Ninth Circuit Reverses Dismissal in Insurance Coverage Dispute Over Chino Airport Cleanup Costs

The dispute centers on costs incurred by the County while remediating environmental contamination at the County-owned Chino Airport. The County sought coverage under three successive ICSOP policies issued between 1966 and 1975, which covered personal injury, property damage, and advertising liability.

The County argued that ICSOP was liable for all property damage up to $9 million per occurrence. ICSOP contended that its liability was capped at $9 million per year in the aggregate, regardless of the number of occurrences.

The district court construed the policies against the County and dismissed its claim for declaratory relief, ruling that an annual aggregate limit applied to property damage. The district court relied heavily on the California Court of Appeal’s decision in Garamendi v. Mission Insurance Co., which interpreted similar policy language as creating a general aggregate limit.

The Ninth Circuit held that the policies were ambiguous and that Garamendi did not bind its judgment. The panel noted significant factual differences between the ICSOP policies and the policy in Garamendi, including that the County sought coverage under the umbrella portion of the ICSOP policies rather than as excess coverage triggered by underlying limits.

The panel also considered extrinsic evidence, including historical context regarding standard Commercial General Liability policies from the 1960s and internal ICSOP documents. These documents indicated that ICSOP personnel had previously taken the position that no aggregate limit applied to premises liability losses like those at Chino Airport.

Because the policies were ambiguous and susceptible to more than one reasonable interpretation, the Ninth Circuit applied California’s rule that ambiguities are construed against the insurer. The panel concluded that the policies did not specify an aggregate limit for property damage.

The Ninth Circuit reversed the district court’s judgment and remanded the case for further proceedings, noting that the district court must now reconsider the County’s request for declaratory relief.