accident policy, is an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause.’  ․ The door failures were unexpected, undesigned, and unforeseen.   There were not the result of normal deterioration, but occurred long before any properly constructed door might be expected to wear out or collapse.   Moreover, they occurred suddenly.   It bears emphasis that we are concerned, not with a series of imperceptible events that finally culminated in a single tangible harm ․, but with a series of specific events each of which manifested itself at an identifiable time and each of which caused identifiable harm at the time it occurred.”  (Geddes & Smith, Inc. v. St. Paul Mercury Indemnity Co., supra, 51 Cal.2d at pp. 563-564, some emphasis added.)

In Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, under the heading “Accidents Are ‘Sudden,’ ” the Court of Appeal upheld a jury instruction essentially identical to the one Lloyd's requested in this case, emphasizing that “[t]he term ‘accident’ means a casualty, something out of the usual course of events, which happens suddenly and unexpectedly and without the design of the person injured.   The term ‘accident’ requires an element of fortuity and an event or happening which occurs in a spontaneous, instantaneous, abrupt or immediate manner, or which happens or comes without warning or premonition, or takes place or appears all at once, or is discovered unexpectedly and happens without warning.”  (Id. at p. 751, emphasis added;  see also Collin v. American Empire Ins. Co., supra, 21 Cal.App.4th 787;  Hogan v. Midland National Ins. Co. (1970) 3 Cal.3d 553;  Allstate Ins. Co. v. LaPore (N.D.Cal.1991) 762 F.Supp. 268, 270.)

Amoco's only response to all this is to say that, “[c]ontrary to [Lloyd's] argument, the pipe breaks clearly qualify as ‘accidents,’ and the [product liability] exclusion thus has no applicability.”   In short, Amoco tells us, “California law does not require that an ‘accident’ be ‘sudden.’ ”   Since the only support cited for this astonishing view is the statement in Geddes & Smith, Inc. v. St. Paul Mercury Indemnity Co., supra, 51 Cal.2d at pages 563-564 that there can be no “all-inclusive” definition of “accident,” we feel no need to do more than refer back to the cases discussed above to explain why Amoco is wrong.⁹  In any event, Amoco does not respond at all to Lloyd's contention that the trial court's use of an incomplete, incorrect and misleading dictionary definition was prejudicially improper where, as here, a substantial body of case law establishes that the word “accident” is not ambiguous.

The error was clearly prejudicial.   This is not a scenario where any reasonable person looking at the Techite cases would conclude that, whatever the technical definition, the damage at issue in those cases resulted from an “accident.”   To the contrary, this is precisely the type of case in which a carefully drafted instruction was of critical importance.   Lloyds' policies exclude coverage for Amoco's liability resulting from the improper or inadequate performance, design or specification of the Techite pipe except in the event of accident.   Since substantial evidence suggests that most of the pipe started leaking as part of a premature process of deterioration or progressive weakening of materials, and that a disproportionate amount of the money spent by Amoco was for the purpose of repairing unbroken pipe that might break in the future rather than to repair pipe or property damaged by “breaks,” “leaks” or “failures,” ¹⁰ it is far more probable than not that a different jury instruction would have resulted in a substantially different calculation of damages.

It follows that the entire judgment must be reversed and the matter remanded for a new trial of all issues.¹¹

DISPOSITION

The judgment is reversed in its entirety and the matter is remanded for a new trial on all issues.   Lloyd's is awarded its costs of appeal.

FOOTNOTES

1.   At trial, there was conflicting evidence about whether Amoco discovered the existence of problems with the Techite pipe at this point (or at any point).   Because we resolve this appeal on another issue, we do not discuss the evidence relevant to any claim of fraud.

2.   To be precise, Amoco formed a subsidiary, Amoco Reinforced Plastics Company (ARPCO) to develop and run its Techite business.   Since ARPCO is an insured subsidiary, it is included within our references to Amoco.

3.   On this appeal, Lloyd's contends the policies do not indemnify Amoco against costs and fees incurred in the underlying cases in which the claimants did not prevail (both sides agree these are indemnity policies and that there was no duty to provide a defense).   We do not reach this issue.

4.   This is what the policy actually provides:  “Liability under this Policy with respect to any occurrence or accident shall not attach unless and until [Amoco] shall have paid the amount of retained limit on account of such occurrence or accident.  [Amoco] shall make a definite claim for any loss for which [Lloyd's] may be liable under the Policy within ․ 12 months after [Amoco] shall have paid an amount of ultimate net loss in excess of the amount borne by [Amoco] or after [Amoco's] liability shall have been fixed and rendered certain either by final judgment against [Amoco] after actual trial, or by written agreement of [Amoco], the claimant, and [Lloyd's].   If any subsequent payments shall be made by [Amoco] on account of the same occurrence or accident, additional claims shall be made similarly from time to time.   Such losses shall be due and payable within 30 days after they are respectively claimed and proven in conformity with the Policy.”

5.   In January 1995 (after the case now before us was tried and while this appeal was pending), the judgment in favor of Amoco and against the City of Fairbanks was reversed by the Ninth Circuit Court of Appeals and that dispute was remanded for a retrial limited to the City of Fairbanks' fraud claims.

6.   One of the issues at trial was whether these “leaks,” “failures” and “breaks” were “accidents” within the meaning of the Lloyd's policies (because the only coverage available to Amoco was the “accident” exception to the products liability exclusion).   The jury instruction on this point is the dispositive issue on this appeal.   Another issue at trial was whether these “leaks,” “failures” and “breaks” caused “property damage” covered by the policies or whether the only significant “damage” was to Amoco's product (the pipe which Amoco repaired and replaced).   For whatever it may be worth, we do note that we have been unable to find any evidence explaining precisely what sort of property damage was caused at any of the six sites.   Other than generalized commentary from Amoco's witnesses about the obvious-that water and sewage gushing out underground is not a good thing-there are no specifics of any kind.

7.   Because we reverse the entire judgment and remand for a new trial on all issues, we need not (and do not) decide whether our decision on Lloyd's earlier appeal (Amoco Chemical Co. v. Certain Underwriters at Lloyd's of London (1995) 34 Cal.App.4th 554) would have affected the punitive damage award.

8.   When a term has been judicially construed and thus made non-ambiguous, the rules of interpretation applied to undefined and ambiguous terms become superfluous.   For this reason, Amoco's reliance on concepts such as the “reasonable expectations” doctrine is misplaced.  (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1265;  Bartlome v. State Farm Fire & Casualty Co., supra, 208 Cal.App.3d at p. 1239.)

9.   Amoco's other authorities are simply inapposite.   For example, in Hogan v. Midland National Ins. Co., supra, 3 Cal.3d 553, the court was construing the phrase “caused by accident” in a coverage clause, not the single word “accident” as it is used in an exclusionary clause (as it is here and in the other cases discussed in the text).   There simply is no legal justifications for the simplistic instruction given in this case (an “accident is an unforeseen and unplanned event or circumstance”).

10.   The cost to repair or replace broken pipe was modest when compared to the cost of replacing that which might break in the future.   At Cawelo, for example, it cost only $450,000 to repair or replace pipe that actually broke while in service.   The cost to replace all allegedly defective but unbroken pipe was $6 million.   And even assuming (without deciding) that a “break” is an “accident,” not all of the claims involved breaks.   Some were described only as “leaks,” “failures” or “collapses.”

11.   Lloyds' other liability issues (as opposed to those addressing damages) are all inextricably entwined with the trial court's fundamental mistake regarding the concept of “accident.”   For example, Lloyd's contends it was prejudicial error for the trial court to direct the jury that “all of the Techite pipe cases constitute one occurrence under the policies” and that, therefore, Lloyd's was entitled to deduct “only one retained limit in the amount of $5,000,000 from the amounts paid by Amoco for the Techite pipe cases.”   Although we do not decide the issue and leave it to the trial court on remand, we do note that on the facts of this case, “accident” and “occurrence” appear to mean the same thing.   As explained above, the only coverage available for the Techite cases was that provided for products liability in the event of an “accident.”   Under the policies, Lloyd's agreed to indemnity Amoco for the “ultimate net loss” which Amoco “paid as a consequence of any occurrence covered” under the policies, with “occurrence” defined as one of three things:  “[1] an accident or [2] a happening or event or [3] a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability.”   This seems to mean that Lloyd's agreed to indemnify Amoco for the amount of the “ultimate net loss” Amoco was required to pay “as a consequence of any [products liability claim arising from an accident].”   Thus, although “occurrence” may have had a broader meaning as used elsewhere in the policies, it appears to mean the same thing as “accident” in our context.As Amoco contends, the general rule is that the number of “occurrences” is determined by analyzing the alleged cause of the underlying property damage, not the number of incidents of property damage or the number of claims (Chemstar, Inc. v. Liberty Mut. Ins. Co. (9th Cir.1994) 41 F.3d 429, 432-433;  Whittaker Corp. v. Allianz Underwriters, Inc. (1992) 11 Cal.App.4th 1236, 1242).   But it does not necessarily follow, as Amoco claims, that this is a “one occurrence case.”   Given that “accident” and “occurrence” are necessarily the same thing on these facts, acceptance of Amoco's view that the deliberate and intentional design and manufacture of the Techite pipe was all “one occurrence” would necessarily require rejection of Amoco's claim of coverage because there would thus be no “accident.”   We leave the resolution of this conundrum to the trial court.

MIRIAM A. VOGEL, Associate Justice.

SPENCER, P.J., and MASTERSON, J., concur.