Aydin Corp. v. First State Insurance

*1195MOSK, J.

I dissent.

The majority affirm the judgment of the Court of Appeal, which reversed the judgment of the superior court, because they agree with the former that the latter committed reversible error by allocating to First State Insurance Company and not Aydin Corporation the burden of proof as to whether a claim that Aydin presented to First State came within a certain exclusionary clause of each of two umbrella liability insurance policies.

I would reverse the Court of Appeal’s judgment because I believe that the superior court did not commit any error whatsoever in the premises, reversible or otherwise.

Section 500 of the Evidence Code stands at the beginning of our analysis. And, as will appear, it will determine our result at the end.

Evidence Code section 500 expressly declares that, “[ejxcept as otherwise provided by law, a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he is asserting.” It impliedly declares that, except as otherwise provided by law, a party has the burden of proof as to his claim for relief or defense.1

At the threshold, I agree with the majority that it is the general rule of Evidence Code section 500 that is applicable and not any exception thereto.

I also agree that, under Evidence Code section 500, it is the insured that bears the burden of proving that a claim that it presents to the insurer comes within an insuring clause of a liability insurance policy, and hence it is the insured that bears the burden of proving that every fact essential thereto either exists or does not exist, as the case may be. (Travelers Casualty & Surety Co. v. Superior Court (1998) 63 Cal.App.4th 1440, 1453 [75 Cal.Rptr.2d 54], petition for review filed June 26, 1998 (S071423), review denied September 16, 1998; accord, e.g., Executive Aviation, Inc. v. National Ins. Underwriters (1971) 16 Cal.App.3d 799, 806 [94 Cal.Rptr. 347] [expressly holding to this effect without citation to Evid. Code, § 500]; see, e.g., Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 406 [257 Cal.Rptr. 292, 770 P.2d 704] [impliedly holding to this effect without citation to Evid. Code, § 500]; cf. Weil v. Federal Kemper Life Assurance Co. (1994) 7 Cal.4th 125, 148 [27 Cal.Rptr.2d 316, 866 P.2d 774, 32 A.L.R.5th *1196789] [expressly holding to this effect without citation to Evid. Code, § 500, in the context of a life insurance policy]; Searle v. Allstate Life Ins. Co. (1985) 38 Cal.3d 425, 437-438 [212 Cal.Rptr. 466, 696 P.2d 1308] [same].)

I further agree that, under Evidence Code section 500, it is the insurer that bears the burden of proving that the insured’s claim comes within an exclusionary clause of a liability insurance policy, and hence it is the insurer that bears the burden of proving that every fact essential thereto either exists or does not exist, as the case may be. (Travelers Casualty & Surety Co. v. Superior Court, supra, 63 Cal.App.4th at p. 1453; accord, e.g., Garvey v. State Farm Fire & Casualty Co., supra, 48 Cal.3d at p. 406 [expressly holding to this effect without citation to Evid. Code, § 500]; Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 880 [151 Cal.Rptr. 285, 587 P.2d 1098] [same]; Executive Aviation, Inc. v. National Ins. Underwriters, supra, 16 Cal.App.3d at p. 806 [same]; cf. Searle v. Allstate Life Ins. Co., supra, 38 Cal.3d at pp. 437-438 [expressly holding to this effect without citation to Evid. Code, § 500, in the context of a life insurance policy].)

Beyond these points, however, my agreement ends.

The insuring clause of each of the two umbrella liability insurance policies issued by First State to Aydin provides, in pertinent part, that, beyond a certain retained limit, First State will “indemnify” Aydin “for ... all sums which” Aydin “shall be obligated to pay by reason of the liability imposed upon” it “by law or liability assumed by” it “under contract or agreement for damages and expenses, because of’ “personal injury” in forms including “[l]ibel, slander, defamation of character, humiliation or invasion of the rights of privacy, unless arising out of advertising activities,” or “because of’ “property damage” in various forms, “to which this policy applies, caused by an occurrence . . . happening anywhere in the world.” (Full capitalization deleted.)

Among the exclusionary clauses of each of the two umbrella liability insurance policies at issue is what is commonly called the “qualified pollution exclusion” (e.g., Croskey et al., Cal. Practice Guide: Insurance Litigation 2 (The Rutter Group 1997) ^ 7:2060, p. 7H-23): “This policy shall not apply” “to any liability . . . arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, solids, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water *1197unless such discharge, dispersal, release or escape is sudden and accidental.”2

In order to prove that its claim came within the insuring clause of either or both of the umbrella liability insurance policies at issue, Aydin had to prove, as expressly required by Evidence Code section 500, the “existence” of “each fact” “essential” thereto. For example, it had to prove that any “liability” arose out of “personal injury” or “property damage.” (Full capitalization deleted.) In order to prove its claim came within the insuring clause of either or both of the policies, it also had to prove, as expressly required by the same provision, the “nonexistence” of “each fact” “essential” thereto. For example, it had to prove that any “liability” for “personal injury” in the form of “[ljibel, slander, defamation of character, humiliation or invasion of the rights of privacy” did not “aris[e] out of advertising activities . . .” (Full capitalization deleted.)

On this point, the majority do not express any disagreement. Let us then pass on.

Similarly, in order to prove that Aydin’s claim came within the qualified pollution exclusion of either or both of the umbrella liability insurance policies at issue, First State had to prove, as expressly required by Evidence Code section 500, the “existence” of “each fact” “essential” thereto. For example, it had to prove that any “liability” on Aydin’s part arose from the “discharge, dispersal, release or escape” of pollutants. In order to prove that Aydin’s claim came within the qualified pollution exclusion of either or both of the policies, it also had to prove, as expressly required by the same provision, the “nonexistence” of “each fact” “essential” thereto. For example —and this is the crux of the matter—it had to prove that “such discharge, dispersal, release or escape” was not “sudden” and “accidental.”

On this point, the majority do indeed express disagreement. They state that First State had to prove the “existence” or “nonexistence” of “each fact” “essential” to the main clause of the qualified pollution exclusion—“[tjhis policy shall not apply” “to any liability. . . arising out of the discharge, *1198dispersal, release or escape” of pollutants—but that Aydin had to prove the “existence” or “nonexistence” of “each fact” “essential” to the subordinate clause—“unless such discharge, dispersal, release or escape is sudden and accidental.” They reason, in substance, as follows: The subordinate clause is an “exception” to the exclusion; as such, it is an insuring clause; and, consequently, it is Aydin that must bear the burden of proof thereon.

The majority’s sundering of the qualified pollution exclusion, which is but a single sentence, into its main and subordinate clauses, and their separate allocation of the burden of proof to First State and Aydin, respectively, as to each one simply does not work. That is because the ground for their action is unsound.

First, the subordinate clause of the qualified pollution exclusion is not an “exception” to the exclusion because the main clause is not itself the exclusion. Rather, the main and subordinate clauses together constitute what is, in fact, a single sentence and what is, in law, a unitary exclusion. The main clause, which defines the general scope of the exclusion, and the subordinate clause, which identifies its precise dimensions, are necessarily interrelated—not unlike the definition of a square as a rectangle with four equal sides and the identification of the length of the sides. The following point, however, bears emphasis. The main clause is syntactically “independent,” and hence can stand without the subordinate clause: “This policy shall not apply” “to any liability . . . arising out of the discharge, dispersal, release or escape” of pollutants. By contrast, the subordinate clause is syntactically “dependent,” and hence cannot stand without the main clause: “unless such discharge, dispersal, release or escape is sudden and accidental.”

Second, even if the subordinate clause of the qualified pollution exclusion were an “exception” to the exclusion, it could not be deemed an insuring clause. For it could not reasonably be read to impose a duty on First State to indemnify Aydin for all sums that Aydin might be obligated to pay by reason of “any liability . . . arising out of the” “sudden and accidental” “discharge, dispersal, release or escape” of pollutants. For, even in the face of “liability” on Aydin’s part “arising out of . . . such discharge, dispersal, release or escape,” First State might be free from any duty to indemnify Aydin for a host of reasons, as for example that the liability in question was not predicated on personal injury or property damage. No, the subordinate clause could not be deemed an insuring clause. Rather, together with the main clause it simply constitutes an exclusionary clause.

Having scrutinized the majority’s reasoning and found it wanting, all we are left with is their unstated assumption that what is determinative on the *1199question of the allocation of the burden of proof is the word with which the subordinate clause of the qualified pollution exclusion begins — the conjunction “unless.” If that were so, form would prevail over substance.

Although in phrasing the following two versions of the qualified pollution exclusion are different, in meaning they are not.

Here is the qualified pollution exclusion in its actual language: “This policy shall not apply” “to any liability . . . arising out of the discharge, dispersal, release or escape” of pollutants “unless such discharge, dispersal, release or escape is sudden and accidental.” (Italics added.)

Here is the qualified pollution exclusion in alternative language: “This policy shall not apply” “to any liability . . . arising out of the nonaccidental or nonsudden discharge, dispersal, release or escape” of pollutants.

The majority do not deny that the burden of proof as to the second version of the qualified pollution exclusion would be allocated solely to First State. Indeed, they could not do so.

But the majority claim the opposite as to the first version of the qualified pollution exclusion. In doing so, however, they trip over Evidence Code section 500. In order to prove that Aydin’s claim came within the qualified pollution exclusion of either or both of the umbrella liability insurance policies at issue, First State had to prove, as expressly required by that provision, the “existence” or “nonexistence,” as the case may be, of “each fact” “essential” thereto. That means that it had to prove, in the main clause, that any “liability” on Aydin’s part arose from the “discharge, dispersal, release or escape” of pollutants. It also means that it had to prove, in the subordinate clause, that “such discharge, dispersal, release or escape” was not “sudden” and “accidental.” What “facts” are “essential” for the qualified pollution exclusion depends not on how the exclusion is worded, but rather on what it means.3

*1200In sum, because I disagree with the Court of Appeal that the superior court committed reversible error in allocating the burden of proof, I would reverse its judgment.

Werdegar, J., concurred.

Whether parties to a contract, such as an insurer and an insured under an insurance policy, may allocate the burden of proof in the event of subsequent litigation the one against the other is a question that need not be addressed here. First State and Aydin did not even purport to do so in either of the two umbrella liability insurance policies at issue.

The majority state that the two umbrella liability insurance policies at issue “do not contain” “a ‘qualified pollution exclusion’ ” “but rather ... ‘a broad exclusion from coverage for any liability resulting from pollution.’ ” (Maj. opn., ante, at p. 1192.) Whether or not the exclusion in question may properly be described as “broad” is beside the point. Let us assume that it is indeed broad, very broad. The fact remains: It is not ««qualified. Therefore, it is qualified. It is certainly different from what is commonly called the “ ‘absolute pollution exclusion’ ” (e.g., Croskey et al., Cal. Practice Guide: Insurance Litigation 2, supra, 7:2085, p. 7H-28: “ ‘This policy shall not apply to . . . bodily injury or property damage arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of pollutants . . . .’ ”).

In accord with the conclusion that I have arrived at is Bebbington v. Cal. Western etc. Ins. Co. (1947) 30 Cal.2d 157, 159 [180 P.2d 673, 1 A.L.R.2d 361], in which we held, in the context of a life insurance policy, that it is the insurer that bears the burden of proving that the insured’s claim comes within an exclusionary clause, including negating the applicability of any “exception” thereto. The majority assert that Bebbington is “not illuminating in the present context.” (Maj. opn., ante, at p. 1189.) They are wrong. They first imply that Bebbington did not mean what it said. The decision speaks for itself. They then state that, in any event, we should not adhere to Bebbington. They maintain that, in view of Zuckerman v. Underwriters at Lloyd’s (1954) 42 Cal.2d 460 [267 P.2d 777], and Heller v. Bankers Life & Cas. Co. (1963) 220 Cal.App.2d 184 [33 Cal.Rptr. 586], Bebbington has little, if any, “vitality.” (Maj. opn., ante, at p. 1189.) Not so. Zuckerman involved an accident insurance *1200policy, whereas Bebbington involved a life insurance policy. Zuckerman merely distinguished Bebbington substantially on the ground that the insuring clause of an accident insurance policy is different from, and, specifically, narrower than, the insuring clause of a life insurance policy. (See Zuckerman v. Underwriters at Lloyd’s, supra, 42 Cal.2d at pp. 471-474.) Zuckerman did not “strictly limit[]” Bebbington to its facts, nor does it support such an action. (Maj. opn., ante, at p. 1189.) A fortiori, Zuckerman did not “overrule!]” Bebbington, expressly or by implication. (Ibid.) A claim to that effect by the justice who had authored Bebbington but who dissented in Zuckerman (Zuckerman v. Underwriters at Lloyd’s, supra, 42 Cal.2d at pp. 484-485 (dis. opn. of Carter, J.)) must be dismissed as mere hyperbole. To the extent that the Heller court read Zuckerman otherwise, it read it incorrectly.

Also in accord is Strubble v. United Services Auto. Assn. (1973) 35 Cal.App.3d 498 [110 Cal.Rptr. 828], in which the Court of Appeal held, in the context of an all-risks insurance policy, that it is the insurer that bears the burden of proving that the insured’s claim comes within an exclusionary clause, including negating the applicability of any “exception” thereto. The majority assert that Strubble is “not instructive here.” (Maj. opn., ante, at p. 1190.) Again, they are wrong. To be sure, in its insuring clause an all-risks insurance policy is different from other kinds of insurance policies, such as umbrella liability insurance policies, with which we are concerned in this case. But, in its exclusionary clauses, it is not.

Finally, in accord is Couch on Insurance, an authoritative treatise, which implies broadly that it is the insurer that bears the burden of proving that the insured’s claim comes within an exclusionary clause, including negating the applicability of any “exception” thereto. (19 Couch on Insurance.(2d ed. 1983) § 79:385, p. 338.) The majority assert that this is not so. (Maj. opn., ante, atp. 1191, fn. 2.) Yet again, they are wrong. True, Couch notes the existence of cases to the contrary. (19 Couch on Insurance, supra, § 79:385, p. 338; id. (1998 pocket supp.) p. 27.) But that is all. And that is not enough.