Case Briefs

The Supreme Court of California, applying California law, held in Ameron International Corp. v. Insurance Co. of the State of Pennsylvania, No. S153852 (Cal. Nov. 18, 2010), that an administrative adjudicative proceeding before the former U.S. Department of Interior Board of Contract Appeals is a “suit” for purposes of coverage under a commercial general liability policy. The Supreme Court held that the rule espoused in Foster-Gardner, Inc. v. National Union Fire Insurance Co., 959 P.2d 265 (Cal. 1998), did not apply on the facts in this case. The Supreme Court made clear, however, that Foster-Gardner will “continue to apply to actions involving pollution remediation orders, or any matters that involve threats to take legal action only, rather than to 'suits.'” Between 1975 and 1980, the policyholder manufactured concrete siphons for use in the Central Arizona Project aqueduct system. The Department of the Interior discovered defects in the siphons in 1990, and in 1995 its contracting officer issued a decision seeking approximately $40 million in damages from the policyholder. The policyholder appealed the contracting officer's decision to the Department of Interior Board of Contract Appeals (“IBCA”). After 22 days of proceedings, the policyholder settled with the government for $10 million. When the insurers denied coverage for defense costs and indemnification, the policyholder filed suit.