CALIFORNIA v. ALLSTATE INSURANCE COMPANY









Filed 3/9/09





IN THE SUPREME COURT OF CALIFORNIA



STATE OF CALIFORNIA, )
)
Plaintiff and Appellant, ) S149988
)
v. ) Ct.App. 4/2 E037627
)
ALLSTATE INSURANCE COMPANY )
et al., ) Riverside County
) Super. Ct. No. RIC381555
Defendants and Respondents. )
__________________________________ )
)
STATE OF CALIFORNIA, )
)
Plaintiff, )
)
v. ) Riverside County
) Super. Ct. No. CIV239784
UNDERWRITERS AT LLOYD’S )
LONDON et al., )
)
Defendants. )
__________________________________ )

This case arises from efforts by the State of California (State) to obtain insurance coverage for property damage liability imposed in a federal lawsuit as a result of discharges from the “Stringfellow Acid Pits,” a State-designed and -operated hazardous waste disposal facility in Riverside County. The trial court granted summary judgment to four of the State’s excess insurers, and the Court of Appeal reversed. The case presents several issues regarding application of pollution exclusions in comprehensive general liability policies: (1) In determining whether the “sudden and accidental” discharge exception to the policies’ pollution exclusion applies, is the proper focus on the initial deposit of chemical wastes into storage on the site or, instead, on the escape of pollutants from the site into the larger environment‌ (2) Does whether an absolute exclusion for pollution of a “watercourse” applies to a 1969 overflow, in which polluted runoff ran down a creek bed, present a triable issue of fact‌ (3) Does whether an emergency release of polluted runoff in 1978 was “accidental” present a triable issue of fact‌ (4) If triable issues exist as to whether some, but not all, discharges of pollutants from the site were sudden and accidental, did the trial court properly grant the insurers summary judgment on the ground that the State cannot prove what part of its property damage liability resulted from sudden and accidental discharges‌
On these issues, we conclude: (1) Because the State’s liability for property damage was founded on its negligence in allowing pollutants to escape from the Stringfellow evaporation ponds into the surrounding groundwater and land, the proper focus of analysis here is on discharges from the ponds, rather than deposits to them. (2) A triable issue exists whether the entirety of the 1969 overflow discharge was limited to a watercourse. (3) A triable issue exists whether the 1978 release was “accidental.” (4) Because a triable issue of fact exists as to whether sudden and accidental discharges were a substantial factor in causing indivisible property damage for which the State was found liable, the trial court erred in granting summary judgment on the ground that the State cannot prove how much of its liability is traceable to those discharges. Based on these conclusions, we will affirm in part and reverse in part the judgment of the Court of Appeal.

Factual and Procedural Background

The State seeks coverage from four insurers, Allstate Insurance Company, Century Indemnity Company, Columbia Casualty Company, and Westport Insurance Corporation (collectively Insurers), for liability imposed in a federal court civil action based on discharge of hazardous wastes from the Stringfellow Acid Pits. In the federal action, the State and the United States sued companies that had disposed of waste at the Stringfellow Acid Pits, and the companies counterclaimed against the State. In 1998, the federal district court held the State 100 percent liable for claims under California law, and 65 percent liable for claims under federal law, for past and future costs of remediating contamination of land and groundwater. The State expects those remediation costs to exceed $500 million. (See United States v. Stringfellow (C.D.Cal. 1995) 1995 WL 450856, pp. *5-*6.)^[1]
Many of the undisputed facts that follow are taken from the November 1993 report of a special master in the federal case, which was adopted, with modifications, by the district court, and which was added to the summary judgment record by one of the Insurers. (United States v. Stringfellow (C.D.Cal. 1993) 1993 WL 565393; see United States v. Stringfellow, supra, 1995 WL 450856, at p. *1.)
In the 1950’s, the State selected the location for and designed and directed the construction of a class I hazardous waste disposal site (i.e., one capable of accepting all types of liquid wastes) known as the Stringfellow Acid Pits. The facility, located in the Jarupa Mountains just north of the community of Glen Avon, in Riverside County, sat on the floor of a canyon drained by Pyrite Creek. In 1955, geologist Robert Fox inspected the Stringfellow site for the State. After a brief inspection that included no borings or soil analysis, Fox deemed the site suitable because of what he believed to be an impermeable layer of rock, which he assumed had no water in it, beneath the site. Fox’s investigation resulted in a report concluding that with construction of a watertight barrier dam across the canyon, and with adequate measures to divert runoff, the site would pose no threat of environmental pollution.
The State directed construction of open, unlined evaporation ponds to contain the hazardous waste, channels to divert rainwater around the site, and a barrier dam at the bottom of the site. The hazardous waste disposal facility was opened in 1956. At the direction and under the control of the State, more than 30 million gallons of liquid industrial waste were deposited in the Stringfellow ponds during the facility’s operation; the State closed the site to new deposits in 1972 after the discovery of groundwater contamination.
Fox’s assessment of the site proved inaccurate. In fact, the site was underlain by decomposed granite and fractured bedrock, through which an underground alluvial channel ran. By 1960, a later report by a State expert found, chemical pollution was seeping into the groundwater through the fractured rock and around the ends of the barrier dam, which had been negligently constructed. A plume of contaminated groundwater moved downgradient from the site.
In addition to underground leaking, two major overflow episodes occurred at the site. In March 1969, a rainstorm of around 20 inches (statistically expected to occur no more than once every 50 years), following on earlier heavy rains in January and February, flooded the site, causing the waste ponds to overflow and send polluted water down the canyon. In March 1978, again following extraordinarily heavy rains, the ponds were once more near overflowing and the retention dam began to fail. The State made a series of controlled discharges from the ponds, releasing about one million gallons of diluted waste down the Pyrite Creek channel. (The circumstances of the 1969 and 1978 releases are discussed in greater detail in connection with the legal issues.)
The State requested coverage for the liability imposed in the federal action from several insurers, including the four involved in this appeal. All four of the pertinent comprehensive general liability polices contain coverage exclusions for liability resulting from environmental pollution. Three of the policies (all but Columbia Casualty Company’s) contain a then standard exclusion, qualified by a “sudden and accidental” exception as to pollution to land or air, but absolute as to pollution to watercourses and bodies of water: “This policy does not apply: [¶] . . . [¶] H. To Personal Injury or Property Damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land or the atmosphere, but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental. [¶] It is further agreed that the Policy does not apply to Personal Injury or Property Damage arising out of the discharges, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon any watercourse or body of water.” (Italics added.)
Columbia Casualty Company’s policy combined the exclusion for pollution of land and air with that for pollution of watercourses and bodies of water, making both subject to the exception for “sudden and accidental” discharges.
Insurers denied coverage. The State then brought this action for declaratory relief, breach of contract, and bad faith denial of coverage. The trial court granted Insurers summary judgment based on their policies’ pollution exclusions. The Court of Appeal reversed. As relevant here, the appellate court held that the focus in applying the pollution exclusion was properly on release of pollutants from containment on the Stringfellow site, that triable issues of fact exist as to whether the 1969 overflow of waste was “sudden and accidental” and whether it discharged pollutants onto land as well as into a watercourse, but that the undisputed facts show the 1978 release was not “accidental” because the State had been warned, after the 1969 events, that it needed to cover the ponds to avoid a reoccurrence.
Regarding the State’s inability to separate out the cost of remediating sudden and accidental releases from costs attributable to the gradual seepage of pollutants from the evaporation ponds into the groundwater (the State had effectively so admitted in response to discovery requests), the Court of Appeal, relying on our decision in State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94, held the policies covered the State’s liability for indivisible damage caused partly by covered causes and partly by excluded causes. The appellate court therefore reversed the grant of summary judgment to Insurers, but ordered the superior court, on remand, to grant their alternative motion for summary adjudication of issues, establishing that the 1978 release as well as the gradual escape of pollutants were excluded events under the policies.
We granted Insurers’ petitions for review, which challenged the Court of Appeal’s holdings on the relevant release for application of the pollution exclusions, whether the 1969 discharge was within the watercourse pollution exclusion, and the burden of allocating costs between covered and excluded causes. The State’s answer to the petitions raised the further issue of whether the Court of Appeal had correctly held the 1978 release to be nonaccidental as a matter of law.

Discussion

“ ‘A trial court properly grants a motion for summary judgment only if no issues of triable fact appear and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); see also id., § 437c, subd. (f) [summary adjudication of issues].) The moving party bears the burden of showing the court that the plaintiff “has not established, and cannot reasonably expect to establish,” ’ the elements of his or her cause of action. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460.)” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720.) We review the trial court’s decision de novo, liberally construing the evidence in support of the party opposing summary judgment and resolving doubts concerning the evidence in favor of that party. (Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037.)
“Our goal in construing insurance contracts, as with contracts generally, is to give effect to the parties’ mutual intentions. [Citations.] ‘If contractual language is clear and explicit, it governs.’ [Citations.] If the terms are ambiguous, we interpret them to protect ‘ “the objectively reasonable expectations of the insured.” ’ ” (Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 501.) The “sudden and accidental” exception to the pollution exclusion, which we construe and apply in this case, acts to reinstate coverage where it would otherwise be barred by the exclusion, and, “[a]s a coverage provision, the exception will be construed broadly in favor of the insured.” (Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1192.)

I. The Relevant Discharge for Application of the Pollution Exclusion

The Court of Appeal held that because the basis for the State’s federal court liability was the escape into the environment of pollutants from containment ponds on the site, “the release of the wastes from the site after they had been deposited there by other entities” was “the relevant discharge for purposes of determining whether the State’s discharge of pollutants was ‘sudden and accidental.’ ” Insurers, relying on Standun, Inc. v. Fireman’s Fund Ins. Co. (1998) 62 Cal.App.4th 882 (Standun), argue, to the contrary, that the relevant discharges are the “initial disposals of waste into the unlined ponds,” which discharges were, of course, neither sudden nor accidental.
We agree with the Court of Appeal. The State seeks indemnity from Insurers for its liability for property damage as determined in the federal action. The policies exclude such liability if the property damage arises out of a discharge of pollutants to land, unless the discharge was “sudden and accidental.” Because the issue is thus whether the discharge causing the property damage for which the State was found liable was “sudden and accidental,” the focus of analysis must be on the particular discharge or discharges that gave rise to that property damage. Here the State’s liability was based on its having sited, designed, built, and operated the Stringfellow facility in such a negligent manner as to allow hazardous chemicals to escape from the evaporation ponds (by both seepage and overflow) into the surrounding environment. The State was not held liable for polluting the evaporation ponds, but for polluting the land and groundwater outside the ponds.^[2] The relevant discharges for application of the pollution exclusion, then, are those in which, due to the State’s negligence, pollutants were released from the Stringfellow evaporation ponds into the surrounding soils and groundwater.
Standun is not to the contrary. The insured in that case was a manufacturer who had dumped its liquid wastes at a landfill operated by a third party. The liquid wastes were not held in containment ponds at the landfill but were deposited on the soil or mixed with solid refuse. (Standun, supra, 62 Cal.App.4th at pp. 885-886, 891.) The appellate court concluded “[t]he relevant discharge as to [the insured] is the discharge of its wastes into the landfill,” not the subsequent migration of wastes from the landfill to other property. (Id. at p. 892.)
Though it reached a different result, the Standun court’s approach resembles our own. As have we, the court “look[ed] first to the underlying claims to determine the polluting event.” (Standun, supra, 62 Cal.App.4th at p. 890.) The underlying actions, a United States Environmental Protection Agency claim and a third party action for contribution, sought damages from the insured “arising out of [its] disposal of hazardous wastes at the . . . landfill.” (Ibid.) Because the policyholder’s liability was based on this set of discharges, which were “purposeful and regular,” not sudden or accidental, its liability policy’s pollution exclusion barred coverage. (Id. at p. 892.)
The result in Standun thus depended, as it does here, on identification of the discharge that formed the basis for the insured’s liability, in that case the insured’s depositing liquid wastes at the landfill. The Court of Appeal in this case explained the importance of the factual distinction: “Here, in contrast, the State was not held liable for dumping wastes into the site. It was held liable for negligently selecting, designing, building, and operating the site. Its liability was based not on the release of wastes into the site — that was, after all, the intended purpose of the site — but on the release of wastes from the site when, because of the State’s negligence, the site failed to contain them properly. Because the bases for the underlying liability in Standun and this case were different, Standun does not support denying coverage here.”
The Standun court also opined that where wastes are deposited directly onto the land, not into a containment facility, “the subsequent release of pollutants from the landfill into the water, air and adjoining land” was merely an instance of “damages arising out of the discharge.” (Standun, supra, 62 Cal.App.4th at p. 891.) Again, Standun is distinguishable. We agree that in the “sudden and accidental” exception, “ ‘[a]ccidental’ means an unexpected or unintended discharge, not unexpected or unintended damage.” (Id. at p. 889; accord, Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 783-784.) When, as in Standun, pollutants are deposited directly onto land or into water, without any attempt at containment, their further migration may reasonably be viewed as an aspect of property damage rather than an additional release or discharge; arguably, the only “discharge” to be considered in such a case is the initial deposit. In this case, however, the hazardous wastes were deposited into ponds intended and expected to contain them, albeit ones poorly sited and designed for the purpose. Because the wastes were placed into containment in the evaporation ponds rather than directly dispersed widely into the environment, the initial deposit of chemical wastes into the Stringfellow ponds was not itself a “discharge, dispersal, release or escape” within the meaning of the pollution exclusion.
In MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, we held an apartment building owner’s liability for spraying the building with insecticides was not excluded from coverage by a pollution exclusion phrased similarly to that here (though lacking an exception for sudden and accidental events). (See id. at p. 639.) We noted that the terms “release” and “escape” in a pollution exclusion “connote some sort of freedom from containment” (id. at p. 651); “the word ‘dispersal,’ when in conjunction with ‘pollutant,’ is commonly used to describe the spreading of pollution widely enough to cause its dissipation and dilution” (ibid.); and in the pesticide context “discharge” was most commonly used “to describe pesticide runoff behaving as a traditional environmental pollutant” (id. at p. 652). Because of the tension between the potentially broad literal meanings of these terms and their connotations in common usage, the pollution exclusion as phrased here and in MacKinnon is ambiguous as to its exact scope of application.
The initial deposit of wastes at the Stringfellow site put them into confinement, imperfect though it was, and did not itself spread chemical wastes widely through the environment. A reasonable insured would not understand an exclusion for “release” of pollutants to apply where, as here, the wastes are deposited into intended containment ponds and do not behave as environmental pollutants until they are later released or discharged from the ponds. (See MacKinnon v. Truck Ins. Exchange, supra, 31 Cal.4th at p. 654 [reasonable insured would not understand spraying of pesticides to control insects in building as an act of pollution]; Patz v. St. Paul Fire & Marine Ins. Co. (7th Cir. 1994) 15 F.3d 699, 704 [unlined evaporation pit “was a containing structure, despite its lack of artificial materials” and “[t]he discharge of wastes into the environment did not occur until the water leached through the bottom of the pit”]; Queen City Farms v. Central Nat. Ins. Co. (Wash. 1994) 882 P.2d 703, 719 [placement of wastes into earthen pits intended to contain them was not a “discharge, dispersal, release, or escape” of pollutants, as “ ‘none of the[se] terms is normally used to describe the placement of a substance into an area of confinement’ ”; rather, “the polluting event is the discharge, dispersal, release, or escape from that place of containment into or upon the land, the air or water”].)
But even considering the initial deposit of chemicals into the evaporation ponds to be a “discharge, dispersal, release or escape” (or rather a set of such events), the subsequent escape of those chemicals from the ponds into the surrounding soils and groundwater was clearly another. And, as we have seen, the State’s liability was based on its negligence in allowing the second set of discharges, not the first. The instances of seepage and overflow from the ponds were therefore liability-causing events, not merely aspects of the property damage as in Standun, supra, 62 Cal.App.4th at page 891. (See SMDA v. American Ins. Co. (Mich.Ct.App. 1997) 572 N.W.2d 686, 703 [pollution exclusion is applied to escape of pollutants from landfill facility, not initial dumping: “ ‘If waste materials are placed in a contained area or structure and later escape into the environment, the latter discharge is the relevant discharge’ ”]; Key Tronic v. Aetna (Cigna) Fire Ins. Co. (Wash. 1994) 881 P.2d 201, 206 [“Depending upon the circumstances, the initial depositing of wastes may be a polluting event. For example, the dumping of toxic wastes into a lake could fit this category, as well as so-called ‘midnight dumping’ along a county road. [¶] However, where wastes are deposited in a sanitary landfill, the escape of polluting materials from the landfill is the relevant polluting event”].)
We conclude the initial deposit of wastes was not a polluting event subject to the policy exclusion (i.e., a “discharge, dispersal, release or escape” of pollutants) and, even if it were, the State’s liability was based not on the initial deposit, but instead on the subsequent escape of chemicals from the Stringfellow ponds into the surrounding soils and groundwater, making that the relevant set of polluting events. In light of these conclusions, we need not address Insurers’ argument that the damages here “ar[ose] out of” the initial deposit of wastes in a simple (“but-for” causal sense.

II. Application of the Watercourse Pollution Exclusion to the 1969 Overflow

Insurers did not seek review of the Court of Appeal’s holding that triable issues exist as to whether the 1969 overflow was “sudden and accidental” within the meaning of the qualified pollution exclusion, but did seek review of whether the 1969 overflow was “into or upon any watercourse” within the meaning of the absolute pollution exclusion for watercourses contained in all the policies but Columbia Casualty Company’s. We agree with the lower court that triable issues exist on this factual issue.
A general dictionary defines “watercourse” as “a stream of water, as a river or brook” or “the bed of a stream that flows only seasonally.” (Random House Dict. Unabridged (2d ed. 1987) p. 2147.) Similarly, a legal dictionary defines the term as “[a] body of water, usu[ally] of natural origin, flowing in a reasonably definite channel with bed and banks.” (Black’s Law Dict. (8th ed. 2004) p. 1623.) We have explained that it is “not necessary to the existence of a watercourse that the flow should be continuous throughout the year” (Lindblom v. Round Valley Water Co. (1918) 178 Cal. 450, 453), but have distinguished a watercourse, i.e., “water flowing in a fixed channel,” from surface water, i.e., “[w]ater diffused over the surface of land, or contained in depressions therein” (Keys v. Romley (1966) 64 Cal.2d 396, 400). Perhaps the simplest and most concise definition is “ ‘the channel through which the water of a particular district or watershed usually or periodically flows.’ ” (Phillips v. Burke (1955) 133 Cal.App.2d 700, 703.)
Insurers have the burden of proof to show the watercourse pollution exclusion applies. (See Aydin Corp. v. First State Ins. Co., supra, 18 Cal.4th at p. 1194.) To establish their entitlement to summary judgment or summary adjudication on this basis, Insurers must show by undisputed evidence the 1969 overflow was confined to the regular channel of the stream draining the canyon where the Stringfellow site was located, Pyrite Creek, though they need not show the creek was flowing at the time. Evidence the contaminants flowed onto land drained by Pyrite Creek, by itself, is insufficient. (Keys v. Romley, supra, 64 Cal.2d at p. 400; Phillips v. Burke, supra, 133 Cal.App.2d at p. 703.) While the evidence Insurers point to in the record does suggest the 1969 flood waters flowed directly from the site into Pyrite Creek, rather than onto the surrounding land, it falls short of establishing the waters’ path as an undisputed fact.^[3]
The parties have not directed us to any eyewitness account of the 1969 flood in the summary judgment record. The nearest thing to a contemporaneous description appears to be the following, in a 1972 letter written by Richard A. Beeurmann, executive officer of the California Regional Water Quality Board, Santa Ana Region, to a Riverside County official: “In the spring of 1969, the heavy rains exceeded the capacity of the storm water diversion ditches and runoff flowed through the dump site carrying some of the waste out of the dump and down a natural drainage ditch parallel to Pyrite Street crossing Highway 60 and Mission Boulevard. Samples collected on March 18, 1969 at the dam across the mouth of the dumpsite and in the ditch at the NW corner of Pyrite and Mission Boulevard showed the presence of acid wastes in the storm runoff.”
In 1980, a State interagency status report on the Stringfellow site stated: “The 1969 high rainfall conditions caused an undetermined quantity of sediments that had been contaminated by toxic wastes at the Stringfellow site to be eroded and deposited downstream in the Pyrite Creek drainage channel.”
Much later, in 2004, an expert for the State summarized the 1969 event as follows: “In 1969 during a period of heavy rainfalls the Site overflowed, discharging waste and stormwater into Pyrite Creek below the Site (NBS, 1973). During this discharge the conductivity (a measure of the degree of contamination) of the discharged fluids was measured just below the dam and at the intersection of Pyrite and Mission Streets. The measurements at these two locations were 7500 and 2800 micromhos respectively, an indication that wastes were discharged from the site.”
Insurers contend that maps in the record show the Pyrite Creek channel extends upslope to the disposal site, from which Insurers infer that overflow from the site went directly into the channel. The maps, however, are not detailed enough to make clear the topography or hydrology of the area. Where exactly the channel ran relative to the site’s evaporation ponds and dam, and where and how the 1969 floodwaters exited the disposal site, are not shown. Thus it cannot be determined from the maps, for example, that water passing over “the dam at the mouth of the dumpsite,” where Beeurmann reported a sample showed contamination, flowed from there directly into the Pyrite Creek channel. The maps also show that “the NW corner of Pyrite and Mission Boulevard,” where Beeurmann also reported contamination was found, is not in the Pyrite channel, which at that point runs parallel to, but east of, Pyrite Street.^[4] Despite the references in Beeurmann’s letter, the 1980 interagency report and the 2004 report of the State’s expert to a flow of contaminated water down the Pyrite drainage, then, Insurers have not established as an undisputed fact that the 1969 floodwaters overflowing the Stringfellow site were restricted to the Pyrite Creek channel and did not also flow onto and contaminate areas of land below the site.

III. Application of the “Sudden and Accidental” Exception to the 1978 Release

The Court of Appeal concluded the State, having experienced the 1969 overflow and been advised on, but not taken, measures to avoid a repetition, must have expected the 1978 flooding, making the 1978 release nonaccidental. The State insists it did take protective measures after 1969, but these were ineffective in the extraordinary circumstances of the 1978 rains; the evidence, the State argues, shows at most it was negligent in allowing the overflow conditions of 1978 to occur, not that it expected or intended the 1978 release. We conclude the record reflects a triable issue of fact on this issue.
As the parties agree, an “accidental” discharge, within the meaning of the “sudden and accidental” exception to the pollution exclusion, is one the insured neither intended nor expected to happen (Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at p. 755 (Shell Oil Co.)), and a discharge is considered “expected” only when the insured subjectively knew or believed it was highly likely to occur (id. at p. 746 [“The plain meaning of ‘expected’ does not include ‘should have known.’ Rather, the word comprehends actual belief in the probability of a future event”]). (See also Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 304-305 [citing Shell Oil Co. for the proposition that the “test for ‘expected’ damage is whether the insured knew or believed its conduct was substantially certain or highly likely to result in that kind of damage”].) While the State bears the ultimate burden of proving the exception applicable (Aydin Corp. v. First State Ins. Co., supra, 18 Cal.4th at p. 1194), on summary judgment we ask only whether the record reflects the existence of a triable factual issue on the question.
The evidence, liberally construed in favor of the State as the nonmoving party (Yanowitz v. L’Oreal USA, Inc., supra, 36 Cal.4th at p. 1037), shows the following: After the 1969 overflow, which resulted from a 50-year storm that overwhelmed the site’s runoff diversion channels, the State temporarily closed the site, rebuilt the ponds and modified the diversion channels to improve storm drainage. Before the site was reopened, the county flood control agency checked it and found the drainage adequate. After the site was permanently closed to new waste in 1972, the State’s chief geologist, Alvin Franks, inspected and assessed it, finding that in addition to leakage, there was a danger of overflow in sufficiently heavy rains. In his 1974 report, Franks suggested, among other measures, leveling and capping the site to prevent flooding of the ponds. Neither that measure nor the others recommended, however, were taken before the 1978 rains, though the State did transfer about 375,000 gallons of waste from the site to other facilities. Had Franks’s recommendations been followed, the federal court special master found, the 1978 release would not have occurred.
In early 1978, severe rainstorms struck the region. A state of emergency in Riverside County was declared by Governor Brown on February 5, and on February 15 President Carter declared the county a disaster area. On March 3, concerned about rising levels in the Stringfellow site’s evaporation ponds, James Anderson, executive officer of the Regional Water Quality Control Board, had additional storage ponds dug on the site and started pumping water to the new ponds. On March 5, as heavy rain continued, the main pond was again full. National Guard troops placed sandbags on top of the dam and pumping continued, though it was limited when one of the two pumps broke. When a crack was observed in the face of the dam, Anderson ordered wastes released through a spillway to prevent an uncontrolled release of up to 20 million gallons. The controlled release was stopped on March 7, but restarted on March 10 when the dam began to give way. It was stopped again on March 11, when the danger of collapse had passed.
As Insurers point out, in one obvious sense the 1978 discharges were not accidental: the wastes were intentionally released at Anderson’s direction. But Anderson ordered the release only to prevent a larger, uncontrolled discharge of wastes if, as threatened, the dam broke, which the State maintains would have been an accidental discharge. Liability policies have been held to cover damages resulting from an act undertaken to prevent a covered source of injury from coming into action, even if that act would otherwise not be covered. (Globe Indem. Co. v. State of California (1974) 43 Cal.App.3d 745, 750-753 (Globe Indemnity) [statutory liability for fire suppression costs, incurred after the insured negligently started a fire that spread to neighboring property, held covered even under a policy limited to liability for bodily injury and property damage]; Goodyear Rubber & Supply v. Great Am. Ins. Co. (9th Cir. 1976) 545 F.2d 95, 96 (Goodyear Rubber) [decided under Or. law: liability for salvage costs covered under property damage liability policy, where salvager had acted to prevent further damage from fire, a covered source of damage]; see also AIU Ins. Co. v. Superior Ct. (1990) 51 Cal.3d 807, 833 [citing Globe Indemnity and Goodyear Rubber as support for holding that government response costs designed to prevent environmental damage from spreading constitute “damages” under liability policy].)
This rule makes sense as a matter of causation, for just as “[d]anger invites rescue” (Wagner v. International Ry. Co. (N.Y. 1921) 133 N.E. 437), so the evident threat of property damage (arising by hypothesis from a covered cause) leads naturally to acts, whether by the insured or others, to prevent or mitigate the damage. (See Globe Indemnity, supra, 43 Cal.App.3d at p. 751 [“since all of the fire suppression costs in question were expended to prevent further damage to tangible property, it can be said that the insureds became legally obligated to pay these fire suppression costs because of damage to tangible property”]; Goodyear Rubber, supra, 545 F.2d at p. 96 [“the peril insured against, the damage caused by the occurrence of explosion and fire, set the salvage operation in motion”].)
The rule fits, as well, with the principle that insurance policies are to be read in accord with the parties’ reasonable expectations; when an insured takes out a policy providing coverage for property damage liability, “[i]t would seem strangely incongruous to him, as it does to us, that his policy would cover him for damages to tangible property destroyed through his negligence in allowing a fire to escape but not for the sums incurred in mitigating such damages by suppressing the fire.” (Globe Indemnity, supra, 43 Cal.App.3d at p. 751; see AIU Ins. Co. v. Superior Ct., supra, 51 Cal.3d at p. 833 [“A contrary result would fail to fulfill the reasonable expectations of the parties”].)
Finally, according coverage in this situation “encourages a most salutary course of conduct,” that is, the taking of measures to mitigate or prevent damage. (Globe Indemnity, supra, 43 Cal.App.3d at p. 752.) And Insurers are not harmed by such measures, since they would be responsible for greater liability were the measures not taken. “It would be a strange kind of justice, and a stranger kind of logic, that would hold the defendant to be liable for as much as $450,000 if the barge and its contents had been consumed by fire, but free of liability for a much lesser amount because of the fortuity of rescue.” (Goodyear Rubber, supra, 545 F.2d at p. 96.) This policy has been codified as to first party insurance in Insurance Code section 531, subdivision (b), which provides for coverage “[i]f a loss is caused by efforts to rescue the thing insured from a peril insured against.”
For these reasons, we conclude that to the extent the conditions in March 1978 threatened a “sudden and accidental” release of wastes from the Stringfellow site, the qualified pollution exclusion does not bar coverage for liability arising from the State’s intentional releases performed to prevent such a greater accidental release.^[5] We turn to the question of whether the overflow and dam break threatened in 1978 would in fact have been “accidental.” Insurers were entitled to summary adjudication on this point only if the record demonstrates, as an undisputed fact, that the State knew or believed a discharge was highly likely to occur because of flooding. (Shell Oil Co., supra, 12 Cal.App.4th at p. 746.) Unlike the Court of Appeal, we find a triable issue of fact on this point.


TO BE CONTINUED AS PART II….



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