thomson-inc-nka-technicolor-usa-inc-technicolor-inc-and ( 2012 )


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  •                                                      FILED
    Dec 06 2012, 8:52 am
    FOR PUBLICATION                                           CLERK
    of the supreme court,
    court of appeals and
    tax court
    ATTORNEYS FOR APPELLANTS:                  ATTORNEYS FOR APPELLEE
    CONTINENTAL CASUALTY CO.:
    GEORGE M. PLEWS
    DONNA C. MARRON                            MARY K. REEDER
    KAREN B. SCHEIDLER                         Riley Bennett & Egloff, LLP
    JOSH S. TATUM                              Indianapolis, Indiana
    Plews Shadley Racher & Braun LLP
    Indianapolis, Indiana                      STEVEN M. CRANE, Pro Hac Vice
    BARBARA S. HODOUS, Pro Hac Vice
    Berkes Crane Robinson and Seal LLP
    Los Angeles, California
    IN THE
    COURT OF APPEALS OF INDIANA
    THOMSON, INC. n/k/a TECHNICOLOR            )
    USA, INC., TECHNICOLOR, INC., and          )
    TECHNICOLOR LIMITED,                       )
    )
    Appellants/Plaintiffs,               )
    )
    vs.                           )     No. 49A05-1201-PL-24
    )
    CONTINENTAL CASUALTY CO.;                  )
    TRAVELERS CASUALTY & SURETY CO. &          )
    TRAVELERS PROPERTY CASUALTY                )
    CO. OF AM.; ACE AM. INS. CO. &             )
    CENTURY INDEMNITY CO., INDEMNITY           )
    INS. CO. OF N. AM., INS. CO. OF N. AM.,    )
    & CIGNA INS. CO.; XL INS. AM., INC.;       )
    and NORTHERN ASSURANCE CO. OF AM.;         )
    )
    Appellees/Defendants.                )
    APPEAL FROM THE MARION SUPERIOR COURT
    The Honorable Michael D. Keele, Judge
    Cause No. 49D07-0807-PL-30746
    December 6, 2012
    OPINION – FOR PUBLICATION
    BRADFORD, Judge
    CASE SUMMARY
    Several years ago, Thomson, Inc., acquired the assets of Technicolor, Inc., which
    included, among other things, three contaminated former film-processing sites.
    Eventually, local environmental authorities directed Thomson to remediate the
    contamination at the sites, an expensive and ongoing process for which Thomson seeks
    indemnification from Continental, who insured Technicolor from 1969 to 1974.
    Thomson argues that the umbrella policy Continental issued to Technicolor covers losses
    resulting from orders from administrative agencies, as occurred here. Continental argues
    that its liability is limited to losses resulting from courtroom litigation.
    After both parties moved for summary judgment on the question of whether
    coverage exists, the trial court ruled in Continental’s favor.            Appellants/Plaintiffs
    Thomson Inc. n/k/a Technicolor USA, Inc., Technicolor, Inc., and Technicolor, Ltd.
    (collectively, “Thomson”) now appeal from the trial court’s grant of summary judgment
    in favor or Appellee/Defendant Continental Casualty Co. Finding that under California
    law, damages under the umbrella policy are limited to those as a result of courtroom
    litigation rather than administrative proceedings, we affirm.
    FACTS AND PROCEDURAL HISTORY
    A. Background
    2
    Beginning in 1924, Consolidated Film Industries (“CFI”) operated a film-
    processing facility at 959 Seward Street in Hollywood, California. In February of 2000,
    Technicolor, Inc., of Hollywood, California, purchased CFI. In 2002, operations ceased
    at the Hollywood facility, and all nine buildings at the facility were demolished in 2005.
    Beginning in 1936, Technicolor Limited, a wholly-owned English subsidiary of
    Technicolor, Inc., operated a film-processing facility on Bath Road, West Drayton,
    United Kingdom.      Beginning in 1964, Technicolor, Inc., operated a film-processing
    facility at 4050 Lankershim Boulevard in North Hollywood, California. In February of
    2001, Thomson, Inc., acquired Technicolor, Inc., and Technicolor Limited, consequently
    also acquiring the three film-processing facilities.
    Testing has revealed chlorinated solvent contamination at the Hollywood, North
    Hollywood, and West Drayton facilities, with the addition of diesel fuel contamination at
    the North Hollywood site. In 2009, Thomson notified Continental that it had been
    required by local authorities to clean up the three sites. As of November 9, 2011,
    remediation had cost approximately $4,800,000 for the Hollywood site, over $1,000,000
    for the West Drayton site, and approximately $730,000 for the North Hollywood site,
    although none had been completely cleaned up.
    B. The Umbrella Policy
    From 1969 to 1974, Continental issued three primary liability insurance policies to
    Technicolor, Inc. From August 15, 1969, to January 1, 1973, Continental also issued one
    umbrella policy, designated RDU-806-03-36 (“the Umbrella Policy”), to Technicolor,
    Inc. Coverage B of the Umbrella Policy provides, in relevant part, that
    3
    The company will indemnify the insured with respect to any occurrence not
    covered by underlying insurance, or with respect to damages not covered
    by underlying insurance but which results from an occurrence covered by
    underlying insurance, for ultimate net loss in excess of the insured’s
    retained limit which the insured shall become obligated to pay as damages
    by reason of liability imposed upon the insured by law or assumed by the
    insured under any contract because of
    personal injury
    property damage, or
    advertising injury
    to which this coverage applies, caused by an occurrence. The company,
    with respect to an occurrence not covered in whole or in part by underlying
    insurance or to which there is no other insurance in any way applicable,
    shall have the right and duty to defend any suit against the insured seeking
    damages on account of such personal injury, property damage or
    advertising injury, even if any of the allegations of the suit are groundless,
    false or fraudulent, and may make such investigation and settlement of any
    claim or suit as it deems expedient, but the company shall not be obligated
    to pay any claim or judgment or to defend any suit after the applicable limit
    of the company’s liability has been exhausted.
    ….
    “ultimate net loss” means the sums paid as damages in settlement of a
    claim or in satisfaction of a judgment for which the insured is legally liable
    after making deductions for all other recoveries … and also includes
    investigation, adjustment, appraisal, appeal and defense costs paid or
    incurred by the insured with respect to damages covered hereunder.
    Appellant’s App. pp. 70, 72.
    C. Procedural History
    On July 17, 2008, Thomson filed suit in Marion County Superior Court, seeking
    coverage from various insurance companies for remediation of the Hollywood, North
    Hollywood, and West Drayton sites. Continental was added to the suit on September 28,
    2009. On March 30, 2011, Thomson moved for partial summary judgment against
    Continental, seeking a declaration of coverage for the remediation sites under Coverage
    B of the Umbrella Policy. On August 1, 2011, Continental cross-moved for summary
    4
    judgment against Thomson, contending, inter alia, that under California law the
    Umbrella Policy did not cover costs and expenses Thomson incurred “to respond to
    administrative directives to remedy environmental contamination[.]” Appellant’s App. p.
    525. On December 23, 2011, the trial court granted Continental’s summary judgment
    motion and denied Thomson’s as to all three remediation sites.
    DISCUSSION AND DECISION
    Whether the Trial Court Erred in Granting
    Continental’s Summary Judgment Motion
    When reviewing the grant or denial of a summary judgment motion, we apply the
    same standard as the trial court. Merchs. Nat’l Bank v. Simrell’s Sports Bar & Grill, Inc.,
    
    741 N.E.2d 383
    , 386 (Ind. Ct. App. 2000). Summary judgment is appropriate only where
    the evidence shows that there is no genuine issue of material fact and the moving party is
    entitled to a judgment as a matter of law. Id.; Ind. Trial Rule 56(C). All facts and
    reasonable inferences drawn from those facts are construed in favor of the nonmoving
    party. 
    Id.
     To prevail on a motion for summary judgment, a party must demonstrate that
    the undisputed material facts negate at least one element of the other party’s claim. 
    Id.
    Once the moving party has met this burden with a prima facie showing, the burden shifts
    to the nonmoving party to establish that a genuine issue does in fact exist. 
    Id.
     The party
    appealing the summary judgment bears the burden of persuading us that the trial court
    erred. 
    Id.
    Both parties agree that California insurance law governs the merits of this appeal
    and that the remediation of the three sites at issue is being done pursuant to directives
    5
    from local environmental agencies.        Moreover, Thomson concedes that there is no
    coverage under the primary liability policies Technicolor, Inc., had with Continental from
    1969 to 1974. Thomson argues, however, that coverage exists under the Umbrella
    Policy.   Specifically, Thomson contends that the language of Coverage B and the
    Umbrella Policy’s definition of “ultimate net loss” provide coverage. This argument
    requires us to evaluate the relevant language of the Umbrella Policy.
    Under California law,
    “While insurance contracts have special features, they are still
    contracts to which the ordinary rules of contractual interpretation apply.”
    “The fundamental goal of contractual interpretation is to give effect to the
    mutual intention of the parties.” “Such intent is to be inferred, if possible,
    solely from the written provisions of the contract.” “If contractual language
    is clear and explicit, it governs.”
    “A policy provision will be considered ambiguous when it is capable
    of two or more constructions, both of which are reasonable.” The fact that
    a term is not defined in the policies does not make it ambiguous. Nor does
    “[d]isagreement concerning the meaning of a phrase,” or “‘the fact that a
    word or phrase isolated from its context is susceptible of more than one
    meaning.’” “‘[L]anguage in a contract must be construed in the context of
    that instrument as a whole, and in the circumstances of that case, and
    cannot be found to be ambiguous in the abstract.’” “If an asserted
    ambiguity is not eliminated by the language and context of the policy,
    courts then invoke the principle that ambiguities are generally construed
    against the party who caused the uncertainty to exist (i.e., the insurer) in
    order to protect the insured’s reasonable expectation of coverage.”
    Foster-Gardner, Inc. v. Nat’l Union Fire Ins. Co., 
    959 P.2d 265
    , 272-73 (Cal. 1998)
    (citations omitted).
    Under California insurance law, as it relates to commercial general liability
    policies, “damages” are limited to losses resulting from a “suit,” which is understood to
    refer, in general, to courtroom litigation.
    6
    [T]he duty to defend a “suit” seeking “damages” under pre-1986 CGL
    policies is restricted to civil actions prosecuted in a court, initiated by the
    filing of a complaint, and does not include claims, which can denote
    proceedings conducted by administrative agencies under environmental
    statutes. Likewise, the duty to indemnify for “‘all sums that the insured
    becomes legally obligated to pay as damages’” ([Certain Underwriters at
    Lloyd’s of London v. Superior Court, 
    16 P.3d 94
    , 105 (Cal. 2001)]) in the
    same standard primary policies is limited to money ordered by a court, and
    does not include expenses such as may be incurred in responding to
    administrative agency orders.
    CDM Investors v. Travelers Cas. & Sur. Co., 
    139 Cal. Rptr. 3d 669
    , 674 (Cal. Ct. App.
    2006).
    Consequently, unless the Umbrella Policy provides coverage for proceedings
    beyond “suits” or for indemnity for losses beyond “damages,” there is no coverage under
    California law.     Thomson argues that the policy’s definition of “ultimate net loss”
    expands the general definition of “damages,” while Continental argues that the California
    Court of Appeal has already addressed and rejected this precise argument in CDM
    Investors. We agree with Continental.
    In CDM Investors, the court evaluated the following language from the coverage
    clause, which provided indemnity for “‘the ultimate net loss in excess of the applicable
    underlying limit which the insured shall become legally obligated to pay as damages.’”
    43 Cal. Rptr. 3d at 676. The CDM Investors court concluded that coverage did not
    extend beyond “damages,” observing that “[t]he coverage clause imposing the duty to
    indemnify is clear in its limitation to court-rendered damages. It states: ‘The company
    will pay … the ultimate net loss … which the insured shall become legally obligated to
    pay … as damages.’” Id. at 677 (emphasis in CDM Investors).
    7
    The coverage language in the Umbrella Policy is legally indistinguishable from
    the above, and so we reach the same conclusion as did the CDM Investors court. The
    coverage clause in the Umbrella Policy provides that “[t]he company will indemnify the
    insured … for ultimate net loss … which the insured shall become obligated to pay as
    damages[.]” Appellant’s App. p. 70 (emphasis added). Just as clearly as it did in the
    policy at issue in CDM Investors, the coverage clause in the Umbrella Policy limits
    “ultimate net loss” to “damages.”
    Indeed, the Umbrella Policy’s language points even more strongly to a lack of
    coverage than did the policy language in CDM Investors. Specifically, the Umbrella
    Policy’s definition of “ultimate net loss” is also explicitly limited to “damages,” whereas
    the definition of the same term in CDM Investors was not:1
    “ultimate net loss” means the sums paid as damages in settlement of a
    claim or in satisfaction of a judgment for which the insured is legally liable
    after making deductions for all other recoveries … and also includes
    investigation, adjustment, appraisal, appeal and defense costs paid or
    incurred by the insured with respect to damages covered hereunder.
    Appellant’s App. p. 72 (emphases added). Following the California Court of Appeal’s
    decision in CDM Investors, we conclude that the Umbrella Policy limits Continental’s
    indemnity obligations to “damages.” Consequently, Continental has no obligation to
    1
    “The policy later defines ‘ultimate net loss’ as ‘the sum actually paid or payable in cash in the
    settlement or satisfaction of any claim or suit for which the insured is liable either by adjudication or
    settlement with the written consent of the company.’” CDM Investors, 43 Cal. Rptr. 3d at 676.
    8
    indemnify Thomson for the remediations of the Hollywood, North Hollywood, and West
    Drayton sites as a matter of law.2
    The judgment of the trial court is affirmed.3
    VAIDIK, J., and CRONE, J., concur.
    2
    Thomson urges us to apply the holding of the California Supreme Court in Powerine Oil Co. v.
    Superior Court, 
    118 P.3d 589
     (Cal. 2005) (Powerine II), in which coverage was found despite the lack of
    courtroom litigation. The coverage clauses at issue in Powerine II, however, specifically included
    coverage for “damages, direct or consequential and expenses ....[,]” which led the Court to conclude that
    “the addition of the term ‘expenses’ in the central insuring clause of these excess/umbrella policies
    extends coverage beyond the limitation imposed were the term ‘damages’ used alone, and thereby
    enlarges the scope of coverage beyond ‘money ordered by a court.’” 
    Id. at 602
     (emphasis in Powerine
    II). As previously mentioned, the Umbrella Policy’s coverage is expressly limited to “damages.”
    Thomson’s reliance on Powerine II is unavailing.
    3
    Because we conclude that the language of the Umbrella Policy precludes coverage, we need not
    address Continental’s arguments that there is no coverage for additional reasons specific to each of the
    three sites.
    9