Coverage Quiz (Q3 2023)


By Al Haverkamp of Lucas & Haverkamp

1Question: The State of California was sued for property damage caused by toxic contamination spanning 43 years. During 42 of these years the State had no insurance coverage. For one of the years the State purchased a liability policy from Pacific Indemnity. Pacific Indemnity acknowledged its policy required it to defend the State, but Pacific argued its defense obligation should be proportional to its one year of coverage over the 43-year period – about 2% of the total defense costs. Pacific Indemnity advanced two reasons for its position: (1) the State decided to self-insure for all but one of the 43 years; and (2) the State did not reasonably expect that one year of insurance would provide coverage for a lawsuit spanning 43 years. Is Pacific Indemnity allowed to apportion defense expenses?
Answer: No. Under Ca law, if any part of a claim is potentially covered the insurer has a duty to defend the entire action. The State was not required to contribute to the defense because it was not an insurer, and equitable contribution only applies between insurers. Self-insurance is equivalent to no insurance. See State v Pac. Indem. Co. (1998) 63 Cal. App. 4th 1535