A California federal court has held that the potential for coverage underlying lawsuits arising from the September 2020 Bobcat Wildfire “is clear” and requires Greenwich Insurance Company to defend Southern California Edison Co. as an additional insured under a policy it issued to a vegetation management company whose negligence allegedly caused the wildfire.
Facts and Analysis
Under California law, a liability insurer owes a broad duty to defend its insured against claims that create a potential for coverage.[i] This broad duty encompasses claims that are “merely potentially covered” considering the facts alleged[ii] and does not require a showing of actual liability or evidence supporting the claims alleged.[iii]
In an opinion issued in January,[iv] the Eastern District of California held that detailed allegations of negligence in 20 underlying lawsuits against Utility Tree Service (UTS) establish the potential for coverage under the policy.
Edison contracted with UTS to manage vegetation maintenance around its power lines to prevent potential tree-to-conductor contact which allegedly occurred in September 2020 according to the lawsuits. The contract required UTS to have insurance with excess coverage for wildfire liability that lists Edison as an additional insured if UTS negligently performed maintenance.
Greenwich argued that it had no duty to defend Edison without any allegations of negligence levied against the named insured, UTS.
The Court disagreed, reasoning that a bare possibility of liability is all that is required to obtain coverage—saying that it was “reasonable to infer that [SCE’s] liability (if any) may arise from UTS’s acts or omissions” which triggers Greenwich’s duty to defend under the contract.[v]
This decision echoes the chorus California courts have maintained for decades: construe the duty to defend broadly and in favor of policyholders wherever possible. If there is any possibility for coverage under an insurance policy based on the complaint’s allegations, the insurer must defend its insured against the entire lawsuit unless it can prove with undisputed facts to the contrary.
[i] Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081.
[ii] Buss v. Superior Court, (1997) 16 Cal.4th 35, 46.
[iii] Isaacson v. Cal. Ins. Guarantee Ass’n (1988) 44 Cal. 3d 775, 793.
[iv] Southern Cal. Edison Co., et al. v. Greenwich Ins. Co. (E.D. Cal. Jan. 18, 2023) No. 2:22-cv-05984-JFW-JEM.