Judge: Joseph Lipner, Case: 22STCV17014, Date: 2024-04-09 Tentative Ruling

Case Number: 22STCV17014    Hearing Date: April 9, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant Admiral Insurance Company (“Admiral”) moves for summary judgment against Plaintiff Canyon Country Mobile Home Estates, LLC (“Canyon Country”). 

The Court GRANTS the motion for summary judgment.

Background

The following facts are taken from the parties’ separate statements except where otherwise noted. The Court does not consider the parties’ reply separate statements, which are not authorized by statute. (Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 252.)

This case is an insurance coverage dispute under an environmental liability policy which Admiral issued to Canyon Country. The policy for “Cleanup Costs” resulting from a “Pollution Condition.” Canyon Country owns and operates a mobile home park (the “Property”) which has an on-site septic system for the treatment and disposal of wastewater.

The Insurance Policies

Admiral issued Environmental Impairment Liability Policy No. FEI-EIL-11555-00 (the “2012 Policy”) to Canyon Country for the period of December 5, 2012 to December 5, 2015. (UMF 9.) Admiral issued Environmental Impairment Liability Policy No. FEI-EIL-11555-01 (the “2015 Policy”) to Canyon Country with an effective period of December 5, 2015 to December 5, 2018. Except for their effective dates, the two policies include the same limitations, conditions, and terms for coverage. (UMF 15.) The FAC alleges a violation of the 2015 Policy only.

The Insuring Agreements of the 2012 Policy and 2015 Policy provide, in pertinent part, as follows:

“[Admiral] shall pay, up to the Limits of Liability and in excess of the Self-Insured Retention, on behalf of the Insured all:

• Cleanup Costs of the Insured;

• Liabilities for Property Damage to a Third Party (including Cleanup Costs);

• Liabilities for Bodily Injury to a Third party, and

• Defense Expenses

resulting from Pollution Conditions at, upon,

within, under or migrating from a Scheduled

Location which commenced during the

Policy Period or after the Retroactive Date,

if any and were Discovered and reported to

[Admiral] during the Policy Period, ….”

(UMF 16 [emphasis in original].)

The 2015 Policy defines “Cleanup Costs” as “reasonable and necessary costs incurred in performing Corrective Actions and/or Restorative Actions at, upon, within, under or migrating from a Scheduled Location.” (UMF 17 [emphasis in original].)

“The term Corrective Actions means actions undertaken with the prior written approval of [Admiral] to investigate, test, sample, monitor, cleanup, remove, remediate, treat, dispose of, neutralize or immobilize Pollutants resulting from a Pollution Condition. Corrective Actions for a Pollution Condition shall be deemed completed when the condition of the property:

• for similar property in the same geographic area as the Scheduled Location; and,

• a no further action letter, closure or other approval is received from the appropriate Regulatory Body.

For purposes of this Policy, “Applicable Risk Based Standards” shall mean those standards developed by the appropriate Regulatory Body for the cleanup of the Pollutant(s):

• satisfies the applicable Risk Based Standards; or

• based upon the land use of the Scheduled Location at the time of inception of this Policy.”

(UMF 18 [emphasis in original].)

“The term Restorative Actions means actions undertaken with the prior written approval of [Admiral] to repair, replace or restore tangible property to substantially the same condition such tangible property was in prior to being damaged during work performed in the course of incurring Cleanup Costs.” (UMF 19 [emphasis in original].)

The 2015 Policy contains the following exclusions:

“This policy does not cover any Claims arising out of, based upon, resulting from or with respect to:

Compliance Actions and Improvements Funds spent for additions, equipment, upgrades or physical improvements to the Scheduled Location or other property of the Insured undertaken voluntarily or to assure future compliance with applicable laws, rules or regulations.

Known Conditions

Any Pollution Conditions Discovered prior to the inception of this Policy. This exclusion does not apply to Pollution Conditions disclosed to the Company prior to the inception of this Policy and specifically listed by endorsement.”

(UMF 20 [emphasis in original].)

The Coverage-Related Events

Canyon Country’s septic system is subject to a 2005 order (the “2005 Order”) by the Los Angeles Regional Water Quality Control Board (the “Control Board”) which required Canyon Country to implement a wastewater monitoring program and file quarterly monitoring reports with the Control Board. The 2005 Order states that Canyon Country advised the Control Board in December 2004 that Canyon Country intended to connect the Property to the Los Angeles County sewer system as soon as a connection was available. The 2005 Order required Canyon Country to promptly implement a monitoring program for its septic system and begin submitting reports in July 2005. (Admiral’s Undisputed Material Fact (“UMF”) 4.)

In 2013, Canyon Country started monitoring its wastewater and discovered that the wastewater discharge from its septic system exceeded some of the requirements of the 2005 Order. (UMF 8.)

On July 15, 2016, Canyon Country submitted a “General Liability Notice of Occurrence/Claim” to Admiral, stating that the water levels in wells at the Property showed elevated levels of unacceptable materials. (UMF 21.) Canyon Country alleges that this constituted a Pollution Condition under the Policy. On January 26, 2017, Admiral’s counsel sent a letter to Canyon Country requesting any kinds of proposals, estimates, contracts, and agreements regarding Canyon Country’s plan to clean-up or remediation plan. (UMF 22.) On April 12, 2018, Canyon Country informed Admiral that it was seriously considering connecting the property to the local sewer system. (UMF 23.) Although Canyon Country has produced invoices for on-site groundwater monitoring and testing in discovery, it does not dispute that it did not provide Admiral with any invoices relating to remediation or cleanup of the pollutants prior to this litigation. (UMF 25.)

On May 2, 2018, Canyon Country informed Admiral that it wished to connect to the local sewer system and was seeking Admiral’s approval to cover the cost of the connection. (UMF 26.) On May 24, 2022, Admiral denied coverage for the claim, stating that it did not find a basis under the 2015 Policy to cover the installation of a hook-up to the local sewer system and the ongoing business costs to provide well monitoring. (UMF 27.)

Canyon Country alleges that the costs associated with connecting to the local municipal sewer system are covered under the 2015 Policy, including the costs of undertaking necessary studies, preparing plans, obtaining permits, and purchasing rights of way or easements. (FAC ¶ 24.)

Procedural History

Canyon Country filed this action against Admiral on May 23, 2022. The operative complaint is now the First Amended Complaint (“FAC”), which alleges a single cause of action for breach of contract.

Admiral moved for summary judgment on January 22, 2024. Canyon Country filed an opposition and Admiral filed a reply.

Request for Judicial Notice

The Court denies Admiral’s first request for judicial notice of the FAC as moot. The FAC is already in the record. The Court grants Admiral’s remaining requests for judicial notice and takes notice of the existence of the subject documents as public records, but not the truth of their contents.

            The Court denies Canyon Country’s first and second request for judicial notice of the FAC and Admiral’s Answer, respectively, as moot. The Court grants Canyon Country’s remaining requests for judicial notice and takes notice of the existence of the subject documents as public records, but not the truth of their contents.

Evidentiary Objections

The Court sustains Admiral’s objection to page 78 of Exhibit H to the Picariello Declaration. Canyon Country admitted in its discovery responses that it began sampling the groundwater in 2013 and that the analysis of the samples taken from September 2013 to December 2015 exceeded the groundwater limits under the 2015 Order for two of the monitoring wells. (Admiral’s Exhibit D, pp. 19:22-28, 20:1-5.) This discovery response bars Canyon Country from creating a triable issue of fact on this issue through the deposition of Canyon Country’s own person most knowledgeable. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 592; Benavidez v. San Jose Police Dept. (1999) 71 Cal.App.4th 853, 861, as modified on denial of reh'g (May 25, 1999).)

The Court overrules the parties’ remaining evidentiary objections.

Legal Standard

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 843.) “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) 

“In ruling on the motion, the court must consider all of the evidence and all of the inferences reasonably drawn therefrom [citation] and must view such evidence [citations] and such inferences [citations] in the light most favorable to the opposing party.” (Aguilar, supra, at pp. 844-845 [quotation marks omitted].) 

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.” (Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.)  A defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).)

“Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Ibid.) To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.)

Discussion

Admiral argues that its denial of coverage was proper because (1) costs for installation of a sewer connection do not fall within the 2015 Policy’s definition of “Cleanup Costs,” (2) the “Known Conditions” and “Compliance Actions and Improvements” exclusions preclude coverage, and (3) Canyon Country made misrepresentations in its application for the 2015 Policy that defeat any potential coverage. Admiral argues that each of these grounds independently bars coverage.

The Court grants summary judgment on the basis of two of these issues: (a) costs for installation of a sewer connection do not fall within the 2015 Policy’s definition of “Cleanup Costs;” and (b) the costs at issue in this lawsuit are subject to the “Compliance Actions and Improvements” exclusion.

Cleanup Costs

  As laid out above, the 2015 Policy provides for coverage of costs for Corrective Actions and Restorative Actions. Corrective Actions are comprised of costs incurred to investigate, test, sample, monitor, cleanup, remove, remediate, treat, dispose of, neutralize, or immobilize Pollutants resulting from a Pollution Condition. Restorative Actions are actions to repair, replace or restore tangible property to substantially the same condition such tangible property was in prior to being damaged during work performed in the course of incurring Cleanup Costs.

The connection of Canyon Country’s septic system to the municipal sewer system is not a Corrective Action. The Pollution Condition at the property was not the presence of sewage water in the septic system, it was the presence of sewage-related pollutants in the groundwater. This is made clear by the fact Canyon Country alleges that the elevated levels of pollutants in the groundwater constituted a Pollution Condition, but asserts that it was not aware of any Pollution Conditions on the Property prior to its discovery of those pollutants in the groundwater. Thus, while the connection to the municipal sewer system would help prevent future Pollution Conditions, it was not a cost involved in investigating, testing, sampling, monitoring, cleaning up, removing, remediating, treating, disposing of, neutralizing, or immobilizing the pollutants that were already in the groundwater due to the existing pollution condition.

Nor is the connection to the municipal sewer system a Restorative Action. Restorative Actions are actions to repair the damage performed in the course of other cleanup costs. The installation of a sewer connection does not perform that function.

Canyon Country argues that it has, in discovery, produced invoices for the monitoring and testing of groundwater – actions which it contends are Corrective Actions – which it conducted during the 2015 Policy period. While this may be true, Canyon Country neither alleges that Admiral improperly denied a request to reimburse those costs nor contends here that it actually submitted those invoices to Admiral as part of a claim under the policy. (UMF 25.) The allegations of the complaint do not include allegations that Admiral breached the contract by failing to cover such claims.  (See Conroy v. Regents of Univ. of California 45 Cal.4th 1244, 1250 [the pleadings “set the boundaries of the issues to be resolved at summary judgment”].)  Canyon Country’s declarations and exhibits relating to the invoices do not contain any indication that those invoices were submitted to Admiral as part of a claim. (Keith Decl., Ex. I, J.) Without a submission of a claim as to those costs, Admiral could not have breached the insurance policy by failing to reimburse them. 

Compliance Actions and Improvements Exclusion

Furthermore, the sewer connection falls under the “Compliance Actions and Improvements” exclusion. Canyon Country does not contest that the sewer connection was an action taken in order to bring the Property into compliance with the 2005 Order.  In response to this argument, Canyon Country argues only that it also seeks coverage for monitoring and testing of groundwater.  (Opp. at p. 13 lines 12-25.)  Thus, the sewer connection is not covered for that reason as well.

For these reasons, the Court grants summary judgment.