State of California v. Underwriters at Lloyd's of London
Published: Jan. 28, 2006 | Result Date: May 16, 2005 | Filing Date: Jan. 1, 1900 |Case number: 239784 Verdict – $28,050,000
Judge
Court
Riverside Superior
Attorneys
Plaintiff
Defendant
John E. Peer
(Woolls Peer Dollinger & Scher)
Craig C. Hunter
(Wilson, Elser, Moskowitz, Edelman & Dicker LLP)
Experts
Plaintiff
Ronald Hendy
(technical)
V. Steve Reed
(technical)
Richard D. Stewart
(technical)
Michael Kavanaugh
(technical)
Defendant
Donn P. McVeigh
(technical)
Patrick J. Sullivan
(technical)
Facts
The plaintiff is the State of California. Between 1956 and 1972, approximately 35 million gallons of hazardous waste from various industries were dumped at the Stringfellow Acid Pits. Stringfellow Acid Pits was a privately-owned containment site in Riverside County located about one mile north of Glen Avon, a community approximately 45 miles east of Los Angeles. The site was in a box canyon. The wastes, including pesticides, heavy metals and other toxic materials, were deposited in unlined pits, thought at the time to be underlain by impervious granite. The wastes contaminated soil, groundwater and surface water.
By the 1980s, the site was no longer privately owned as it was under state control. In a judgment against the State in a federal action, U.S.A., et al. v. J.B. Stringfellow, et al., liability was imposed on the state. The judgment was based on Congress' Comprehensive Environmental Response, Compensation and Liability Act, or Superfund. The judgment found the State liable for the "selection, design and construction" of the site under CERCLA. The State was ordered to clean up the site. The past and future liabilities imposed on the State have been estimated at hundreds of millions of dollars.
In regards to the costs of cleanup, the State filed claims with all of its primary and excess liability insurance carriers, with the exception of primary carrier Pacific. All of the excess carriers refused to indemnify the State for its CERCLA liabilities. The State then sued for breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory relief. In 1993, the State sued five of its excess insurers. In 2002, the State sued the remaining excess insurers, and the two actions were consolidated. The State requested that the bad faith claim go to trial in March 2006 and the remaining insurers requested that the bad faith claims go to trial in October 2006. The Court set the bad faith claim to go to trial on June 5, 2006. All the other causes of action are covered in this report.
The State of California reached a settlement with most of the insurers. Settlements totaled $119,575,000. The State also received from Pacific (Chubb) $52 million in defense costs.
A number of the companies were voluntarily dismissed after settling with the State, or were dismissed on summary judgment because of pollution exclusion provisions in their policies. The State is appealing the summary judgment dismissals.
As for the companies that went to trial, the parties stipulated that as a result of the selection, design and construction of the Stringfellow site, from 1957 through 1976, there was third-party property damage, as defined in the policies.
Damages
The State alleged the covered cleanup costs to total a present value of $533,082,867. It alleged that over time this value could increase to over $700 million. The cleanup includes identifying, pumping and treating contaminated groundwater. The defendants stipulated to covered cleanup costs totaling more than $50 million. Due to the defendants' stipulation, the jury was not shown evidence in regards to damages amounts.
Injuries
[CONTINUED FROM CONTENTIONS BOX] * * * The State countered with secondary evidence to prove that the policy existed and was in effect. It submitted documentary evidence of the third-party insurance broker. It also provided documentary evidence of other insurance companies that confirmed that the State was insured by Stonebridge through a master policy form. In regards to the Stonebridge policy's terms, the State contended it was the same master policy form it utilized with other companies. The State introduced testimonial and documentary evidence of the other companies' agents that the State had a master policy form which other companies utilized to reflect the coverage agreement.
Result
The jury found that all defendants breached their insurance policies with the State. It found no concealment on the part of the State. It also found that the State conducted no willful acts to cause property damage. The policy limits of the policies which the jury found the companies breached totaled $28.05 million. Judge E. Michael Kaiser followed the verdict. However, he limited the state to the selection of a single tower (policy period) of coverage. The State chose the 1970 to 1973 tower. That included policies issued by Continental Casualty, Continental Insurance/Harbor Insurance Co. and Wausau, totaling $12 million. The State intends to appeal Judge Kaiser's ruling because the State was limited to one policy period of coverage.
Other Information
The defendants moved to offset the verdict figure by the prior settlement figures. The motion was denied without prejudice. The Court has set the bad faith trial to begin on June 5, 2006. The defendants requested an adjudication of their alleged equitable rights of contribution and allocation in regards to the settling carriers. The Court deferred that until after the bad faith trial.
Deliberation
five hours
Poll
12-0 (breach of contract), 12-0 (no willful acts), 12-0 (no misrepresentation through 1970), 10-2 (no misrepresentation after 1970)
Length
six weeks
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