FRONTIER OIL CORPORATION v. RLI INSURANCE COMPANY PARTI
In determining which state's law to apply to the interpretation of an insurance policy, trial court must apply Civil Code Sec. 1646 which states that a contract is to be interpreted according to the law and usage of the place it is to be performed if the contract "indicate[s] a place of performance" and according to the law and usage of the place it was made if the contract "does not indicate a place of performance" rather than the governmental interests test. The intended place of performance of a liability insurance policy is the place of the insured risk. Under California law, where policy generally provided for both defense and indemnity of liability claims, and pollution liability endorsement deleted the exclusion that would otherwise remove pollution claims from the scope of the coverage, insurer was obligated to defend claims for damages arising from "pollution incidents" with respect to insured's oil and gas operations notwithstanding that the pollution liability endorsement did not mention a duty to defend. Where complaints in underlying actions alleged that insureds conducted oil and gas exploration, production, processing, and storage activities at specified site; that, as a result of those operations, hazardous substances were "spilled, emitted, released, [and] discharged" into the environment; that the operations resulted in "releases, discharges, fugitive emissions, leaks and spills"; and that, as a result, plaintiffs suffered damages of a nature and kind covered by the policy; and where said complaints did not foreclose the possibility that the damage was caused by a sudden and accidental release, complaints presented a possibility of coverage under the policy, and it was error for trial court to grant summary judgment absolving insurer of duty to defend.
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