Notice-Prejudice Rule Does Not Apply to Reporting ... - JD Supra
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July 14, 2009 July 14, 2009
Notice-Prejudice Rule Does DoesNot NotApply Apply to to Reporting Reporting Requirements in Pollution “Buy-Back” Clause Requirements in Pollution “Buy-Back” Clause Newsletter Editors
Amy B. Briggs Erin Erin E. E. Stagg Stagg
An insured failed to report within sixty report aa pollution pollution occurrence occurrence within sixty days days of becoming aware of of the same, same,as asrequired requiredby byaapollution pollution buy-back buy-back provision in the the policy. policy. Accordingly, itit forfeited for liability liability forfeited coverage coverage for arising arising out out of of those those incidents. Venoco, Venoco, Inc. Inc. v. v. Gulf Gulf Underwriters Underwriters Ins. Ins. Co., Co., __ Cal. App. 4th 4th __ __ (July (July 1, 1, 2009). 2009). an oil oil company, company, operated operatedoil oil wells wells near nearBeverly BeverlyHills Hills High School Venoco, an (the “School”). “School”). InIn2003, Venoco was sued by individuals claiming 2003, Venoco was sued individuals claiming to to have have been exposed exposedto to toxic toxic chemicals while they been they attended attended or were were employed employed at at the School. The The exposures exposures allegedly occurred from 1976 onward.
Amy B. Briggs
Partner Partner [email protected] 415.291.7451 415.291.7451
Carlos E. Needham
Partner Partner
Gulf had issued aaone-year one-yearliability liability policy policy to Venoco in effect from Gulf had issued from 1996 to 1997. The policy contained a pollution exclusion, but also contained The policy contained a pollution exclusion, but also contained a “buy-back” that pollution liabilities “buy-back” that provided provided limited limited coverage coverage for pollution liabilitiesso so long long as as were met. met. One certain requirements were One of of the the requirements requirements was that Venoco report a pollution pollution occurrence within sixty of it. occurrence within sixty days days of of becoming becoming aware aware of Gulf defensein in2003 2003citing citing Venoco’s Venoco’s failure failure Gulf rejected rejected Venoco’s Venoco’s request for a defense period. Venoco to comply with the pollution buy-back’s sixty-day reporting period. Venoco sued, but but Gulf Gulf successfully brought a motion for sued, for summary summary judgment, judgment, and and the Court of Appeal affirmed the judgment judgment in in Gulf’s Gulf’s favor.
The Court of Appeal rejected Venoco’s various challenges challenges to to the thevalidity validity of the sixty-day reporting requirement. First, First, the the court court held held that that the the reporting reporting requirement requirement was was not not hidden hidden because because itit separateparagraph paragraphand andwas was“clear “clearand andexplicit.” explicit.” stood out as as aa separate
Second, thereporting reporting timelines timelines were were “not “not unusual unusual in in the the oil oil Second, the
[email protected] 310.312.4193 310.312.4193
Jeremiah P. Sheehan Counsel Counsel
[email protected] 212.830.7205 212.830.7205
Our Practice
Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=28900746-0185-4dd8-be68-7a964a3dffd0
industry.” Moreover, with industry.” Moreover,Venoco Venocoused usedtwo twoinsurance insurance brokers brokers to negotiate negotiate with Gulf to purchase the pollution buy-back provision, suggesting that Venoco’s Gulf to purchase the pollution provision, suggesting weighed against againstits itsfailure failure to to timely timely report. own sophistication in this area weighed Third, Venoco’s Third, Venoco’sclaim claimtotohave havebeen been unaware unaware of the reporting requirement undercut by by Venoco’s prior was undercut prior specific specificrequest request that Gulf Gulf add add such such a
provision. Fourth, the appellate appellate court court disposed disposedof ofVenoco’s Venoco’sclaim claim that that California’s California’s the sixty-day sixty-day reporting requirement notice-prejudice rule applied and that the thus inapplicable inapplicable because Gulf did not prove was thus because Gulf prove itit suffered suffered actual actual and and substantial prejudice as as aa result result of of the the late late notice. notice. The Venoco court held policy provides for a particular type of that “where the policy provides that that special special coverage coverage for claim is conditioned on express compliance with a reporting requirement, claim is conditioned on express
the time time limit limit is without proof proof of prejudice.” is enforceable enforceable without Similarly, the reporting reporting provision Similarly,the the court court rejected rejected the contention that the after Gulf’s Gulf’s violated public policy. Venoco Venoco first first notified notifiedGulf Gulfinin2003, 2003, years years after policy expired, thus rendering Gulf subject to a surprise claim years after the policy expired, thus rendering Gulf subject to a surprise claim years policy had and denying denying Gulf Gulf an an opportunity opportunity to plan for future risks policy had expired and and financial exposure. In Inthis thisrespect, respect, the the reporting reporting requirement requirement was analogous to that in a claims-made-and-reported policy, analogous to that in a claims-made-and-reported policy, which is not subject to the notice-prejudice rule.
FOR ADDITIONAL INFORMATION FOR ADDITIONAL INFORMATIONON ONTHIS THISISSUE, ISSUE, CONTACT: CONTACT: Amy litigation practice Amy B. B. Briggs BriggsMs. Ms.Briggs’ Briggs’complex complexbusiness business litigation practice focuses on insurance insurance coverage coverageand andbad badfaith faithdisputes. disputes. Ms. Ms. Briggs focuses on has representednumerous numerouspolicyholders, policyholders,including includingfinancial financial institutions, has represented large real estate estateentities, entities,public public retirement retirement systems systemsthroughout throughout California, California, and medical device manufacturers, manufacturers, and and nonprofit nonprofit pharmaceutical and disputes. She has has successfully successfullylitigated litigated first- and organizations in coverage coverage disputes. third-party coverage and bad faith claims arising under commercial third-party coverage bad faith under commercial general general liability, property, liability, property, fiduciary liability, liability, employers’ employers’ liability, liability,and and D&O D&O and and E&O policies. She has appeared and argued before the California Court E&O policies. She has appeared and argued before the California Court of Appeal on multiple multiple occasions. occasions. Erin general commercial commercial litigation. litigation. ErinE. E.Stagg StaggMs. Ms.Stagg Stagg focuses focuses on general In member of of In her her first first two twoyears yearsof ofpractice, practice,she she has has already already been been a member two trial teams. The first matter, which was resolved on the steps trial teams. The first matter, which was resolved on the steps of the courthouse, resulted resulted in in an an extremely extremely favorable favorable settlement settlement for for the client. the courthouse, After aa three-month jury award After three-month trial, trial,the the second second matter resulted in the largest jury in the United States in 2008. In that case, ICO Global Communications States in 2008. In that case, ICO (Holdings) Limited (Holdings) Limitedprevailed prevailedon onits itsbreach breach of of contract, contract, fraud, fraud, and and tortious and its its subsidiary, Boeing interference claims against The Boeing Company and
The The insurance insurance professionals professionals at at Manatt Manatt represent represent major major life, life,
health, disability, health, disability, accidental and accidental death death and dismemberment, dismemberment, travel, travel, long-term care and and long-term care property and casualty casualty property and insurance companies in a insurance companies in a range of insurance insurance range of litigation, regulatory and and litigation, regulatory transactional more transactional work work ... ... more .. Practice Practice Group Group Overview Overview .. Practice Practice Group Group Members Members
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Satellite Systems International. Systems International.
ATTORNEY ADVERTISING pursuant to New York DR 2-101(f) Albany | Los Angeles | New York | Orange County | Palo Alto | Sacramento | San Francisco | Washington, D.C. © 2009 Manatt, Phelps & Phillips, LLP. All rights reserved.
July 14, 2009 July 14, 2009
Notice-Prejudice Rule Does DoesNot NotApply Apply to to Reporting Reporting Requirements in Pollution “Buy-Back” Clause Requirements in Pollution “Buy-Back” Clause Newsletter Editors
Amy B. Briggs Erin Erin E. E. Stagg Stagg
An insured failed to report within sixty report aa pollution pollution occurrence occurrence within sixty days days of becoming aware of of the same, same,as asrequired requiredby byaapollution pollution buy-back buy-back provision in the the policy. policy. Accordingly, itit forfeited for liability liability forfeited coverage coverage for arising arising out out of of those those incidents. Venoco, Venoco, Inc. Inc. v. v. Gulf Gulf Underwriters Underwriters Ins. Ins. Co., Co., __ Cal. App. 4th 4th __ __ (July (July 1, 1, 2009). 2009). an oil oil company, company, operated operatedoil oil wells wells near nearBeverly BeverlyHills Hills High School Venoco, an (the “School”). “School”). InIn2003, Venoco was sued by individuals claiming 2003, Venoco was sued individuals claiming to to have have been exposed exposedto to toxic toxic chemicals while they been they attended attended or were were employed employed at at the School. The The exposures exposures allegedly occurred from 1976 onward.
Amy B. Briggs
Partner Partner [email protected] 415.291.7451 415.291.7451
Carlos E. Needham
Partner Partner
Gulf had issued aaone-year one-yearliability liability policy policy to Venoco in effect from Gulf had issued from 1996 to 1997. The policy contained a pollution exclusion, but also contained The policy contained a pollution exclusion, but also contained a “buy-back” that pollution liabilities “buy-back” that provided provided limited limited coverage coverage for pollution liabilitiesso so long long as as were met. met. One certain requirements were One of of the the requirements requirements was that Venoco report a pollution pollution occurrence within sixty of it. occurrence within sixty days days of of becoming becoming aware aware of Gulf defensein in2003 2003citing citing Venoco’s Venoco’s failure failure Gulf rejected rejected Venoco’s Venoco’s request for a defense period. Venoco to comply with the pollution buy-back’s sixty-day reporting period. Venoco sued, but but Gulf Gulf successfully brought a motion for sued, for summary summary judgment, judgment, and and the Court of Appeal affirmed the judgment judgment in in Gulf’s Gulf’s favor.
The Court of Appeal rejected Venoco’s various challenges challenges to to the thevalidity validity of the sixty-day reporting requirement. First, First, the the court court held held that that the the reporting reporting requirement requirement was was not not hidden hidden because because itit separateparagraph paragraphand andwas was“clear “clearand andexplicit.” explicit.” stood out as as aa separate
Second, thereporting reporting timelines timelines were were “not “not unusual unusual in in the the oil oil Second, the
[email protected] 310.312.4193 310.312.4193
Jeremiah P. Sheehan Counsel Counsel
[email protected] 212.830.7205 212.830.7205
Our Practice
Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=28900746-0185-4dd8-be68-7a964a3dffd0
industry.” Moreover, with industry.” Moreover,Venoco Venocoused usedtwo twoinsurance insurance brokers brokers to negotiate negotiate with Gulf to purchase the pollution buy-back provision, suggesting that Venoco’s Gulf to purchase the pollution provision, suggesting weighed against againstits itsfailure failure to to timely timely report. own sophistication in this area weighed Third, Venoco’s Third, Venoco’sclaim claimtotohave havebeen been unaware unaware of the reporting requirement undercut by by Venoco’s prior was undercut prior specific specificrequest request that Gulf Gulf add add such such a
provision. Fourth, the appellate appellate court court disposed disposedof ofVenoco’s Venoco’sclaim claim that that California’s California’s the sixty-day sixty-day reporting requirement notice-prejudice rule applied and that the thus inapplicable inapplicable because Gulf did not prove was thus because Gulf prove itit suffered suffered actual actual and and substantial prejudice as as aa result result of of the the late late notice. notice. The Venoco court held policy provides for a particular type of that “where the policy provides that that special special coverage coverage for claim is conditioned on express compliance with a reporting requirement, claim is conditioned on express
the time time limit limit is without proof proof of prejudice.” is enforceable enforceable without Similarly, the reporting reporting provision Similarly,the the court court rejected rejected the contention that the after Gulf’s Gulf’s violated public policy. Venoco Venoco first first notified notifiedGulf Gulfinin2003, 2003, years years after policy expired, thus rendering Gulf subject to a surprise claim years after the policy expired, thus rendering Gulf subject to a surprise claim years policy had and denying denying Gulf Gulf an an opportunity opportunity to plan for future risks policy had expired and and financial exposure. In Inthis thisrespect, respect, the the reporting reporting requirement requirement was analogous to that in a claims-made-and-reported policy, analogous to that in a claims-made-and-reported policy, which is not subject to the notice-prejudice rule.
FOR ADDITIONAL INFORMATION FOR ADDITIONAL INFORMATIONON ONTHIS THISISSUE, ISSUE, CONTACT: CONTACT: Amy litigation practice Amy B. B. Briggs BriggsMs. Ms.Briggs’ Briggs’complex complexbusiness business litigation practice focuses on insurance insurance coverage coverageand andbad badfaith faithdisputes. disputes. Ms. Ms. Briggs focuses on has representednumerous numerouspolicyholders, policyholders,including includingfinancial financial institutions, has represented large real estate estateentities, entities,public public retirement retirement systems systemsthroughout throughout California, California, and medical device manufacturers, manufacturers, and and nonprofit nonprofit pharmaceutical and disputes. She has has successfully successfullylitigated litigated first- and organizations in coverage coverage disputes. third-party coverage and bad faith claims arising under commercial third-party coverage bad faith under commercial general general liability, property, liability, property, fiduciary liability, liability, employers’ employers’ liability, liability,and and D&O D&O and and E&O policies. She has appeared and argued before the California Court E&O policies. She has appeared and argued before the California Court of Appeal on multiple multiple occasions. occasions. Erin general commercial commercial litigation. litigation. ErinE. E.Stagg StaggMs. Ms.Stagg Stagg focuses focuses on general In member of of In her her first first two twoyears yearsof ofpractice, practice,she she has has already already been been a member two trial teams. The first matter, which was resolved on the steps trial teams. The first matter, which was resolved on the steps of the courthouse, resulted resulted in in an an extremely extremely favorable favorable settlement settlement for for the client. the courthouse, After aa three-month jury award After three-month trial, trial,the the second second matter resulted in the largest jury in the United States in 2008. In that case, ICO Global Communications States in 2008. In that case, ICO (Holdings) Limited (Holdings) Limitedprevailed prevailedon onits itsbreach breach of of contract, contract, fraud, fraud, and and tortious and its its subsidiary, Boeing interference claims against The Boeing Company and
The The insurance insurance professionals professionals at at Manatt Manatt represent represent major major life, life,
health, disability, health, disability, accidental and accidental death death and dismemberment, dismemberment, travel, travel, long-term care and and long-term care property and casualty casualty property and insurance companies in a insurance companies in a range of insurance insurance range of litigation, regulatory and and litigation, regulatory transactional more transactional work work ... ... more .. Practice Practice Group Group Overview Overview .. Practice Practice Group Group Members Members
Info & Resources .. Subscribe Subscribe Unsubscribe .. Unsubscribe Sarbanes-Oxley Act Act .. Sarbanes-Oxley Newsletter Disclaimer Disclaimer .. Newsletter Manatt.com .. Manatt.com
Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=28900746-0185-4dd8-be68-7a964a3dffd0
Satellite Systems International. Systems International.
ATTORNEY ADVERTISING pursuant to New York DR 2-101(f) Albany | Los Angeles | New York | Orange County | Palo Alto | Sacramento | San Francisco | Washington, D.C. © 2009 Manatt, Phelps & Phillips, LLP. All rights reserved.
