EDWARD M. CHEN, United States District Judge.
Plaintiff Essex Walnut Owner L.P. purchased an insurance policy — an Environmental Legal Liability Policy — from Defendant Aspen Specialty Insurance Company. See Jt. Undisp. Fact ¶ 1. The policy covered a certain site in Walnut Creek where Essex intended to demolish existing structures and build a new, mixed-use development. See Jt. Undisp. Fact ¶¶ 4-6. As part of this project, Essex had to do some excavation in the site. During excavation, Essex discovered debris within part of the site (the "Excavated Area") — more specifically, wood,
Currently pending before the Court is Aspen's motion for summary judgment and Essex's motion for partial summary judgment. Having considered the parties briefs and accompanying submissions, as well as the oral argument of counsel, the Court hereby
As noted above, Essex purchased an insurance policy titled "Environmental Legal Liability Policy" from Aspen. The critical provisions of the policy are as follows:
Essex obtained the insurance policy for a site where it intended to build a new, mixed-use development. See Jt. Undisp. Fact ¶¶ 4-5. Prior to demolition and construction, the site consisted of small retail shops, small office buildings, and a paved parking lot. See Docket No. 32-1 (Bain Decl. ¶ 3).
As part of the project, excavation was required, and Essex had a temporary shoring system designed for it "to protect the integrity of the excavation, as well as to stabilize the area outside of excavation." Docket No. 32-2 (Berger Decl. ¶ 3); see also Jt. Undisp. Fact ¶ 6 (stating that Essex had a "shoring system" designed for it "as part of the planned construction and mixed-use development at the Site"); Docket No. 32-1 (Bain Decl. ¶ 5) (testifying that ENGEO, the company Essex hired to do a geotechnical report for the site, "recommended temporary shoring to facilitate construction of the underground parking and development"). The temporary shoring system "consisted of retaining walls anchored by tie backs' drilled at a downward angle into soil outside the retaining walls." Jt. Undisp. Fact ¶ 7.
During excavation, Essex discovered debris buried in the Excavated Area. See Jt. Undisp. Fact ¶ 11. "The debris consisted of wood, concrete, glass, metal, tires, and large, buried tree trunks." Jt. Undisp. Fact ¶ 12. Essex ultimately had that debris removed and, as noted above, the parties reached a settlement regarding the cost of removing the debris from the Excavated Area.
The dispute between the parties is related to the area outside of the Excavated Area. Essex maintains that (1) there is debris outside of the Excavated Area and that (2) the debris outside of the Excavated Area caused certain tie-backs of the shoring system to fail. The tie-backs that failed were anchored into soil outside of the Excavated Area. See Jt. Undisp. Fact ¶ 20. According to Aspen, there is no evidence or insufficient evidence of debris outside of the Excavated Area.
Essex has not asked Aspen to cover the cost of removing any debris from outside of the Excavated Area. See Jt. Undisp. Fact ¶ 18. Instead, Essex has asked Aspen to cover the cost of re-designing the shoring system on the theory that the debris outside of the Excavated Area, where the tie backs were anchored, caused the tie backs to fail, thus necessitating a re-design in the shoring system.
Essex has asserted the following claims for relief: declaratory relief, breach of contract, and bad faith.
Federal Rule of Civil Procedure 56 provides that a "court shall grant summary judgment [to a moving party] if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). An issue of fact is genuine only if there is sufficient evidence for a reasonable jury to find for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "The mere existence of a scintilla of evidence... will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party]." Id. at 252, 106 S.Ct. 2505. At the summary judgment stage, evidence must be viewed in the light most favorable to the nonmoving party and all justifiable inferences are to be drawn in the nonmovant's favor. See id. at 255, 106 S.Ct. 2505.
In the instant case, Aspen is moving for summary judgment based on two issues: (1) that debris is not a "pollutant" under the policy and (2) that the cost of re-designing the shoring system is not a "clean-up cost" under the policy. Essex is moving for partial summary judgment on two issues: (1) that debris is a "pollutant" under the policy and (2) that a "pollution condition" as defined by the policy existed.
As indicated by the above, the parties' summary judgment motions call upon the Court to interpret the insurance policy. "[I]nterpretation of an insurance policy is a question of law." Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995). Contract interpretation, as a question of law, is often amenable to summary judgment, see LaGrassa v. Burlington Ins. Co., No. 11-CV-2730-JAM-EFB, 2012 WL 5932959, at *3, 2012 U.S. Dist. LEXIS 168263, at *8 (E.D. Cal. Nov. 26, 2012), although "[s]ummary judgment may be inappropriate in a contract case if there is a dispute over a material fact necessary to interpret the contract." United Pac. Ins. Co. v. Kilroy Indus., 608 F.Supp. 847, 850 (C.D. Cal. 1985).
"While insurance contracts have special features," the California Supreme Court has emphasized that "they are still contracts to which the ordinary rules of contractual interpretation apply." Bank of the W. v. Superior Court, 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992).
Perez-Encinas v. Amerus Life Ins. Co., 468 F.Supp.2d 1127, 1133 (N.D. Cal. 2006); see also Bank of the W., 2 Cal.4th 1254, 1264-65, 10 Cal.Rptr.2d 538, 833 P.2d 545 (providing the same basic overview).
The California Supreme Court has noted that not only do courts generally resolve ambiguities in favor of coverage but they also "generally interpret the coverage clauses of insurance policies broadly, [in order to protect] the objectively reasonable expectations of the insured." Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal.4th 645, 667, 42 Cal.Rptr.2d 324, 913 P.2d 878 (1995).
The first issue for the Court to decide is whether debris constitutes a "pollutant" under the policy.
As an initial matter, the Court takes into account that it is not clear that there is any debris in the area outside the Excavated Area — or at least Aspen maintains that there is no evidence of insufficient evidence of debris. If there is a genuine dispute of material fact as to whether there is debris in the area outside of the Excavated Area, then that would ordinarily preclude summary judgment in favor of either party. However, neither party is asking the Court to make a determination on summary judgment as to whether there is in fact debris in the area outside the Excavated Area. Rather, Aspen argues that, even assuming there is debris outside of the Excavated Area, debris cannot be a "pollutant" under the insurance policy. In turn, Essex asserts that, assuming there is debris outside of the Excavated Area, debris is a "pollutant" for purposes of the policy.
The starting point for whether debris is a "pollutant" is the definition of "pollutant" in the policy at issue. The policy defines "pollutant" as follows:
Policy at 13 (some bold omitted).
In MacKinnon v. Truck Ins. Exch., 31 Cal.4th 635, 3 Cal.Rptr.3d 228, 73 P.3d 1205 (2003), the California Supreme Court considered a policy that had a similar definition for "pollutant," albeit in a pollution exclusion clause rather than, as here, a pollution coverage clause. The California Supreme Court noted that, while "pollutant" was defined in the policy as, e.g., any irritant or contaminant, "[v]irtually any substance can act under the proper circumstances as an `irritant or contaminant.'" Id. at 650, 3 Cal.Rptr.3d 228, 73 P.3d 1205. In other words, a broad interpretation of "pollutant" could lead to "absurd results" (i.e., the pollution exclusion clause would exclude just about everything from coverage). Id. at 652, 3 Cal.Rptr.3d 228, 73 P.3d 1205.
The California Supreme Court focused on how the "ordinary layperson" would understand the term and concluded that, under the "common connotative meaning" of the word, the pollution exclusion clause would be limited to "injuries arising from events commonly thought of as pollution, i.e., environmental pollution, [which] also appears to be consistent with the choice of the terms `discharge, dispersal, release or escape' in the policy." Id. at 652-53, 3 Cal.Rptr.3d 228, 73 P.3d 1205 (emphasis added). The Court added that this interpretation was consistent with the history behind pollution exclusion clauses, which were "adopted to address the enormous potential liability resulting from antipollution laws enacted between 1966 and 1980." Id. (also stating that "[t]he history and purpose of the clause, while not determinative, may properly be used by courts as an aid to discern the meaning of disputed policy language").
Unlike MacKinnon, which dealt with a pollution exclusion clause, the instant case concerns a pollution coverage clause; this ordinarily would counsel in favor of a broader definition here in the insured's favor. However, the basic teaching of MacKinnon — namely, that "pollutant" should be understood to mean something that is commonly thought of as pollution, i.e., environmental pollution — logically applies even in the context of the case at bar. See Ruffin Rd. Venture Lot IV v. Travelers Prop. Cas. Co. of Am., No. 10-CV-11-JM (WVG), 2011 WL 2463291, 2011 U.S. Dist. LEXIS 66095 (S.D. Cal. June 20, 2011) (in a pollution coverage case, looking to MacKinnon for guidance and indicating that a pollutant is something that contaminates a source's natural surroundings). MacKinnon's interpretation comports fully with the title of the insurance policy here — "Environmental Legal Liability Policy" (emphasis added). It is also consistent with the examples of "pollutant" provided in the policy (e.g., smoke, hazardous substances) and with other policy provisions; in particular, the policy provides that Aspen will pay for "clean-up cost" which the policy defines as an expense incurred to, e.g., address contamination caused by a pollution condition "to the extent required by environmental law" or "as determined reasonable and necessary by an environmental professional." Policy at 10 (emphasis added). Since Aspen's liability under the policy is tied to "environmental" matters, it is only logical that
To the extent Aspen advocates an even more restrictive interpretation of "pollutant" — i.e., something is a "pollutant" only "if it is described as such in environmental law," Def.'s Opp'n at 10 — the Court does not agree. First, as just indicated, Aspen's liability is not limited "to the extent required by environmental law." Moreover, while Aspen has cited cases where courts have made reference to environmental law, those cases have not held that something is a pollutant only when it is described as such in environmental law. See, e.g. Ortega Rock Quarry v. Golden Eagle Ins. Corp., 141 Cal.App.4th 969, 980, 46 Cal.Rptr.3d 517 (2006) (simply stating that "state and federal environmental laws may provide insight into the scope of the policies' definition of pollutants [in an exclusion clause] without being specifically incorporated in those definitions") (emphasis added). Moreover, Aspen's attempt to narrow the MacKinnon interpretation of "pollutant" is particularly unwarranted given that the instant case involves a coverage clause, not an exclusion clause. Finally, as Essex points out, if Aspen wanted to so limit "pollutant," it could easily have done so; in contrast to the definition of "clean-up cost" which expressly references "environmental law," "pollutant" makes no such reference.
The question is thus whether the kind of debris allegedly found here in the soil is commonly thought of as environmental pollution. Although it is not clear what kind of debris, if any, is actually in the area outside the Excavated Area, for purposes of this order, the Court assumes that the debris is the same kind of debris as that which was found in the Excavated Area — i.e., wood, concrete, glass, metal, tires, and large, buried tree trunks.
Courts have reached varying conclusions as to whether this kind of debris constitutes environmental pollution. Compare Aetna Cas. & Sur. Co. v. Dow Chem. Co., 933 F.Supp. 675, 684 (E.D. Mich. 1996) ("The pollution exclusion clause excludes coverage for `any' contaminant or irritant. When released into the environment, styrofoam, polystyrene, rubble and debris all constitute contaminants or irritants."), with Manus v. Ranger Ins. Co., 142 Fed. Appx. 280, 282 (9th Cir. 2005) (unpublished decision) ("Given the narrow interpretation of the pollution exclusion in MacKinnon, we cannot say that based upon the `facts known to the insurer at the inception of the suit,' the materials dumped by JV (including dirt, brush, weeds, grapevines, leaves, tree stumps, tree branches, ice plants, sod, concrete, and tires) could only be considered `contaminants commonly thought of as pollution.' Therefore, the pollution exclusion did not excuse Ranger's duty to defend JV in the underlying lawsuit.").
The policy itself does not provide any additional clarity. For example, while it lists some kinds of waste ("low level radioactive matter or waste" and medical, infectious or pathological waste or waste materials") as "pollutant[s]," it does not necessarily foreclose other kinds of waste; the definition of "pollutant" uses the phrase "including without limitation." Policy at 13. Aspen's invocation of the principle of ejusdem generis is unavailing precisely because "pollutant" was defined in this specific way. In contrast, in Guam Industrial Services, Inc. v. Zurich American Insurance Co., 787 F.3d 1001 (9th Cir. 2015), the principle of ejusdem generis was properly applied because the policy at issue had an endorsement (which, as an exception to a pollution exclusion clause, effectively provided pollution coverage) that provided
Id. at 1006 (emphasis added).
In the instant case, however, the Court need not reach any definitive ruling on the meaning of "pollutant" — or for that matter "pollution condition" (a related issue raised in Essex's motion) — because ultimately the pending motions may be resolved based on the term "clean-up cost."
Aspen, but not Essex, has asked for summary judgment as to whether the cost of redesigning the temporary shoring system constituted a "clean-up cost" under the policy. As noted above, the following provisions from the policy relate to "clean-up cost."
Essex argues that the cost for the redesign of the temporary shoring system is a "clean-up cost" because it was a cost incurred to "contain" or "neutralize" the "contaminated soil" (i.e., contaminated because of the presence of debris). Essex argues that, in the alternative, the cost of the redesign should be considered a "restoration cost."
Essex's arguments lack merit. For purposes of this decision, the Court assumes that the soil was "contaminated" because of the presence of debris in the area outside of Excavated Area. But even with that assumption, the redesigned shoring system neither contained nor neutralized the contaminated soil.
To "contain" environmental pollution is to restrain or control the pollution or to check or halt its spread. See, e.g.,
Essex's argument that the redesigned shoring system also "neutralize[d]" the environmental pollution fares no better. Neutralize means, in essence, to make ineffective. See https://www.merriam-webster.com/dictionary/neutralize (last visited August 10, 2018) (defining "neutralize" to "to counteract the activity or effect of: make ineffective"). Essex did not neutralize the contamination because Essex left the contamination there; it did not render the contamination any less effective in terms of its impact on the environment. Although the redesign of the shoring system addressed the instability in the soil that was purportedly due to the debris, the revised shoring system neutralized instability, not contamination of the soil. Moreover, as Aspen points out, Essex did not even neutralize the instability because it left the debris there; instead Essex simply found a way to avoid the instability purportedly caused by the debris.
To the extent Essex suggests that getting rid of the debris — i.e., physically removing it — would have been too expensive and a redesign was cheaper, see Docket No. 32-1 (Bain Decl. ¶ 17) (testifying that, "[e]ven if Essex had access and the ability to excavate the debris affecting the tiebacks, that option was impractical based on the amount of time and much greater costs to achieve the same goal of containing and neutralizing the contaminated soil"), that does not change the Court's analysis. At bottom, Essex incurred costs not because the debris was an environmental pollutant but rather because the debris caused the soil to be structurally less stable.
Finally, Essex protests that, at the very least, the cost of the redesign was a "restoration cost" under the policy. As noted above,
Policy at 13 (some bold omitted). However, the redesign cost is not a restoration cost. There is no "damaged real or personal property." Although Essex claims that the "original shoring system where the tie
For the foregoing reasons, the Court grants Aspen's motion for summary judgment. Even if debris constitutes a "pollutant" under the policy, debatable proposition, Aspen is entitled to summary judgment because, as a matter of law, the cost of redesigning the temporary shoring system is not a "clean-up cost" under the policy. Because the Court is granting Aspen's motion for summary judgment, Essex's motion for partial summary judgment is denied as moot.
This order disposes of Docket Nos. 27, 29, 37, and 38.
