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06/20/97 W.C. RICHARDS COMPANY v. HARTFORD ACCIDENT

June 20, 1997

W.C. RICHARDS COMPANY, INC., PLAINTIFF-APPELLANT,
v.
HARTFORD ACCIDENT AND INDEMNITY COMPANY, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable Stephen A. Schiller, Judge Presiding.

Released for Publication August 5, 1997.

Presiding Justice Greiman delivered the opinion of the court. Theis and Quinn, JJ., concur.

The opinion of the court was delivered by: Greiman

PRESIDING JUSTICE GREIMAN delivered the opinion of the court:

In a declaratory judgment action, plaintiff W.C. Richards Company, Inc., the insured, appeals the trial court's order granting summary judgment to defendant Hartford Accident and Indemnity Company, the insurer, and finding that defendant did not owe plaintiff a duty to defend relating to certain environmental issues. The issue on appeal is whether, under California law, the defendant insurer had a duty to defend the plaintiff insured in a matter initiated by a state environmental regulatory agency, i.e., the California Regional Water Quality Control Board (the Board).

We reverse and find that defendant had a duty to defend.

The facts are not in dispute. From 1960 to 1991, plaintiff owned and operated an industrial paint manufacturing facility in Anaheim, California (the Anaheim site). By letter dated August 14, 1990, the Board informed plaintiff that the Anaheim site was determined to be a possible source of pollutants found in nearby groundwater. The outcome of the instant appeal is determined by whether or not the Board letter triggered defendant's duty to defend.

The Board letter, entitled "REQUEST FOR TECHNICAL REPORT," informed plaintiff that "a statewide sampling program to determine the extent and nature of volatile organic contamination in groundwater throughout the state" had been conducted pursuant to a legislative directive. Plaintiff's Anaheim site was under the jurisdiction of the Board for the Santa Ana region (Regional Board). The letter then stated as follows:

"Results obtained from the sampling of wells in this geographical area indicate that chlorinated volatile organic contaminants (VOCs) are present in the groundwater.

The Regional Board is conducting a follow up investigation to determine the source of these pollutants. Regional Board staff has been investigating current and past industrial users of chlorinated organic chemicals, such as solvents, in Anaheim. As a result, we have found that there has been historical use of chlorinated solvents at your facility and that poor handling and disposal practices, which could have resulted in discharges of wastes, have existed. From the information gathered during our investigation, your facility has been determined to be one of the possible sources of the pollutants found in the groundwater near this site.

Since your company is the current operator of the facility and owner of the site, your company is responsible for any wastes that may have been discharged there. Therefore, in accordance with Section 13267 of the California Water Code, we request that you submit a technical report. The technical report must be signed by a registered engineering geologist or engineer with a minimum of 5 years experience in hydrogeology."

The Board letter then outlined the information that should be included in the report. The letter further advised plaintiff "that if this investigation finds that contaminants are present that could adversely impact groundwater, additional investigations or remedial measures may be necessary."

Subsequently, plaintiff submitted the Board letter to defendant and requested that defendant provide a defense based on this letter. The relevant language of the insurance policy that applies to defendant's duty to defend states as follows:

"The company will pay on behalf of the insured all sums which the insured shall become legally obligated ...


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