RECENT CALIFORNIA DECISIONS

November 2007

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Third District Court Ruling in Bad Faith Insurance Case Likely to Impact Water Agency Negotiations in Groundwater Contamination Cases
Aerojet-General Corporation v. Commercial Union Insurance Company

In a September 13 ruling that could change the ground rules for water agencies negotiating groundwater cleanup settlements, the Third Appellate District interpreted the word “damages” in excess liability insurance policies to exclude costs pursuant to a negotiated settlement that were not ordered by a court. The court addressed a company’s right to indemnification for a settlement it reached with various water entities that sued the company for groundwater contamination in violation of the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq.