Procedural Posture

May 18, 2021 Off By Glespynorson

Plaintiff insured sued defendant insurers for coverage of its $10 million settlement of a contract dispute with the federal government and costs relating to an administrative hearing before the U.S. Department of Interior Board of Contract Appeals (IBCA). The San Francisco Superior Court, California, granted one insurer’s judgment on the pleadings and the other insurers’ demurrers to the complaint, without leave to amend. The insured appealed.

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Applying case law that interpreted commercial general liability (CGL) policies in the context of environmental agency activity, the trial court concluded that the IBCA proceeding underlying the current case was not a “suit” covered under the primary CGL and excess/umbrella policies at issue and that the money paid by the insured to settle the dispute was not covered “damages.” The reviewing court agreed as to those policies with insuring agreements that were similar to those construed in the prior case law and that did not define “suit.” For those policies, the existing bright-line rule was properly applied, despite significant differences between the IBCA proceeding and environmental remediation orders. However, as to the policies that contained a definition of the term “suit,” and/or provided indemnity for “loss,” rather than “damages,” there was a duty on the insurers to indemnify and/or defend. As to those policies, the trial court erred. Some of the primary policies, for example, defined “suit” as a “civil proceeding,” wording that was not considered in the prior cases. The IBCA proceeding was an adjudicative hearing and was a civil proceeding within the policies’ coverage.


The court affirmed the judgments with respect to the polices that were similar to those discussed in prior case law but reversed and remanded as to the policies that defined “suit” or provided indemnity for “loss.”