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Court of Appeal:
Extrinsic Evidence Properly Barred in Ex-DDT-Maker’s Suit
Montrose Chemical Corporation of California Was Properly Blocked From Attempting to Show That Under Policies Covering ‘Sudden’ Release of Pollutants Liability Could Be Imposed on Insurers for ‘Gradual’ Discharge—Opinion
By a MetNews Staff Writer
“Sudden” and “gradual” are antonyms, Div. Three of the Court of Appeal for this district held yesterday, rejecting the contention by Montrose Chemical Corporation of California that its insurance policies cover it for massive environmental damage caused by the slow release of pollutants at its Torrance DDT plant, up until it ceased production in 1982.
Montrose was the largest producer of the insecticide DDT (Dichlorodiphenyltrichloroethane) in the United States and is said to have caused about 1,700 tons of the chemical to make its way to the ocean through the sewer system. The federal government banned in in 1972 based on its dangers to humans and wildlife, and the U.S. and California in 1990 brought suit against Montrose and other chemical companies.
“Whatever shades of meaning the word ‘sudden’ may have, it does not include events that happen gradually over time, Justice Anne H. Egerton wrote.
She addressed a ruling by Los Angeles Superior Court Judge Lawrence P. Riff in an opinion denying Montrose’s petition for a writ of mandate challenging the determination that extrinsic evidence may not be admitted to as to the meaning of the contractual language.
Issue Stated
Egerton said:
“Would an objectively reasonable policyholder expect ‘sudden’ to mean ‘gradual’? That is the dispositive issue presented in this case. More specifically, we must decide whether an insurance policy providing coverage for damage arising out of a ‘sudden’ discharge, dispersal, release or escape of pollutants can reasonably be construed to provide coverage for damage arising out of a gradual discharge, dispersal, release or escape of pollutants. The trial court—believing it was bound by what the parties have labeled the ‘prior judicial construction’ doctrine —concluded it had no discretion to receive extrinsic evidence to interpret the disputed policy language, because our state appellate courts have uniformly held that ‘sudden’ unambiguously does not mean gradual.
The justice indicated agreement with Riff.
Supreme Court’s Directive
Div. Three acted pursuant to as directive by the California Supreme Court to determine whether “the existence of a prior judicial construction of an insurance policy’s form exclusion that found it to be unambiguous precludes a trial court from considering extrinsic evidence in determining whether the exclusion is ambiguous.”
Egerton made note of two 1993 Court of Appeal opinions—one from the First District’s Div. Three and the other from the Fourth District’s Div. Three—finding that a “gradual” occurrence is not a “sudden” one. She said that in the aftermath of those opinions, “our state courts of appeal have uniformly concluded the term ‘sudden,’ as used in” policy exclusions “must have a temporal element and is not reasonably susceptible of an interpretation that covers gradual pollution.”
She said that Riff “correctly followed controlling appellate precedent” in rejecting extrinsic evidence by which Montrose proposed to show coverage for gradual pollution.
Responding to the Supreme Court’s question, she wrote that “the general answer to that question” of whether an interpretation of language inconsistent with precedent is precluded is “no,” explaining:
“[A] court may preliminarily consider all credible evidence offered to prove the intention of the parties to a contract, even if a disputed term appears to the court to be unambiguous on the face of the instrument.”
She continued:
“In this case, however, the trial court correctly excluded the proffered extrinsic evidence. We reach this conclusion not because past appellate panels have found the disputed policy language to be unambiguous in the abstract, but because these past authorities have uniformly rejected the exact interpretation advanced by Montrose—namely, that ‘sudden’ could be reasonably construed to mean ‘gradual’ in the relevant insurance policy provisions….Under these circumstances, adherence to the ‘judicial pecking order’ compelled the trial court to follow this appellate precedent and exclude the proffered extrinsic evidence as irrelevant….
“For our part, although we are not strictly bound by the decisions of courts exercising equal jurisdiction, we nonetheless reach the same conclusion as our colleagues in these past cases.”
The case is Montrose Chemical Corporation of California v. Superior Court (Canadian Universal Insurance Company, Inc), B335073.
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