INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Mercury mess
Santa Clara Valley Water District was insured by Century Indemnity Company under primary and excess policies. In 2000, the district notified Century that it had been advised by the federal government of potential claims for natural resource damages resulting from mercury contamination in the Guadalupe River Watershed (NRD claim). Century requested additional information, including the status of negotiations.
Century made several similar requests to the district between 2000 and 2002. In 2001, Century indicated that it had no duties under the primary policies because no lawsuit was pending, had no duty to indemnify the district under the excess policies until the underlying limits of the policies had been exhausted, and was reserving its rights under the policies.
The district subsequently signed a tolling agreement, was sued in federal court, and entered a consent decree without notifying Century.
In 2008 the district notified Century of the existence of the lawsuit and the consent decree and stated that it had incurred $4 million in costs to comply with the consent decree. Century cited a no voluntary payment (NVP) provision. The district did not contact Century until 2014 when it completed its required consent decree work. In 2015 the district sued Century. Century appealed.
The court of appeal affirmed summary judgment for Century. The NVP provisions barred the district from seeking indemnification for the expenses it incurred under the consent decree, without notifying Century or obtaining its consent. Those provisions applied to the settlement even though it was achieved through a consent decree rather than a traditional settlement agreement.
Because the NRD claim was disposed of by that settlement, there was no “adjudication” that gave rise to an “ultimate net loss” that gave the district the right to pay and seek indemnification.
Santa Clara Valley Water District v. Century Indemnity Company—Court of Appeal of the State of California, Sixth Appellate District—March 30, 2023—No. CV286500.
