Citations
- 12 Cal. App. 4th 715
Full opinion text
Opinion
CHIN, J.
Introduction
Shell Oil Company (Shell) raises difficult issues regarding insurance coverage for environmental pollution liability. Shell’s main contentions involve interpreting standard comprehensive or commercial general liability (CGL) insurance language and California’s statutory bar against insuring “wilful” acts. Shell challenges numerous rulings made during a long and complex trial.
In 1952, Shell assumed a lease of part of the Rocky Mountain Arsenal (Arsenal), a United States Army (Army) complex in Colorado. At the Arsenal Shell manufactured chemicals and pesticides and disposed of its wastes using Army facilities. Over the years, toxic wastes from both Shell and the Army contaminated soil and groundwater. The cost to remedy this pollution has been estimated at $1.8 billion. In December 1983, the United States and the State of Colorado (Colorado) sued Shell for remediation costs and environmental damage. Shell and the United States eventually agreed on Shell’s share of the Arsenal’s cleanup costs. Shell’s liability for pollution at the Arsenal could reach hundreds of millions of dollars.
Shell maintained a primary layer of liability insurance and multiple layers of excess coverage. During its years at the Arsenal, the company bought approximately 800 CGL policies. Travelers Indemnity Company (Travelers) was Shell’s primary CGL insurer for property damage liability until 1975, when Aetna Casualty and Surety Company (Aetna) and then Insurance Company of North America (INA) issued Shell’s primary coverage. A battery of insurers provided excess coverage.
Shell identified six distinct causes of pollution at the Arsenal. Shell asserts each cause was an “occurrence” covered by its insurers, except Oil Insurance Limited (OIL), an insurer Shell owned with other oil industry members. For many reasons, the insurers denied any obligation to indemnify Shell for the Arsenal pollution. Principally, the insurers contend that Shell knew or should have known that its Arsenal operations created a substantial probability of environmental damage.
In phase I of the trial, the court interpreted the relevant policy provisions. In phase II, a jury heard extensive testimony on the Arsenal pollution and was instructed on the policy term meanings determined in phase I. The jury found against Shell; the judgment denied any coverage for the Arsenal claims.
On appeal, Shell attributes error to several elements of the phase I interpretations and the jury instructions. Foremost among Shell’s issues are: (1) the rules the trial court used to interpret the insurance policies; (2) the scope of Insurance Code section 533; (3) whether “expected,” as used in the policies and exclusions, implies an objective, reasonable person standard or a subjective test that examines the insured’s state of mind; (4) whether “sudden” means only “unexpected” or instead refers to events that are abrupt; (5) whether exclusions for property in Shell’s care, custody, or control were properly submitted to the jury; and (6) whether the insurers’ defense that Shell did not give timely notice of the Arsenal claims should have gone to the jury. Travelers also appeals, contending that OIL must contribute to the nearly $17 million Travelers advanced for Shell’s defense against the United States and Colorado.
We conclude that two of Shell’s arguments have merit. The insurers did not show substantial actual prejudice caused by untimely notice from Shell, but sending this defense to the jury was harmless error. More importantly, we hold that the jury was given a mistaken definition of “expect” that turned not on what Shell knew, but on what Shell should have known. This error requires that we reverse the judgment in part and remand the case. However, certain policies contained pollution exclusions that preclude coverage of the Arsenal claims. Therefore, we affirm the judgment as to those policies. We also affirm denial of Travelers’ contribution claim because OIL was an excess insurer and the primary insurance was not exhausted.
Facts
1. The Arsenal
The Arsenal covers roughly 28 square miles near Denver, Colorado. It was created in 1942 to produce chemical munitions for the Army, including nerve gas, blistering agents, and incendiary devices. The Arsenal was built in six months, using whatever was available to accommodate wartime exigencies. After the war, the Army used the Arsenal to produce, store, and demilitarize chemical warfare agents, but part of the manufacturing capacity became surplus.
The Army offered to lease the Arsenal’s surplus chemical manufacturing plants and equipment. In 1947, the Julius Hyman Company (Hyman) leased part of the Arsenal to manufacture chemical pesticides in the same equipment the Army had used to make chemical weapons. The lease payments covered disposal of manufacturing wastes in the Army’s waste facilities on the Arsenal.
Shell purchased Hyman in May 1952 and merged it into Shell Chemical Company about two years later. With the purchase, Shell assumed the Arsenal lease and hired almost all of Hyman’s employees. Shell used the Arsenal to manufacture agricultural chemicals, such as pesticides and herbicides, and some chemical products for the Army. Shell’s Arsenal operations necessarily generated a stream of toxic wastes. Shell operated its Arsenal facilities 24 hours a day, every day, for years.
2. The Arsenal Waste System
The Arsenal’s effluent wastes drained into large, shallow evaporation basins. A chemical sewer system installed for the Army Corps of Engineers in the early 1940’s carried the wastes to the basins. Shell used the Army’s effluent waste disposal system until 1978.
The first evaporation basin, Basin A, was built in 1943 by scraping soil from a natural depression. Nothing covered the basin bottom to make it impervious to liquids. The wastes sent to the basin were expected to evaporate or seep into the ground and bind with the soil, clay, and gravel underlying the basin. Water and salt made up the greatest portion of the waste sent to the basin.
Basin A started overflowing as the waste volume increased. To catch the overflow, a series of smaller evaporation basins, Basins C, D, and E, were built in the early 1950’s. These basins were made the same way as Basin A, and relied on the same processes to handle the waste effluent. Basin C, though, was so porous that it was called “straw bottom.”
In the mid-1950’s, complaints of crop damage and salt contamination on farms northwest of the Arsenal led to the construction of Basin F. This basin covered 93 acres and was approximately 10 feet deep. It had a three-eighths-inch-thick asphalt liner to prevent waste effluent from seeping into the groundwater. Shell’s effluent wastes were sent to Basin F from 1956 until 1978.
Wastes that Shell could not put in the chemical sewer it put in drums for disposal in shallow earthen trenches. The trenches were 300 feet long, 20 feet wide, and 10 feet deep. Shell dumped drums of contaminated materials, solid wastes, and sludges into the trenches, or poured in heated, tar-like wastes from a tank truck. When the trenches were nearly full, fuel oil was poured over them and ignited to decontaminate the chemical wastes through incineration. The trenches were then covered with a layer of soil. When air pollution problems halted open trench burnings, Shell stockpiled these wastes in thousands of covered and uncovered drums near the trenches.
3. Pollution Problems at the Arsenal
Shell’s leasehold included three freshwater lakes near its Arsenal plants. Water to cool the chemical manufacturing equipment was drawn from and returned to the lakes. Wildlife began to die at these lakes the first year Hyman operated at the Arsenal. In 1950, Dr. Hyman himself detected his company’s pesticides in the pipe that returned water to the lakes. Ducks died at the lakes until the mid-1960’s; 1,200 ducks were reported killed in the spring of 1952 alone. In 1956, tests found Shell’s pesticides in tissue samples from waterfowl killed at the lakes; tests in the mid-1960’s found the pesticides in snails and vegetation from the lakes. The lakes were drained, and contaminated mud was scraped from their bottoms and dumped on the ground nearby. The cooling water system was changed so that used water was not returned to the lakes.
In 1954, Shell was told that crops on a farm northwest of the Arsenal showed signs of chemical damage after irrigation with well water. It soon became clear that water flowing underground from the Arsenal was the most likely cause of the problem, though well water tests found only high salt levels and did not detect the Shell chemicals. After Basin F was built, the unlined basins were not used for effluent disposal, though they were used for storm water collection.
By the mid-1960’s, the Army was concerned about the high levels of toxic materials in Basin F and the environmental hazard of their exposed surface storage. The Army told Shell that alternatives to Basin F had to be developed. Throughout the early 1970’s, Shell maintained that evaporation basins could be used safely and were the most economical means of disposal. Army studies in the late 1960’s suggested that Basin F’s liner was deteriorating, though nearby test wells did not establish that the basin was leaking into the groundwater. In May 1970, the Army told Shell that Army engineers had concluded that the chemical mix in Basin F caused the liner to deteriorate and that they assumed the basin’s contents were oozing into the aquifer. The Army told Shell that use of Basin F had to end, and that Shell would have to pay a substantial portion of the costs of new waste facilities and aquifer contamination claims. However, Basin F was used for Shell’s wastes until 1978, and the Army continued to use the basin until 1981 or 1982.
In 1975, after Shell and Army chemicals were discovered in water sources north of the Arsenal, the Colorado Department of Health ordered that the Army and Shell “immediately take whatever steps are necessary to clean up all sources” of the chemicals. In meetings with Shell to discuss the response to the cease and desist orders, the Army proposed a 17-year, $345 million environmental restoration plan for the Arsenal. Soon after, the Army asked Shell to participate in the cost of cleaning up the Arsenal. Shell took the position that groundwater contamination was the Army’s responsibility because waste disposal was the Army’s obligation under Shell’s Arsenal lease and related agreements. In 1978, the Army asked Shell to contribute to a $50 million program to clean up Basin F; Shell again asserted that it had no such responsibility. Shell did not notify its insurance carriers of these matters at the time.
In 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (42 U.S.C. § 9601 et seq.), which created categories of responsible parties who would be liable for environmental damage and the costs of cleaning hazardous waste sites (42 U.S.C. § 9607). (See United States v. Shell Oil Co. (D.Colo. 1985) 605 F.Supp. 1064, 1068.) In October 1981, Shell learned that the Army intended to hold Shell liable for cleanup costs at the Arsenal. Between January 1982 and June 1983, Shell sent a series of notices to inform its insurers of the potential liability for the Army’s claims. The last notice asked the insurers for their position on Shell’s insurance coverage for those claims.
In December 1983, the United States and Colorado filed environmental damage lawsuits against Shell in the United States District Court in Denver, Colorado. The United States’ suit alleged that the environmental damage and pollution cleanup costs at the Arsenal amounted to $1.8 billion. In June 1988, the United States and Shell signed a consent decree to settle the federal claims. Under this decree, Shell’s liability for cleanup costs is open-ended, with Shell being responsible for 50 percent of the first $500 million, 35 percent of the next $200 million, and 20 percent of any amount over $700 million.
4. Shell’s Insurers
Shell’s size and diversity required a commensurate insurance program, which was directed by skilled professionals in Shell’s insurance department, assisted by large and experienced insurance brokers. Shell bought CGL insurance from hundreds of insurers and Lloyd’s of London underwriters. Insurance on this scale is purchased in layers, with the first layer of insurance referred to as primary coverage. Additional policies, referred to as excess coverage, have liability limits greater than the primary coverage and can be bought in layers. When the size of a claim exceeds the limits of liability assumed by the insurers at a given layer of coverage, the next higher coverage layer also will respond to the claim.
Shell’s primary coverage was provided by Travelers (1948-1975), Aetna (1975-1978), and INA (1978-1983). Primary CGL coverage typically includes an agreement by the insurer to defend claims against the insured until the primary coverage’s limits of liability are exhausted. Shell’s insurance program employed up to nine layers of excess coverage, often with several insurers participating in the same layer of coverage at the same time. Frequently, insurance policies issued for excess layers will “follow form,” i.e., conform with the standardized language used by policies in lower layers. Following form gives the insured more uniform coverage and facilitates spreading risks among insurers. Most of Shell’s policies followed form, so certain provisions and phrases recurred throughout Shell’s policies.
5. The Trial Court Proceedings
In October 1983, shortly before the United States’ suit was filed, Shell filed this declaratory relief action against insurers which sold CGL coverage to Shell from 1940 to 1983. Shell’s suit involved the meaning and applicability of approximately 800 insurance policies. One liability insurer Shell did not sue was OIL, which other insurers made a party by cross-complaints.
Shell sought defense and indemnification by the insurers for the claims concerning the Arsenal and another toxic waste disposal site in Fullerton, California, known as the McColl site. The Arsenal coverage disputes involve the 1952 through 1982 policy years.
The parties agreed to trial in phases. The phase I court trial began on November 4, 1987, and resolved the interpretation of the policies’ terms. The phase I statement of decision became the foundation for jury instructions in phase II.
The phase II jury trial began on August 30, 1988. In that phase, the trial court’s interpretation of the policy provisions was applied to the facts of the Arsenal claims. For Shell’s coverage claims and the insurers’ defenses, the parties presented extensive evidence on the Arsenal’s history and pollution. The jury received the 86 pages of instructions both by videotape and a written copy. The court gave the jury a general verdict form that required the jury to decide, for each of the 31 years involved, whether Shell had any coverage for pollution damage at the Arsenal.
After 60 days of trial, and nearly 6 days of deliberations, the jury returned its verdict against Shell for all 31 years. The final judgment declaring that Shell had no coverage for the Arsenal claims was entered on January 27, 1989; Shell’s motions for a new trial and for judgment notwithstanding the verdict were denied on March 23, 1989. This appeal followed.
Discussion
1. Rules for Interpreting Insurance Contracts
Shell contends the trial court used a “renegade interpretative system” to construe the insurance contracts. This contention has no merit for the substantive issues Shell raises on appeal. The trial court’s method for interpreting the pertinent insurance contract provisions was substantially consistent with the rules later endorsed in AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807 [274 Cal.Rptr. 820, 799 P.2d 1253] (hereafter AIU).
The analysis in AIU began with the fundamental rule that interpretation of an insurance contract, like any contract, is governed by the mutual intent of the parties at the time they form the contract. (AIU, supra, 51 Cal.3d at pp. 821-822.) The parties’ intent is found, if possible, solely in the contract’s written provisions. (Id., at p. 822.) “The ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage’ [citation], controls judicial interpretation. [Citation.]” (Ibid.) Thus, if a layperson would give the contract language an unambiguous meaning, we apply that meaning. (Ibid.) Only these basic principles are needed to interpret contract language that is clear and unambiguous.
The rules for recognizing ambiguity are also straightforward. Ambiguity exists when an insurance policy provision is susceptible to two or more constructions that are reasonable and not based on strained interpretations. (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912 [226 Cal.Rptr. 558, 718 P.2d 920].) Contract language interpretation involves considering the whole instrument and the circumstances of the case; ambiguity is not an abstract question. (Id., at p. 916, fn. 7.) “A word generally has several meanings, even in the dictionary. You have to consider the sentence in which it stands to decide which of those meanings it bears in the particular case, and very likely will see that it there has a shade of significance more refined than any given in the wordbook.” (Holmes, The Theory of Legal Interpretation (1899) 12 Harv.L.Rev. 417.)
When particular policy language is ambiguous, it is interpreted in the sense the insurer believed the insured understood it at the time of formation. (AIU, supra, 51 Cal.3d at p. 822.) If that principle cannot remove an ambiguity, as when there is no basis for a belief that the insured understood a term in a specific sense, then the ambiguity is construed against the party who caused the uncertainty to exist. (Id., at pp. 822-823; Civ. Code, § 1654.)
Because insurance policy language usually is the insurer’s, with no meaningful opportunity for insureds to bargain for modifications, courts normally resolve policy ambiguities in favor of finding coverage. (AIU, supra, 51 Cal.3d at p. 822.) For the same reasons, courts generally interpret coverage clauses broadly and interpret exclusions narrowly to protect the insured’s objectively reasonable expectations. (Ibid.)
Different rules apply when the insured “does not suffer from lack of legal sophistication or a relative lack of bargaining power, and where it is clear that an insurance policy was actually negotiated and jointly drafted . . . .” (AIU, supra, 51 Cal.3d at p. 823; see Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 438 [204 Cal.Rptr. 435, 682 P.2d 1100].) Under such circumstances, ambiguities are not necessarily construed in favor of coverage. (AIU, supra, at p. 823; Garcia, supra, at p. 438.) However, this departure from the norm requires evidence that the provision in question was jointly drafted; merely showing that policy terms were negotiated, and that the insured had legal sophistication and substantial relative bargaining power, is not enough. (AIU, supra, at p. 823; Garcia, supra, at p. 438.)
In AIU, the insured was a large corporation with both substantial bargaining power and legal sophistication. (AIU, supra, 51 Cal.3d at p. 823.) The corporation’s subsidiary drafted CGL policies identical to those involved in that case. (Ibid.) There was evidence that the policies were written on a line-by-line basis through continuing negotiation with the insurer. (Id., at p. 823, fn. 9.) Nevertheless, the court held the insurers responsible for the ambiguities in that case because there was no evidence those particular ambiguous provisions were actually negotiated and jointly drafted. (Id., at pp. 823-824.)
The court said that policy terms would be construed in the broad sense understood by laypersons absent evidence that the parties intended narrower technical meanings and crafted policy language specially for that purpose. (AIU, supra, 51 Cal.3d at p. 823.) In AIU, the policy terms in question were taken verbatim from standard CGL policies used by the insurance industry. (Id., at pp. 815, 823-824, fn. 9 and accompanying text.) Further, there was no evidence the insurer had cause to believe the insured originally understood the policy language in any technical or restrictive manner. (Id., at p. 823; see Civ. Code, § 1649.) Therefore, the court construed the ambiguities in favor of coverage. (AIU, supra, at p. 823.)
In all respects material to this appeal, the trial court employed the insurance interpretation rules the Supreme Court endorsed in AIU. The trial court tried to determine the parties’ mutual intent at the time the contracts were formed and used the contracts’ language as the primary evidence of that intent. The trial court applied its understanding of the ordinary and popular meanings of the words used in the contracts. It used specialized meanings only when evidence showed a word was intended in a technical sense or was subject to a particular trade usage.
Shell argues the trial court failed to construe ambiguities against the insurers and improperly applied the “sophisticated insured” exception to standardized language common to many CGL policies. Whatever merit this argument may have for other interpretative rulings, it has none for the issues Shell raises on appeal. Each policy interpretation Shell contends was error was decided on unambiguous language or, in one instance, on a plain and ordinary meaning that conformed to the parties’ understanding and intention. As we discuss in the following sections, none of the interpretative issues raised by Shell require us to construe an ambiguity against the insurers.
2. Section 533 and “Wilful” Acts
Section 533 states: “An insurer is not liable for a loss caused by the wilful act of the insured; but [the insurer] is not exonerated by the negligence of the insured, or of the insured’s agents or others.” (§ 533, italics added.) The trial court instructed the jury that under all of Shell’s policies, property damage must be neither expected nor intended. Before 1975, Shell’s primary policies did not explicitly require that property damage be unintended and unexpected; nor did the primary policies contain an intentional acts exclusion before 1966. Thus, Shell claims the instructions improperly subjected all policies to an exclusion expressly stated only in later policies.
Shell takes the position that section 533 provides the controlling concept of fortuity for all of Shell’s policies and the only exclusion for intentionally caused damage under the policies issued before 1966. Shell contends it must be indemnified for property damage liability, regardless of whether the damage was caused negligently or recklessly, unless it subjectively intended to cause the damage or intentionally committed a wrongful, inherently harmful act. (Citing J. C. Penney Casualty Ins. Co. v. M. K. (1991) 52 Cal.3d 1009 [278 Cal.Rptr. 64, 804 P.2d 689] [hereafter Penney].)
The narrow question Penney decided was that, as a matter of law, section 533 excludes liability coverage for sexual molestation of a child without proof that the insured subjectively intended harm, because molesting a child is always intentional, wrongful, and harmful. (Penney, supra, 52 Cal.3d at pp. 1025, 1028.) In reaching this holding, the court discussed the public policy and legislative intent evinced by section 533 (Penney, supra, at pp. 1020-1025) and clarified an earlier decision that appeared to require proof of a “ ‘preconceived design to inflict injury.’ [Citation.]” (Id., at p. 1021.)
Section 533 is an implied exclusionary clause in every insurance contract. (Penney, supra, 52 Cal.3d at p. 1019; Evans v. Pacific Indemnity Co. (1975) 49 Cal.App.3d 537, 540 [122 Cal.Rptr. 680].) The statute reflects a fundamental public policy of denying coverage for willful wrongs and discouraging willful torts. (Penney, supra, at pp. 1019-1021, fn. 8 and accompanying text.) As a statutory exclusion, section 533 is not subject to the rule of strict construction against an insurer; instead, we construe it according to the Legislature’s intent, for which we refer first to the words of the statute. (Penney, supra, at p. 1020, fn. 9 and accompanying text.)
The first clause of section 533 precludes indemnity for a “wilful act,” while the second clause qualifies the first by effectively eliminating “negligence” from the concept of “wilful act.” (§ 533.) This language has remained unchanged since 1873. (Evans v. Pacific Indemnity Co., supra, 49 Cal.App.3d at p. 541.) The Supreme Court discussed the origins of the section’s language in McKenzie v. Scottish U. & N. Ins. Co. (1896) 112 Cal. 548 [44 P. 922]. The court noted that insurers traditionally were liable for their insureds’ ordinary negligence, but that other forms of negligence could release the insurer. (Id., at p. 557.) The court said: “To set at rest questions involving the different degrees of negligence, ... we may reasonably suppose was the object of the framers ....[][] Under section [533] the nice distinctions often made necessary are dispensed with, and the general proposition is established that no form of negligence . . . avoids the policy, unless it amounts to a willful act on the part of the insured.” (Id., at pp. 557-558, discussing Civ. Code, former § 2629, which became § 533.)
Thus, a “wilful act” under section 533 means something more than intentionally doing an act constituting ordinary negligence. (Penney, supra, 52 Cal.3d at p. 1021.) Under McKenzie, no form of negligence amounting to less than section 533’s “wilful act” precludes coverage. (Penney, supra, at p. 1021.) “In short, section 533 does not preclude coverage for acts that are negligent or reckless.” (Penney, supra, at p. 1021.) However, excluding negligence and recklessness does not alone establish the meaning of “wilful act” under section 533.
Before the decision in Penney, some courts interpreted Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 886-887 [151 Cal.Rptr. 285, 587 P.2d 1098], as meaning that section 533 does not bar coverage for acts that are intentional or willful under traditional tort principles unless the acts are done with a preconceived design to injure. (See, e.g., State Farm Fire & Casualty Co. v. Eddy (1990) 218 Cal.App.3d 958, 969 [267 Cal.Rptr. 379]; Allstate Ins. Co. v. Overton (1984) 160 Cal.App.3d 843, 849 [206 Cal.Rptr. 823].) However, Penney explained that when properly understood, Clemmer and the cases on which it relied do not support the view that coverage is barred only when the insured acted with a subjective intent to injure. (Penney, supra, 52 Cal.3d at pp. 1021-1025; Fire Ins. Exchange v. Altieri (1991) 235 Cal.App.3d 1352, 1358 [1 Cal.Rptr.2d 360].) The existence of a preconceived design to injure is relevant only when mental capacity is an issue or the insured’s intent or motive might justify an otherwise wrongful act. (Penney, supra, at pp. 1021-1025; B & E Convalescent Center v. State Compensation Ins. Fund (1992) 8 Cal.App.4th 78, 96-97 [9 Cal.Rptr.2d 894]; Fire Ins. Exchange, supra, at p. 1358.) Thus, section 533 precludes indemnification, whether or not the insured subjectively intended harm, if the insured seeks coverage for an intentional, wrongful act that is inherently and necessarily harmful. (Penney, supra, at p. 1025.) Although Penney established that sexual molestation of a child is a “wilful act” under section 533, the decision does not resolve our question: is any state of mind other than a subjective intent to injure so culpable as to render deliberate actions uninsurable?
We are guided by the Supreme Court’s interpretation of similar language in the Labor and Insurance Codes concerning workers’ compensation awards. Labor Code section 4553 grants additional compensation to an employee injured by an employer’s “serious and willful misconduct. . . .” Likewise, section 11661 prohibits indemnification for the additional compensation recoverable for “serious and willful misconduct. . . .” All three statutes express the same public policy and would refer to the same conduct except that section 533 does not apply to workers’ compensation insurance. (Azevedo v. Abel (1968) 264 Cal.App.2d 451, 458 [70 Cal.Rptr. 710].)
In Mercer-Fraser Co. v. Industrial Acc. Com. (1953) 40 Cal.2d 102 [251 P.2d 955], the Supreme Court examined the Legislature’s intent in using the phrase “serious and willful misconduct” in Labor Code section 4553. (Mercer-Fraser, supra, at p. 116.) The court reviewed common law and statutory interpretations of “willful misconduct,” “willful and wanton negligence,” “wanton and reckless misconduct,” and “gross negligence.” (Id., at pp. 116-120, internal quotation marks omitted.) It concluded that “serious and wilful misconduct is basically the antithesis of negligence, and that the two types of behavior are mutually exclusive; an act which is merely negligent and consequently devoid of either an intention to do harm or of knowledge or appreciation of the fact that danger is likely to result therefrom cannot at the same time constitute wilful misconduct; conversely an act deliberately done for the express purpose of injuring another, or intentionally performed either with knowledge that serious injury is a probable result or with a positive, active, wanton, reckless and absolute disregard of its possibly damaging consequences, cannot properly be classed as the less culpable conduct which is termed negligence. It follows that a finding of serious and wilful misconduct cannot be sustained upon proof of mere negligence of any degree.” (Id., at p. 120.)
Defined in these terms, “serious and willful misconduct” meets the requirement that a “wilful act” under section 533 cannot be any form of negligence. (See McKenzie v. Scottish U. & N. Ins. Co., supra, 112 Cal. at p. 558.) Logically and semantically, there is no reason to suppose that “serious and willful misconduct” connotes a less culpable state of mind than “wilful act.”
Nevertheless, it is now clear that section 533 does not prohibit coverage for reckless conduct. (Penney, supra, 52 Cal.3d at p. 1021.) Also, the Supreme Court has said in dictum that some forms of conduct amounting to a conscious disregard of others’ safety might not constitute an uninsurable “wilful act” under section 533. (See Peterson v. Superior Court (1982) 31 Cal.3d 147, 158-159 [181 Cal.Rptr. 784, 642 P.2d 1305].) As a practical matter, the distinction between reckless conduct and “positive, active, wanton, reckless and absolute disregard of [an act’s] possibly damaging consequences” (Mercer-Fraser Co. v. Industrial Acc. Com., supra, 40 Cal.2d at p. 120) is too fine to be significant. (See Prosser & Keeton, The Law of Torts (5th ed. 1984) § 34, pp. 212-214.) After removing any connotation of recklessness, a “wilful act” under section 533 must mean an act deliberately done for the express purpose of causing damage or intentionally performed with knowledge that damage is highly probable or substantially certain to result. (Cf. Hawaiian Pineapple Co. v. Ind. Acc. Com. (1953) 40 Cal.2d 656, 662-663 [255 P.2d 431] [regarding Lab. Code, § 4553]; Mercer-Fraser Co., supra, at pp. 115-118.) As we discuss in the next section of this opinion, that degree of foreknowledge or belief that a result will occur means the result is expected.
This approach is supported by the Restatement Second of Torts’ definition of “intent” and distinction between “intentional misconduct” and “recklessness.” The Restatement uses “intent” to denote that an act’s consequences are desired or believed to be substantially certain to result. (Rest.2d Torts, § 8A.) “As the probability that the consequences will follow decreases, and becomes less than substantial certainty, the actor’s conduct loses the character of intent, and becomes mere recklessness . . . .” (Rest.2d Torts, supra, § 8A, com. b.) Recklessness, in the Restatement’s view, does not necessarily require actual foreknowledge of the harmful consequences of particular acts; it is enough that a reasonable person would have recognized the aggravated risk. (Rest.2d Torts, supra, § 500, com. a.) A merely reckless person lacks subjective awareness of the near certainty of harm. “While an act to be reckless must be intended by the actor, the actor does not intend to cause the harm which results from it. It is enough that he realizes or, from facts which he knows, should realize that there is a strong probability that harm may result, even though he hopes or even expects that his conduct will prove harmless.” (Rest.2d Torts, supra, § 500, com. f, italics added.) Where the actor knows that the harmful consequences are substantially certain to result, and proceeds with the act anyway, the law treats the actor as if the result was desired. (Rest.2d Torts, supra, § 8A, com. b.)
We conclude that section 533 prohibits indemnification of more than just intentional acts that are subjectively desired to cause harm and acts that are intentional, wrongful, and necessarily harmful regardless of subjective intent. A “wilful act” under section 533 must also include a deliberate, liability-producing act that the individual, before acting, expected to cause harm. Conduct for which the law imposes liability, and which is expected or intended to result in damage, must be considered wrongful and willful. Therefore, section 533 precludes indemnification for liability arising from deliberate conduct that the insured expected or intended to cause damage. Accordingly, the trial court did not err by instructing the jury that for a liability policy to cover property damage, the insured must neither expect nor intend the damage.
3. The Plain Meaning of “Expected or Intended’’
The central issue in this appeal is the meaning of the word “expect” as used in policy language that bars coverage for damage that is “expected or intended.” Our conclusion on section 533’s prohibitions emphasizes the importance of a proper and consistent interpretation of “expect.” Shell and amicus curiae Aerojet-General Corporation (Aerojet) assert that “expect” requires a subjective standard that looks to the insured’s actual knowledge and state of mind. The insurers argue that “expect” imposes an objective standard that depends on the knowledge and state of mind a similarly situated reasonable person would possess. In support of their position, the insurers cite numerous authorities from other jurisdictions.
The trial court accepted the insurers’ argument. Jury instruction No. 42 said, in part: “. . . Injury is intended and expected (and hence, there is no coverage) if Shell possessed the intent to damage the property of another, or if Shell intentionally committed an act wherein it should have reasonably been known by Shell that there was a high degree of certainty that damage to the property of another would result from that act. ...” Jury instruction No. 43 said, in part: “ ‘Expected’ is defined as ‘to look forward to the probable occurrence or appearance of; to consider likely or certain; to consider reasonable or due.’ As contained in the occurrence definitions and in the pollution exclusions, the exclusionary word ‘expected’ denotes that the actor knew or should have known that there was a substantial probability that certain consequences would result from his or her acts or omissions. »
The leading case for this objective view of “expected” is City of Carter Lake v. Aetna Cas. and Sur. (8th Cir. 1979) 604 F.2d 1052. That court rejected an insurer’s argument that a result is expected when it is just reasonably foreseeable. (Id., at p. 1058.) The court said an insured reasonably expects a CGL policy to cover some negligent acts, but it does not follow that all negligent acts must be covered. {Ibid.) The court then stated: “For the purposes of an exclusionary clause in an insurance policy the word ‘expected’ denotes that the actor knew or should have known that there was a substantial probability' that certain consequences will result from his actions. If the insured knew or should have known that there was a substantial probability that certain results would follow his acts or omissions then there has not been an occurrence or accident as defined in this type of policy when such results actually come to pass.” (Id., at pp. 1058-1059.) Footnote 4 explained: “The difference between ‘reasonably foreseeable’ and ‘substantial probability’ is the degree of expectability. . . . The indications must be strong enough to alert a reasonably prudent man not only to the possibility of the results occurring but the indications also must be sufficient to forewarn him that the results are highly likely to occur.” (Id., at p. 1059, fn. 4.)
City of Carter Lake offered no reason or authority for injecting the objective “should have known” test into a definition of “expected.” Likewise, several courts have adopted the same or a similar interpretation without discussing their rationale for an objective test. (See, e.g., Auto-Owners Ins. Co. v. Jensen (8th Cir. 1981) 667 F.2d 714, 719-720 [interpreting Minn, law]; American Mut. Liability Ins. v. Neville Chemical (W.D.Pa. 1987) 650 F.Supp. 929, 932; Weber v. IMT Ins. Co. (Iowa 1990) 462 N.W.2d 283, 287-289; Summit Assoc. v. Liberty Mut. Fire Ins. (1988) 229 N.J.Super. 56 [550 A.2d 1235, 1239].)
Some courts adopted an objective test out of concern that a subjective test gives insureds too much of an advantage in coverage disputes. As one court explained: “Probing one’s state of mind is an elusive task at best. Supplanting an objective standard with a subjective standard for determining whether the act or conduct of an insured is ‘intentional’ or ‘expected or intended’ for purposes of assessing coverage would emasculate apposite policy provisions by making it impossible to preclude coverage for intentional acts or conduct absent admissions by insureds of a specific intent to harm or injure. Human nature augers against any viable expectation of such admissions.” (Truck Ins. Exchange v. Pickering (Mo.Ct.App. 1982) 642 S.W.2d 113, 116; see also Western Cas. & Sur. Co. v. Waisanen (D.S.D. 1987) 653 F.Supp. 825, 830 [“[C]ourts have been reluctant to adopt a totally subjective test which would place complete control of the coverage question in the hands of the insured.”].)
We believe these concerns are misplaced. Intent and knowledge can be proved without an insured’s admission; circumstantial evidence can establish them in civil cases as surely as in criminal prosecutions. (See 1 Witkin, Cal. Evidence (3d ed. 1986) Circumstantial Evidence, §§ 401-402, 408, pp. 374-376, 381-382.) Claims of ignorance are unlikely to succeed when circumstantial evidence shows the insured expected damage or avoided confirming such a belief in hopes of denying awareness of the risk.
The other rationale offered for an objective test is an attempt to differentiate the concepts of “intend” and “expect.” One court stated: “[N]o damage is done to plain English or to the reasonable expectations of the insured to find there is a difference between ‘expect’ and ‘intend’ and to find this difference is simply a difference in the degree of probability. ‘Intend’ means the insured desires to cause the consequences of his act or believes the consequences are substantially certain to result. ‘Expect’ means the insured realized or should have realized there was a strong probability the consequences in question would result from his acts. [Citations.]” (Farm Bureau Town & Country Ins. v. Tumbo (Mo.Ct.App. 1987) 740 S.W.2d 232, 236; see also Steelman v. Holford (Mo.Ct.App. 1989) 765 S.W.2d 372, 377.)
However, this extended definition of “expect” comes about only if “intend” is given the specialized meaning used in the law, as the court did in Farm Bureau. When “intend” is used in tort law, it acquires an extra meaning indistinguishable from a layperson’s sense of “expect.” (See Rest.2d Torts, supra, § 8A.) If “intend” is given its ordinary meaning of “[t]o have in mind some purpose or design” (American Heritage Dict. (1981) p. 682, col. 2), then “expect” can have its ordinary meaning, which does not include “intend’s” sense of results desired, purposefully sought, or brought about by design.
More recent CGL policies use “expect” in a context that makes applying an objective, “should have known” standard awkward. Policies that base coverage on an “occurrence” commonly define the term as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” (Italics added.) The insurance industry apparently adopted the phrase, “from the standpoint of the insured,” to clarify that whether an event is an “accident” is evaluated from the insured’s perspective, not the injured victim’s, as some courts had decided. (Patrons-Oxford Mut. Ins. Co. v. Dodge (Me. 1981) 426 A.2d 888, 890-891.) Regardless of the motive for including the phrase, it focuses the inquiry on the insured’s actual, subjective expectation, not the expectation of a hypothetical reasonable person. (See Brown Foundation v. St. Paul Ins. Co. (Ky. 1991) 814 S.W.2d 273, 279.) Even if the reference to “the standpoint of the insured” was meant to invoke an objective test, at best the phrase is ambiguous— triggering the usual consequences for ambiguous insurance policy language. Thus, this type of “occurrence” definition compels a subjective expectation test.
Judicial interpretation is controlled by the clear and explicit meanings of words in their ordinary and popular senses, unless the parties adopted a special or technical usage. (AIU, supra, 51 Cal.3d at p. 822.) Even if the reasoning of the insurers’ authorities was compelling, this rule would preclude endorsing an objective, “should have known” meaning for “expected.” At trial, the parties offered no evidence that “expected” and “intended” had other than their plain meanings in Shell’s policies. Therefore, we interpret these words in their ordinary and popular sense.
Leading dictionaries do not have definitions of “expect” that are appropriate in the context of Shell’s policies and contain any connotation of “should have known.” If a person “should have known” there was a substantial likelihood an event would occur, then the person “should have expected” it. The plain meaning of “expected” does not include “should have known.” Rather, the word comprehends actual belief in the probability of a future event.
We conclude that the ordinary and popular meaning of “expected,” in the context of Shell’s CGL policies, is not ambiguous. Our conclusion is reinforced by the sense three dictionaries attribute to “expect” in contrast with its synonyms. “To expect is to look forward to the occurrence of something with little reservation as to its likelihood.” (American Heritage Dict., supra, p. 461, col. 2.) “Expect implies confidently believing, usually for good reasons, that an event will occur . . . .” (Random House Dict., supra, p. 501, col. 1.) “Expect usu[ally] implies a high degree of certainty to the point of making preparations or anticipating particular things [or] actions . . . .” (Webster’s Third New Internal. Dict., supra, p. 799, col. 1.)
The ordinary and popular meaning of “expect” connotes subjective knowledge of or belief in an event’s probability. We see no material difference if the degree of that probability is expressed as substantially certain, practically certain, highly likely, or highly probable; the terms are minor shadings of the same idea. All convey the ordinary and popular sense that we do not think of events we “expect” as absolute certainties. Accordingly, we cannot adopt the more restrictive interpretation of some courts that “the phrase ‘neither expected nor intended’ should be read only to exclude those damages that the insured knew would flow directly and immediately from its intentional act.” (Hecla Min. Co. v. New Hampshire Ins. Co. (Colo. 1991) 811 P.2d 1083, 1088; see City of Johnstown, N.Y. v. Bankers Standard Ins. (2d Cir. 1989) 877 F.2d 1146, 1150; cf. State Farm Fire & Casualty Company v. Muth (1973) 190 Neb. 272 [207 N.W.2d 364, 366].) By suggesting that the foreknowledge must be detailed and absolutely certain, such interpretations unacceptably change the plain meaning of a plain word.
Our conclusion on the meaning of “expected or intended” is not unique. Patrons-Oxford Mut. Ins. Co. v. Dodge, supra, 426 A.2d at page 892, adopted essentially the same interpretation, albeit without examining the words’ ordinary and popular meanings. The court decided that damage “‘. . . which is either expected or intended from the standpoint of the Insured’ ” refers only to damage “that the insured in fact subjectively wanted (‘intended’) to be a result of his conduct or in fact subjectively foresaw as practically certain (‘expected’) to be a result of his conduct.” (Ibid., original italics.) Similarly, Quincy Mut. Fire Ins. Co. v. Abernathy (1984) 393 Mass. 81 [469 N.E.2d 797, 800], held that “expected” requires a showing that the insured “knew to a substantial certainty” that damage would ensue. “Had the insurer intended a different result, it could have used more appropriate language in the exclusion clause.” (Ibid.)
Both courts reached their conclusions because they believed the phrase was ambiguous and construed it to favor coverage. (Patrons-Oxford Mut. Ins. Co. v. Dodge, supra, 426 A.2d at pp. 890-891; Quincy Mut. Fire Ins. Co. v. Abernathy, supra, 469 N.E.2d at pp. 799-800.) We do not share that view. Often courts have difficulty with the phrase because they apply the specialized legal meaning of “intend.” This leaves “expect” with little to do. When we interpret both words in their ordinary and popular sense, the context renders their meaning clear and explicit. Even if we thought the phrase ambiguous, though, we would still arrive at the same conclusion.
“Expected or intended” is standard language in many CGL policies. The insurers do not suggest that joint drafting produced the “occurrence” definitions or “expected’s” use in the pollution exclusions. Nor do they claim a basis for believing Shell understood the words in a particular way. Therefore, if ambiguity existed, we would adopt a reasonable construction favoring coverage (AIU, supra, 51 Cal.3d at pp. 823-824), which would be the construction we have endorsed.
For these reasons, we hold that the jury instructions defining “expect” contained error. The instructions misdirected the inquiry to what Shell should have known instead of limiting consideration to what Shell actually knew or believed. Thus, they deviated from the ordinary, popular meaning of “expect” and the standard required by section 533. By testing what Shell should have known, the instructions invited denial of coverage for conduct within the realm of negligence, notwithstanding their gloss on the probabilities that reasonably should have been known. The appropriate test for “expected” damage is whether the insured knew or believed its conduct was substantially certain or highly likely to result in that kind of damage.
4. “Occurrences” and “Accidents”
Shell claims the trial court misapplied the fortuity concept in the policies’ “occurrence” definitions and misinterpreted the meaning of “accident.” As a result, some policies would not cover unintended and unexpected damage caused by intended acts. “Accident” is an integral part of the policies’ “occurrence” definitions, and so we examine the role and meaning of “accident” in that context.
Before 1975, Shell’s primary policies used a disjunctive to define an “occurrence” as “(1) an accident, or [1] (2) continuous or repeated exposure to conditions which results in . . . property damage during the policy period.” (Italics added.) In contrast, later policies typically defined an occurrence as “an accident, including continuous or repeated exposure to conditions, which result in . . . property damage neither expected nor intended from the standpoint of the insured.” (Italics added.)
The trial court instructed the jury that policies defining “occurrence” as “an accident, or [|] . . . exposure . . .” required only that the resulting damage be unexpected or unintended. For policies defining “occurrence” as “an accident, including . . . exposure ...” the trial court told the jury “that both the event or events causing the damage and the damage itself [must] be unexpected and unintended.”
Shell argues against this distinction between the two “occurrence” definitions. First, Shell contends that the minor change from “accident, or” to “accident, including” should not create the significant change in coverage reflected in the jury instruction because “including” normally is a term of enlargement and not limitation. Second, Shell argues that section 533 requires coverage for intentional conduct that results in unexpected or unintended damage because it is not just an exclusion, but also a mandate of coverage for all negligence, regardless of contrary policy language. Third, Shell asserts that “accident” means more than unexpected and unintended causes of damage; the term also includes unexpected and unintended consequences of intentional acts.
Shell’s first argument is correct in one respect; “including” is a word of enlargement. However, here it enlarges the meaning of “accident” to add exposure to damaging conditions; gradual events can then be “accidents” and “occurrences” under the policies. This change broadened the scope of covered events because some courts required that “accidents” be “sudden.” (See, e.g., Geddes & Smith, Inc. v. St. Paul Mercury Indemnity Co. (1959) 51 Cal .2d 558, 563-564 [334 P.2d 881] (hereafter Geddes).) The more recent “occurrence” definitions include gradual events within the concept of “accident,” but these policies nevertheless maintain a basic requirement that such events be accidents. Under the older policies an “occurrence” was an accident or exposure to damaging conditions, a definition that allowed coverage for damaging exposures that were not accidents. Therefore, as a matter of syntax and semantics, the trial court’s distinction between the two definitions of “occurrence” was correct.
Shell’s second argument relies on the second clause of section 533. Shell asserts that just as the first clause bars coverage for willful acts, the second clause requires coverage for any form of negligence. Shell contends that both clauses are mandatory and cannot be overridden by contrary policy terms.
The argument misconceives the basic nature of the statute. “Section 533 is ‘an implied exclusionary clause which by statute is to be read into all insurance policies.’ [Citations.]” (Penney, supra, 52 Cal.3d at p. 1019, italics added.) The section reflects a fundamental public policy of denying coverage for willful wrongs; thus, an insurer cannot cover acts excluded by the section. (Id., at pp. 1019-1020, fn. 8.) The second clause of section 533 simply excludes any form of negligence from the category of willful acts. Shell provides no authority for the argument that section 533 requires nonwillful acts to be covered and vitiates any contrary policy language. To the contrary, insurers have the right to limit policy coverage in plain and understandable language and can limit the character and extent of the risk assumed. (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 432 [296 P.2d 801, 57 A.L.R.2d 914]; Masonite Corp. v. Great American Surplus Lines Ins. Co. (1990) 224 Cal.App.3d 912, 919 [274 Cal.Rptr. 206].) Thus, an insurer may place more restrictions on the liability it assumes than those set by section 533. (American Guar. & Liability v. Vista Medical Supply (N.D.Cal. 1988) 699 F.Supp. 787, 790 (opn. of Schwarzer, J.).)
Shell’s third argument is based on a discussion of the meaning of “accident” in Geddes, supra, 51 Cal.2d at pages 563-564. Shell contends that the court’s reference to an “accident” as an undesigned happening or “consequence” means that any unexpected or unintended result is an “accident,” even if caused by intended conduct.
Although Geddes referred to an “accident” as a “consequence,” the reference played no part in the reasoning of the decision. Instead, the court concluded that the door failures involved in that case were accidents because they were unexpected, undesigned, and sudden. (Geddes, supra, 51 Cal.2d at p. 564.) The property damage that resulted from the door failures was therefore “ ‘caused by accident,’ ” as the policy language required. (Id., at p. 562.)
For the same reason, the logic and grammar of the post-1974 policies preclude our interpreting “accident” as meaning a “consequence.” Those policies, which define an “occurrence” as “an accident, including . . . ,” cover property damage “caused by” an “occurrence.” Therefore, an “occurrence” is a causal event, defined as an “accident.” In this context, an “accident” cannot mean unintended damage because the causal event also would be the result. Logically, a consequence cannot cause itself.
This court interpreted a similar “occurrence” definition in Commercial Union Ins. Co. v. Superior Court (1987) 196 Cal.App.3d 1205 [242 Cal.Rptr. 454]. In that case, the insured sought coverage when an employee sued after being fired. The policy covered damages “caused by an occurrence,” defined as “an accident, including, continuous or repeated exposure to conditions, which results in bodily injury or property damage. This injury or damage must be neither expected nor intended by [the insured].” (Id., at pp. 1206-1207, italics omitted.) The insured conceded that he intended the employee’s termination, but argued for coverage because he did not intend or expect the employee’s severe emotional distress. We found that under this “occurrence” definition, the term “accident” does not apply to an act’s consequences, but instead applies to the act itself. (Id., at p. 1208.) When “occurrence” is defined as an “accident,” we concluded that injury caused by expected or intended actions is not covered. (Id., at p. 1209; see also Loyola Marymount University v. Hartford Accident & Indemnity Co. (1990) 219 Cal.App.3d 1217, 1224-1225 [271 Cal.Rptr. 528]; Merced Mutual Ins. Co. v. Mendez (1989) 213 Cal.App.3d 41, 48-50 [261 Cal.Rptr. 273]; Dyer v. Northbrook Property & Casualty Ins. Co. (1989) 210 Cal.App.3d 1540, 1547-1549 [259 Cal.Rptr. 298].) The trial court correctly distinguished the effect of the two different “occurrence” definitions.
However, we should not be misunderstood as suggesting that an expected or intended act at any point in the causal chain of events means that any resulting damage was not caused by accident. Instead, we hold only that where damage is the direct and immediate result of an intended or expected event, there is no accident.
5. “Sudden,” as Used to Define “Accident” and as Used in the Pollution Exclusions
Shell contends that the trial court erred by including “sudden” in its definition of “accident” and also by defining “sudden” so that gradual events were not covered. Shell is joined by amicus curiae Aerojet on the latter contention.
A. Accidents Are “Sudden”
Shell claims that by including “sudden” in the definition of “accident,” the jury instructions limited Shell’s coverage to abrupt events, contrary to Geddes. (Geddes, supra, 51 Cal.2d at pp. 563-564.) Jury instruction No. 35 stated: “The term ‘accident’ means a casualty, something out of the usual course of events, which happens suddenly and unexpectedly and without the design of the person injured. The term ‘accident’ requires an element of fortuity and an event or happening which occurs in a spontaneous, instantaneous, abrupt or immediate manner, or which happens or comes without warning or premonition, or takes place or appears all at once, or is discovered unexpectedly and happens without warning.” However, Shell’s argument that this instruction erroneously allowed only abrupt events to be covered has two flaws.
First, “accident” is not an isolated term in the policies; rather, it is an integral part of the “occurrence” definition. Just before defining “accident,” the trial court told the jury that “occurrence” included “continuous or repeated exposure to conditions” that results in property damage. A covered “occurrence” could include events that are not abrupt because the “occurrence” definitions enlarged the concept of “accident” to encompass events that happen gradually. Considered as a whole, the instructions did not preclude coverage for an “occurrence” that was gradual and not abrupt in nature.
Second, the trial court’s definition of “accident” was consistent with the interpretation in Geddes. (Geddes, supra, 51 Cal.2d at pp. 563-564.) That case stated that one defining element of an “accident” is that it “ ‘ “happens suddenly.” ’ ” (Id., at p. 563.) Shell argues that Geddes took this element from an accidental death policy case and that the only definition applicable to Shell appears later in the discussion: “ ‘Accident, as a source and cause of damage to property, within the terms of an accident policy, is an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause.’ [Citation.]” (Id., at pp. 563-564, quoting Hauenstein v. Saint Paul-Mercury Indem. Co. (1954) 242 Minn. 354 [65 N.W.2d 122, 126].) Shell notes that this definition does not include “sudden” or “suddenly.” However, Geddes does not purport to specify discrete meanings of “accident” dependent on the kind of insurance involved.
Shell overlooks the Geddes court’s rationale for concluding that the door failures in question were accidents: “The door failures were unexpected, undesigned, and unforeseen. . . . Moreover, they occurred suddenly. It bears emphasis that we are concerned, not with a series of imperceptible events that finally culminated in a single tangible harm [citation], but with a series of specific events each of which manifested itself at an identifiable time and each of which caused identifiable harm at the time it occurred. . . . [E]ach door, when it failed, failed suddenly. At one moment it was a usable door, at the next it was not.” (Geddes, supra, 51 Cal.2d at p. 564.)
Geddes does not support Shell’s view that suddenness should not be used to define “accident.” Moreover, the trial court instructed the jury that “continuous or repeated exposure” could be an “occurrence.” The “occurrence” definitions therefore encompassed both sudden and gradual events. Viewed together, the instructions defining “accident” and “occurrence” were correct.
B. “Sudden” Events Start Abruptly
The second issue concerning “sudden” is the subject of substantial judicial disagreement across the country. Shell and Aerojet contend that in pollution exclusions, “sudden” need not have a temporal connotation and reasonably can mean just “unexpected” or, as Shell urges with less vigor, “unintended.” They argue that “sudden” is ambiguous and that we should construe it to cover unexpected or unintended events without any temporal limitation. They claim the trial court erred by instructing the jury that in the pollution exclusions, “ ‘sudden’ means a happening without warning; unforeseen; a happening coming or appearing unexpectedly; not foreseen or prepared for; and characterized by hastiness, abruptness, quickness, and swiftness.”
We first consider the context in which Shell’s policies use “sudden.” Before the pollution exclusions were added to those policies in 1969, they covered liability arising from an “occurrence," including “continuous or repeated exposure to conditions.” The pollution exc