Black Compean & Hall L.L.P.

Attorneys at Law

BCH Shares in Victorious MSA on Qualified Pollution Exclusions

Posted on 10/02/2010


On October 2, 2009 in consolidated environmental coverage actions involving Union Oil Company of California (“Union Oil”) against numerous of its general liability insurance carriers who provided coverage going back to the late 1940s, the trial court judge in the actions venued in the Complex Branch of the Los Angeles County Superior Court, granted a motion for summary adjudication of the duty to indemnify brought by certain carriers on a particular oil field site, which is one of several sites in issue in the actions.  The actions are known as the Union Oil Consolidated Coverage Cases, L.A. Superior Court Case No. BC271474, and Black Compean Hall & Eli LLP, now Black, Compean & Hall L.L.P., represents defendant Argonaut Insurance Company (“Argonaut”) in the actions.

In the consolidated actions Union Oil seeks to recover from its prior carriers hundreds of millions of dollars Union Oil expended over a lengthy period of years in responding to various governmental agency pollution assessment, cleanup, abatement, and remediation orders, and in responding to and settling numerous related civil environmental and/or property damage actions.  Those orders and actions involve numerous sites all over the country.  The site which was the subject of the aforementioned motion is a 3,000 acre oil field located on the Central Coast of California in San Luis Obispo County, known as the Guadalupe Oil Field.  At that site Union Oil was engaged for years in the process of underground oil and gas extraction.

Argonaut participated in two high layer levels of liability insurance for Union Oil back in the early to mid-1970s, and is one of a number of “direct insurers” of Union Oil, i.e., ones who insured Union Oil directly for liability, as opposed to carriers who insured Union Oil only as an additional insured on policies issued to others.  On behalf of Argonaut, and as a part of a liaison group of direct carrier defendant counsel, Black Compean Hall & Eli LLP, by attorneys Michael D. Compean and Kimberly R. Arnal, participated in discovery and drafting of the motion for summary adjudication and its supporting papers.  The motion was based on so-called “qualified” types of pollution exclusions contained in the policies of the moving insurers, i.e., ones which exclude coverage for pollution damage unless the release of pollutants was “sudden and accidental” or “sudden, unintended and unexpected.”

 

The trial court judge held that the moving carriers satisfied their initial burden of proof on the motion by demonstrating with overwhelming evidence that the release of the contaminant in question, a product called diluent, which was a thinning agent used to facilitate the flow of the highly viscous oil coming out of the ground at the site, was the result of ongoing gradual leaks of the pipelines at the site caused by corrosion over time, and was not the result of any sudden and accidental release.  This shifted the burden to Union Oil to raise a triable issue as to the existence of particular sudden and accidental releases of contaminant which contributed substantially to the damage in question (i.e., contamination of the underground water table at the site).  The court held Union Oil failed to satisfy that burden with any admissible evidence.  The court granted the motion, therefore, holding that the moving carriers, including Argonaut, had no duty to indemnify Union Oil for the damages sought related to the Guadalupe Oil Field site. 

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