Opinion
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. 984502
Reardon, Acting P.J.
Chevron U.S.A., Inc. (Chevron) appeals from an order denying its application for an order to show cause why its claim against Golden Eagle Insurance Corporation (GEIC) as third party administrator for respondent Golden Eagle Insurance Company (Golden Eagle) should not be allowed. The underlying actions involved groundwater contamination claims. The policies in question had broad total pollution exclusions clauses which precluded coverage. Therefore, the trial court did not abuse its discretion in denying the application and accordingly we affirm the judgment.
In 1997, the California Insurance Commissioner was appointed conservator of Golden Eagle, and GEIC was appointed third party claims administrator to process and determine covered claims. (Low v. Golden Eagle Ins. Co. (2003) 110 Cal.App.4th 1532, 1534, fn. 1.) Pursuant to court order, GEIC’s decision on a claim is subject to review by the San Francisco Superior Court.
I. BACKGROUND
Insurer in conservation Golden Eagle issued an insurance policy to Patrick Diluccia, doing business as Los Osos Valley Garage, located at 1099 Los Osos Valley Road in Los Osos (commonly referred to as Bear Valley Chevron), which ran from November 1, 1990 through November 1, 1991, as well as a renewal policy running through November 1, 1992. Each policy had a per accident limit of $500,000. By endorsement Chevron was listed as an additional insured to both policies.
The policies included a “Total Pollution Exclusion Endorsement,” which excludes coverage for bodily injury or property damage “which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.” This exclusion did not apply in two situations: (1) where “fuels, lubricants, fluids, exhaust gases or other similar pollutants that are needed for or result from the normal electrical, hydraulic or mechanical functioning of the covered ‘auto’ or its parts, if: [¶] the pollutants either escape or are discharged, dispersed or released directly from an ‘auto’ part designed by its manufacturer to hold, store, receive or dispose of such pollutants”; and (2) where pollutants that are not in or upon a covered “auto” if: “the pollutants or any property in which the pollutants are contained are upset, overturned or damaged as a result of the maintenance or use of a covered ‘auto’; [¶] the discharge, dispersal, release or escape of the pollutants is caused directly by such upset, overturn or damage; and [¶] the ‘bodily injury’ or ‘property damage’ is not otherwise excluded.” In other words, with respect to a car covered under the policy, the total pollution exclusion does not pertain to pollutants that escape from one of the usual systems in such a car that are meant to contain such pollutants, or to pollutants that are upset or overturned as a result of servicing such a car.
In August and October 2002, two water providers filed lawsuits against several parties, including Chevron, alleging groundwater contamination from the release, discharge, disposal or spilling of gasoline containing the additive methyl tertiary butyl ether (MTBE) from Bear Valley Chevron. The complaints asserted that Bear Valley Chevron owned, maintained and operated or controlled underground gasoline storage tanks, pipelines and transport and dispensing systems; that Chevron provided the service station with gasoline containing MTBE; and the station owners stored and dispensed gasoline containing MTBE in underground storage tanks and/or related infrastructure. Further, Chevron did not advise or fully advise Bear Valley Chevron owners/operators of the hazardous nature of MTBE and did not properly determine that the station’s operations were being conducted so as to avoid releases or discharge of MTBE-laden gasoline. One of the Los Osos complaints stated that Chevron had knowledge that a substantial number of underground storage tanks and other gasoline storage facilities were leaking. Both alleged that Chevron continued to supply gasoline containing MTBE after discovery by regulatory agencies that the Bear Valley Chevron owners and operators released, discharged, disposed or spilled the pollutant. One averred that the MTBE migrated and continued to migrate through areas of the Los Osos Groundwater Basin, while the other claimed there was a plume of contamination extending from the station site, across Los Osos Valley Road and toward and underneath a shopping center.
Hereafter, referred to as the Los Osos actions or complaints, they are: (1) Southern California Water Company v. Chevron U.S.A., Inc. (Super. Ct. San Luis Obispo County, 2003, No. CV020782); and (2) Los Osos Community Services District v. Chevron Corporation (Super. Ct. San Luis Obispo County, 2004, No. CV021041).
One Los Osos action settled in August 2003, the other in September 2004. Chevron paid $1,560,000 in settlement of both actions, and incurred $542,386.33 in defense costs. Prior to settlement, in March 2003 Chevron tendered the actions to GEIC, requesting a complete defense and indemnity. Not until February 2005 did GEIC respond that it would participate in Chevron’s defense under a complete reservation of rights, at a rate of $160 per hour. A year later GEIC submitted $6,996.78 in satisfaction of Chevron’s claims, utilizing “the Proportionate Loss Method of calculation” which had been approved by the liquidation court. The calculation was based on a percent of the total settlement GEIC paid to insured Patrick Diluccia ($20,000 paid to Diluccia divided by $1,569,000 total settlement equals 1.29 percent). Applying that percent to Chevron’s total fees and costs of $542,386.33 yielded the proffered amount.
With GEIC’s rejection of its claim, in March 2006 Chevron exercised its right to seek judicial review by filing an application for an order to show cause. Opposing the application, GEIC took the position that there was no possibility of coverage due to the total pollution exclusion endorsement, and therefore GEIC had no obligation to make any defense contribution. Further, the Insurance Commissioner had discretion to select an allocation method by which to calculate GEIC’s contribution to the defense, and he properly exercised that discretion by applying the well-established proportional loss method. The trial court denied the order to show cause application in its entirety.
II. DISCUSSION
A. Standard of Review
In a special proceeding for an insurer in conservation, the action of the commissioner as conservator is subject to review under an abuse of discretion standard, “asking if the action was arbitrary, i.e., unsupported by a rational basis, contrary to specific statute or discriminatory.” (Low v. Golden Eagle Ins. Co., supra, 110 Cal.App.4th at p. 1544.) Thus the trial court must affirm the commissioner’s rejection of a claim unless (1) the commissioner did not provide a fair and full determination of the claim; (2) the decision was not supported by substantial evidence; or (3) the commissioner relied on an improper legal standard or otherwise based the determination on an error of law. (Garamendi v. Golden Eagle Ins. Co. (2005) 128 Cal.App.4th 452, 466.)
B. The Trial Court Did Not Abuse Its Discretion in Concluding the Total Pollution Exclusion Endorsement Precluded Coverage and Thus No Duty to Defend Arose.
An insurer’s duty to defend is contractual. It runs to claims that are merely potentially covered in view of facts alleged or otherwise disclosed. On the other hand, where none of the claims is potentially covered, there is no duty to defend. (Buss v. Superior Court (1997) 16 Cal.4th 35, 46-48.)
In Garamendi v. Golden Eagle Insurance Co. (2005) 127 Cal.App.4th 480, the reviewing court considered the total pollution exclusion endorsement at issue in this case. The underlying litigation involved claims asserted by workers based on inhalation of silica dust arising from the insured’s sandblasting operations. Claimant argued, among other points, that there was a potential for coverage notwithstanding the pollution exclusion endorsement because the underlying complaints alleged liability based on the sale of defective products that contributed to personal injuries caused by silica dust. (Id. at pp. 486, 488.) Dismissing this argument, the reviewing court held that the broad language of the exclusion applied “to any bodily injury ‘which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal . . . of pollutants at any time.’ This language shifts the focus to injuries that would not have occurred ‘but for’ the discharge of pollutants.” (Id. at pp. 487-488.) Even if the product liability claims were otherwise valid, the injuries would not have occurred but for discharge of the pollutant, and therefore the exclusion applied. (Id. at p. 488.)
So, too, in this case it is clear that “but for” the “actual, alleged or threatened” seepage and migration into the groundwater of gasoline containing MTBE, there would be no basis for damages in the Los Osos litigation. Other cases similarly have found no coverage for and/or duty to defend groundwater pollution cases in the face of various pollution exclusion provisions. (See Westoil Terminals Co., Inc. v. Industrial Indemnity Co. (2003) 110 Cal.App.4th 139, 145, 148-149; Legarra v. Federated Mutual Ins. Co. (1995) 35 Cal.App.4th 1472, 1480-1481.)
Nonetheless, Chevron maintains that Golden Eagle had a duty to defend because its “[b]elated [a]ssertion” that there is no potential duty to defend “is [a]rbitrary and [u]nsupported” by the record in the action. The argument is this: Golden Eagle provided defense and indemnity to Diluccia, Chevron’s coinsured, under the same policies and based on the same operative facts. To treat Chevron differently “is discriminatory and lacks a rational basis.” What Chevron forgets is that the interpretation of an insurance contract is a question of law, and the duty to defend is an objective matter determined under contract law. The GEIC adjuster or claims analyst who reviewed Diluccia’s claim apparently thought there was a duty to defend and hence GEIC provided a limited defense based on a mistaken interpretation of the policy. By the time of the order to show cause proceedings, counsel for GEIC had reached a different conclusion, namely that there was no possibility of coverage under the total pollution exclusion endorsement.
Where the underlying action does not surface any potential for coverage under an insurance policy, the opinions and writings of the insured’s staff do not give rise to a duty of defend. Again, this is because interpretation of an insurance policy is a question of law. (Quan v. Truck Ins. Exchange (1998) 67 Cal.App.4th 583, 602.) “Without more, writings or memos by insurance company personnel venturing their opinions as to whether a defense should be afforded do not constitute ‘admissions’ of a defense duty. . . . [¶] . . . The fact that insurance company employees may have questioned, in writing, whether denial of a defense obligation was proper based on the facts cannot demonstrate that those facts gave rise to potentially covered liability.” (Ibid.;accord Chatton v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 846, 865 [admission of liability by employees of insurer does not establish liability, because interpretation of insurance policy involves legal rather than factual determination].)
We note, too, that Chevron has not put forth any argument of waiver or estoppel. But of course coverage under a policy of insurance cannot be established by estoppel or waiver. (Manneck v. Lawyers Title Ins. Corp. (1994) 28 Cal.App.4th 1294, 1303.) The doctrines of implied waiver and estoppel, based on an insured’s conduct or actions, are not available to bring within the scope of coverage risks that are not covered by the terms of a policy, or risks expressly excluded therefrom. (Aetna Casualty & Surety Co. v. Richmond (1977) 76 Cal.App.3d 645, 653.)
Analytically an insurer’s earlier defense of a coinsured is no different than an admission of liability from the insurer’s employee as far as the impact of that action on the question of whether defense or coverage is owed. Moreover, in this case GEIC explicitly and initially agreed to defend Chevron under a broad reservation of rights enabling GEIC “to assert a full or potential denial of defense or indemnity, or both, at a later date if it is determined that no or limited coverage applies to all or part of this matter.” Where an insurer does not deny a defense at the outset but elects to provide one under a reservation of its right to reimbursement, “[b]y law applied in hindsight, courts can determine that no potential for coverage, and thus no duty to defend, ever existed. If that conclusion is reached, the insurer, having reserved its right, may recover from its insured the costs it expended to provide a defense which, under its contract of insurance, it was never obliged to furnish.” (Scottsdale Ins. Co. v. MV Transportation (2005) 36 Cal.4th 643, 658; accord Golden Eagle Ins. Corp. v. Cen-Fed, Ltd. (2007) 148 Cal.App.4th 976, 995.)
C. The Exceptions to the Total Pollution Exclusion Endorsement Do Not Offer a Possibility of Coverage.
Chevron further maintains that Golden Eagle should have defended because there was a potential for coverage based on allegations in the complaint that Chevron’s liability arose “at least in part, from the station owner/operators’ failure to properly conduct their operations at the premises, resulting in ‘releases’ and ‘discharges’ of gasoline.” These allegations, they claim demonstrate that the actions potentially fell within one of the two exceptions to the pollution exclusion.
The following, taken from one of the Los Osos complaints, is illustrative of the general allegations which Chevron references: “The Bear Valley Chevron Owner/Operator defendants failed to properly store and deliver gasolines containing the additive MTBE, failed to properly monitor and inspect storage and delivery systems to detect leaks and spills, and failed to properly respond to leaks and spills, to the effect that gasolines containing MTBE are being released into the soils and groundwater of the Los Osos Basin and are contaminating the community’s drinking water supply. These defendants released, spilled, disposed of, discharged, or caused to be released, spilled, disposed or discharged, gasoline containing MTBE . . . from Bear Valley Chevron into the soils and/or the Los Osos Basin.”
These allegations do not purport to describe gasoline which escapes, etc. (1) from an automobile part designed to hold, store, etc. such gasoline, or (2) when a container of gasoline is overturned “as a result of the maintenance or use” of an automobile covered under the policy. This is so because the complaints describe and focus on Bear Valley Chevron’s storage and delivery systems and operations, not its car repair services. The clear import of the Los Osos complaints is that gasoline containing MTBE leaked from the underground storage tanks and delivery systems, not that a little gasoline was spilled or leaked in conjunction with repairing a car. The magnitude of pollution is described as a “plume” of contamination and contamination spreading throughout the Los Osos basin. The Los Osos complaints were filed 10 years after the last Golden Eagle insurance policy expired. In the event some gasoline did escape from a car being serviced, it would be pure speculation that the gasoline had been purchased from a Chevron dealer. An insured cannot trigger the duty to defend by speculating about facts extraneous to the complaint regarding potential third party liability. (Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1114.)
Similarly, the general theory of liability against Chevron is predicated on its role as a supplier of gasoline containing the additive MTBE to Bear Valley Chevron, its knowledge and concealment of the hazardous nature of the product, and its failure to determine that operations were conducted to avoid release of the contaminant. Chevron’s gasoline entered the storage and delivery systems, leaked or otherwise discharged into the groundwater and contaminated the water supply. Chevron was not sued by the water companies because of the escape of gasoline from a serviced car, or because a container of Chevron gasoline was overturned as a result of the servicing of a car.
Vann v. Travelers Companies (1995) 39 Cal.App.4th 1610 does not help Chevron. There, an automobile body shop was sued for environmental contamination arising from the long-term operation of the business. Reversing judgment for the insurer on the issue of the duty to defend, the reviewing court held that vague allegations in the complaint were broad enough to raise the possibility that the alleged discharge of pollutants fell within the “ ‘sudden and accidental’ ” exception to the policy’s pollution exclusion clause. (Id. at pp. 1615-1616.) In contrast, here the allegations in the complaints do not potentially encompass the narrow exceptions to the pollution exclusion clause, and do no support Chevron’s speculation that facts exist to support those exceptions.
III. DISPOSITION
The total pollution exclusion precluded coverage for the groundwater contamination claims in the underlying actions. The allegations in the pleadings do not come within the narrow exceptions to that exclusion, and therefore there was no potential for coverage under the policy. There being no duty to defend, there was no duty to indemnify.
The judgment is affirmed.
We concur: Sepulveda, J., Rivera, J.