60 Day Notice Provision in Expanded Coverage was Enforceable; California's Notice-Prejudice Rule Did Not Apply
The insured had to comply with the notice provision in the “special” “expanded” coverage under a “pollution buy-back” endorsement to a policy, which policy otherwise excluded coverage for property damage or bodily injury caused by pollution. In Venoco, Inc. v. Gulf Underwriters Ins. Co. (2009) __ Cal.App.4th __ (2009 WL 1875640), California’s appellate court held there was no coverage for claims by students and administrators at Beverly Hills High School who claimed injuries from oil wells drilled at what became the site of their school.
Gulf Insurance Company’s policy excluded coverage for pollution. The policy was endorsed with pollution coverage if the claims stemmed from an accident and the claim was reported to Gulf within 60 day of discovery of the accident. (Provisions with similar timing requirements are also found in automobile liability policies and in other coverage add-ons.)
The insured did not report any accident nor did it report any such accident within the 60 day time requirement. The court found the policy provision to be conspicuous and reporting requirements like this one to be enforceable. The court further held there was no requirement that the insurer show prejudice due to late notice of the claim. The notice-prejudice rule, the court explained, pertained to late reporting of a claim otherwise covered by the policy. Here the timing requirement was one of the conditions for coverage, as was that there be an accident that caused the pollution.
Nonetheless, the insured argued there was a duty to defend because the policy provided the insurer would defend “groundless” claims. Not so, explained the court. “Groundless” claims must still be claims potentially covered by the policy, and this claim was not.
