City of Los Angeles v. Travelers Indemnity Company

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 13, 2024
• Docket: 22-56162
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 13 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

CITY OF LOS ANGELES, acting by and No. 22-56162 through its Board of Harbor Commissioners, D.C. No. Plaintiff-counter- 2:22-cv-00130-GW-PD defendant-Appellant,

v. MEMORANDUM*

TRAVELERS INDEMNITY COMPANY; TRAVELERS CASUALTY AND SURETY COMPANY, FKA Aetna Casualty and Surety Company,

Defendants-counter- claimants-Appellees,

UNITED NATIONAL INSURANCE COMPANY,

Defendant-Appellee.

Appeal from the United States District Court for the Central District of California George H. Wu, District Judge, Presiding

Argued and Submitted February 14, 2024 Pasadena, California

Before: W. FLETCHER, NGUYEN, and LEE, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. In 2019, the City of Los Angeles obtained a roughly $230,000 judgment

against Wilmington Marine, a boatyard operator that had leased a site at the Port of

Los Angeles from the City. In awarding judgment, the California state superior court

found that Wilmington had spent fifty years allowing scrapings of boat paint, as well

as other toxic materials, to fall onto the pavement above the Los Angeles harbor

without attempting to contain the paint waste before it washed into the harbor.

Wilmington—which the city knew was defunct when the lawsuit was filed—could

not pay the award, so the city sought indemnification from Wilmington’s insurers,

Travelers and United National, in federal court. The district court granted the

insurers summary judgment based on policy exclusions that barred coverage for

pollution-related property damage unless the damage was caused by “sudden and

accidental discharges.” We have jurisdiction under 28 U.S.C. § 1291 and affirm.

1. The district court did not err in limiting its analysis to the underlying

superior court judgment. The City argues that the district court erred in restricting

its analysis to the evidence introduced in support of the superior court judgment. In

the City’s view, because the underlying judgment was concerned with liability and

not indemnity, the City should have been permitted to offer new evidence to prove

that Wilmington’s actions were sudden and accidental. Under California law, the

duty to indemnify arises only “where a judgment has been entered on a theory which

is actually (not potentially) covered by” the underlying insurance policy. Palmer v.

2 Truck Ins. Exch., 988 P.2d 568, 576 (Cal. 1999) (quoting Collin v. Am. Empire Ins.

Co., 21 Cal. App. 4th 787, 803 (1994)). To determine whether an insurance policy

covers a judgment, a court must “compar[e]” the judgment with the terms of the

insurance policy. Fireman’s Fund Ins. Co. v. Nat’l Bank of Coops., 103 F.3d 888,

896 (9th Cir. 1996). The district court thus did not err in comparing the superior

court judgment with the insurance policies and excluding the City’s new evidence.

Further, the district court excluded proffered new evidence because it conflicted with

evidence introduced by the City in the state court case. The district court did not err

in so doing.

2. The district court did not err in determining that the relevant discharges

were the initial waste deposits. The City argues that, under State v. Allstate

Insurance Co., the district court was required to find that the relevant discharges

here were the “escape[s]” of pollutants to the water. 201 P.3d 1147, 1154–55

(Cal. 2009). Allstate Insurance holds that the relevant discharges are those on which

liability was based. Id. Here, the superior court held Wilmington liable based on its

decades-long failure to contain the pollutants and waste it dropped onto the

pavement above the harbor. The district court thus did not err in concluding that

these discharges—on which liability was based—were the relevant discharges for

indemnity purposes.

3 3. The district court did not err in concluding that the discharges here were

neither sudden nor accidental. Under California law, “sudden and accidental

discharges” must be “‘abrupt,’ ‘unintended, and unexpected.’” Travelers Cas. &

Sur. Co. v. Super. Ct., 63 Cal. App. 4th 1440, 1458 (1998). Intentional discharges

and discharges that occur over a long period of time are not “sudden and accidental.”

See Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal. App. 4th 715, 754–55 (1993).

The City presented extensive evidence to the superior court that the discharges

here resulted from Wilmington’s longstanding business practices and intentional

acts, not from unintended or unexpected events. For example, the City’s witnesses

testified that Wilmington received—and disregarded—numerous environmental

audits instructing it to adopt containment measures. One witness testified that

Wilmington allowed waste to flow directly from the pavement to the harbor.

Another testified that Wilmington refused to “sweep” or “clean up” waste, choosing

instead to let it “wash[] right into the mud.” And the City likened Wilmington’s

waste management practices to someone fertilizing their lawn, arguing that

Wilmington “spread” waste around without even “wait[ing] for rain” to wash it into

the water. Wilmington’s liability was not based on sudden and accidental

discharges, and the district court did not err in granting the insurers summary

judgment.

AFFIRMED.