50 Cal. 4th 1370, 242 P.3d 1020, 118 Cal. Rptr. 3d 95

Filed 11/18/10
Plaintiff and Appellant,
Ct.App. 1/5 A109755
San Francisco County
Super. Ct. No. 419929
Defendants and Respondents. )

Plaintiff and Appellant,
Ct.App. 1/5 A112856
San Francisco County
Super. Ct. No. 419929
Defendant and Respondent.

This court has defined the term ?suit? in a comprehensive general liability
(CGL) insurance policy as ?a court proceeding initiated by the filing of a
complaint.? (Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18
Cal.4th 857, 887 (Foster-Gardner). Foster-Gardner declined to include an
environmental agency?s pollution remediation order in that definition, and so we

found the insured business was not entitled to coverage under its CGL policy for
its cleanup liability. (Id. at pp. 860-861, 864.) Here, in a case involving numerous
primary, excess, and umbrella insurance policies, we must decide the narrow
question: Is a federal administrative adjudicative proceeding before an
administrative law judge of the former United States Department of Interior Board
of Contract Appeals (IBCA),1 which involved 22 days of trial, numerous
witnesses, and substantial evidence, a ?suit? for purposes of the duty to defend and
potential insurance coverage under those policies that do not define the term
?suit.? This quasi-judicial adjudicative proceeding, employed to resolve
government demands against insured parties, is a ?suit? as a reasonable insured
would understand that term. We therefore conclude that Foster-Gardner?s rule
does not apply here and reverse the Court of Appeal?s judgment to the extent it
held otherwise.
Appellant Ameron International Corporation (Ameron) is based in
Pasadena, California, and incorporated under the laws of the State of Delaware.
Respondent insurers (respondents) are 11 insurance companies that provided
Ameron with primary CGL coverage as well as excess/umbrella policies between
1978 and 1995.2 Beginning in 1975, the United States Department of the

In 2007, after the IBCA proceedings here, that department was terminated
and consolidated with other agency boards to form the United States Interior
Civilian Board of Contract Appeals, established effective January 6, 2007. The
consolidation did not affect the applicable regulations at issue in this case, and the
parties do not argue that it did.
The respondents are: Insurance Company of the State of Pennsylvania
(ICSOP), Century Indemnity Company (as successor to CCI Insurance Company,
as successor to Insurance Company of North America) (INA), Pacific Employers
Insurance Company (Pacific), St. Paul Surplus Lines Insurance Company (St.
Paul), International Insurance Company (International), Puritan Insurance
Company (Puritan), Transcontinental Insurance Company (Transcontinental), Old
(footnote continued on next page)

Interior?s Bureau of Reclamation (Bureau) contracted with Peter Kiewit Sons?
Company (Kiewit) for the fabrication and installation of concrete siphons used in
the Bureau?s Central Arizona Project aqueduct. Kiewit then subcontracted
manufacture of the siphons to Ameron, requiring it to defend and indemnify
Kiewit in the event the siphons proved defective. Kiewit is an insured under
Ameron?s insurance policies.
In 1990, the Bureau discovered defects in the siphons that required their
replacement at a cost of approximately $116 million. In 1992, the Central Arizona
Water Conservation District filed an action against Ameron in federal district
court in Arizona for its responsibility in providing the defective siphons. Ameron
provided respondents with timely notice of that action, which was eventually
dismissed. An appeal in the Ninth Circuit Court of Appeals also was dismissed,
and is not a subject of the present coverage action.
In 1995, the Bureau?s contracting officer issued two final decisions finding
Kiewit responsible for the siphons? defects and seeking almost $40 million in
damages from Kiewit and Ameron.3 Under the terms of their indemnity
agreement providing for a private contractual remedy, Kiewit and Ameron
challenged the contracting officer?s decision before the IBCA. In light of the
(footnote continued from previous page)
Republic Insurance Company (Old Republic), Twin City Fire Insurance Company
(Twin City), Great American Surplus Lines Insurance Company (Great
American), and Harbor Insurance Company (Harbor).
With the exception of Harbor, all respondents appear in case No. A109755.
Harbor appears in case No. A112856. On our own motion and by an order
separately filed, we have consolidated the two appeals.
Ameron argues that it paid for and prosecuted the IBCA proceeding in
Kiewit?s name. In the case at bar, Ameron seeks insurance coverage for itself and
on behalf of Kiewit. Kiewit is not a party to this appeal.

Bureau?s action against them, Ameron provided timely notice to respondent
The IBCA administrative law proceeding lasted 22 days and concluded
when Ameron and Kiewit settled the Bureau?s claims against them for $10
million. Following the settlement, Truck Insurance Exchange, ?one of Ameron?s
primary insurers, paid Ameron certain sums with respect to the [Central Arizona
Project] litigation.?4 In addition, INA offered to pay $750,000 towards the
settlement, but Ameron rejected this amount as insufficient. The remaining
respondents generally failed or refused to pay for the cost of defending or
indemnifying Ameron in the litigation before the IBCA.
Ameron, in its own right and as the assignee of Kiewit?s rights, filed its
operative complaint against respondent insurers on July 21, 2004, alleging causes
of action for breach of contract, breach of the covenant of good faith and fair
dealing, declaratory relief, waiver and estoppel, and contribution.5 Ameron?s
complaint alleged that the IBCA proceedings are ?civil proceedings? in which the
IBCA acts in a ?judicial capacity? when conducting hearings and deciding
contested factual issues. Ameron pointed out that under the Contract Disputes Act
of 1978 (Contract Disputes Act) (41 U.S.C. ? 601 et seq.), it could have chosen to
challenge the decision of the Bureau?s contracting officer either by appealing that

The Court of Appeal noted, ?Whether Truck compensated Ameron for its
defense costs and/or for the settlement it paid is unclear from the face of the
complaint . . . . Truck . . . is . . . [not] a party to this appeal.?
As all courts involved in the case and Ameron observe, Ameron is the
assignee of Kiewit?s rights under the 11 insurance policies involved in the present
litigation. As the assignee, Ameron assumed all Kiewit?s rights under the policies.
In addition, Ameron was the real party in interest in the trial before the IBCA. It
was also Ameron that paid attorney fees to defend the government?s claims in its
own name and paid the premiums on the policies sold to it. Based on these facts
and the assignment here, Ameron is the proper party before the court.

decision to the IBCA, or by bringing an action in the United States Court of
Federal Claims (Federal Claims Court). (41 U.S.C. ?? 606, 609.) Ameron
contended that the Contract Disputes Act refers to an action filed in either the
IBCA or the Federal Claims Court as a ?suit,? thus triggering respondents?
coverage duties. Ameron asserted that respondents failed or refused to defend or
settle the Bureau?s claims against it before the IBCA, failed to indemnify it for the
IBCA settlement, and neglected to investigate the potential for coverage. The
superior court granted respondents? demurrer and dismissed Ameron?s complaint.
The trial court relied on Foster-Gardner, supra,18 Cal.4th 857, which held that an
environmental agency?s order identifying the insured as a party responsible for
remediating environmental pollution was not a ?suit? that would trigger an
insurer?s duty to defend its insured or provide insurance coverage. (Id. at pp. 860-
The Court of Appeal partially reversed the trial court?s judgment and
awarded defense and coverage costs for those policies that defined a ?suit? as a
?civil proceeding.?6 However, after commenting that it was reluctantly applying
Foster-Gardner?s reasoning to those policies that did not define the term ?suit,?
the Court of Appeal concluded that similar pre-1986 insurance policies containing
language virtually identical to the policies at issue in Foster-Gardner7 gave
Ameron no defense or liability coverage, because the IBCA adjudicative
administrative hearing was before a federal administrative agency and not a court

These included three of the four policies from INA, as well as policies
issued by International, Twin City, St. Paul, and Harbor, and two excess/umbrella
policies that ICSOP issued successively from 1990 to 1992.
These included policies from Transcontinental, Puritan, Old Republic,
Pacific, and Great American, and an excess/umbrella policy ICSOP issued from
1992 to 1995.

of law. We granted review to decide whether, under the applicable Ameron
policies at issue here, the rule announced in Foster-Gardner applies to preclude
the obligation to provide a defense and potential indemnity coverage in an
administrative law proceeding before the IBCA.8
A. Background

1. Standard of Review and Insurance Law Principles
In general, interpretation of an insurance policy is a question of law and is
reviewed de novo under settled rules of contract interpretation. (E.M.M.I. Inc. v.
Zurich American Ins. Co. (2004) 32 Cal.4th 465, 470 (E.M.M.I.); Waller v. Truck
Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 (Waller).) ?The fundamental rules of
contract interpretation are based on the premise that the interpretation of a contract
must give effect to the ?mutual intention? of the parties. ?Under statutory rules of
contract interpretation, the mutual intention of the parties at the time the contract is
formed governs interpretation. (Civ. Code, ? 1636.) Such intent is to be inferred,
if possible, solely from the written provisions of the contract. (Id., ? 1639.) 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? (id., ? 1644), controls judicial interpretation.
(Id., ? 1638.)? ? (Waller, supra, 11 Cal.4th at p. 18.)

Respondents INA and Pacific seek judicial notice of Foster-Gardner?s
petition for rehearing filed with this court on August 18, 1998, following our
opinion in Foster-Gardner, supra, 18 Cal.4th 857. Respondents contend that the
arguments made in Ameron?s opening brief are similar to the arguments made in
the petition for rehearing, indicating that this court has already considered
?insurance coverage for an adjudicative procedure.? We decline to take notice of
a rehearing petition filed over 12 years ago. (Evid. Code, ? 459.)

An insurance policy provision is ambiguous when it is susceptible of two or
more reasonable constructions. (E.M.M.I., supra, 32 Cal.4th at p. 470.) If
ambiguity exists, however, the courts must construe the provisions in the way the
insurer believed the insured understood them at the time the policy was purchased.
(Civ. Code, ? 1649.) In addition, if, after the court evaluates the policy?s language
and context, ambiguities still exist, the court must construe the ambiguous
language against the insurer, who wrote the policy and is held ? ?responsible? ? for
the uncertainty. (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822
(AIU).) Particularly, ?[i]n the insurance context, . . . ambiguities [are resolved] in
favor of coverage? so as to protect the insured?s reasonable expectation of
coverage. (Ibid.; see La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity
Co. (1994) 9 Cal.4th 27, 37.) In addition, to prevail on a duty to defend claim, an
insured need ? ?only show that the underlying claim may fall within policy
coverage . . . .? ? (Ortega Rock Quarry v. Golden Eagle Ins. Corp. (2006) 141
Cal.App.4th 969, 977.) Insurers have the more difficult burden of proving that the
underlying claim cannot fall within policy coverage. (Ibid.)
2. Foster-Gardner and Subsequent Cases
Respondents assert that the hearing before the IBCA was not the trial of a
?suit? as defined in the insurance policies. They generally rely on language in
Foster-Gardner to argue that because the IBCA is not a court of law, any hearing
before it is not the trial of a ?suit? unless specifically indicated as such in the
pertinent policy. (Foster-Gardner, supra, 18 Cal.4th at pp. 887-888.) Ameron, in
turn, contends that Foster-Gardner either does not apply to the IBCA?s ?civil
proceedings,? or, if it does, we should overrule it to provide that the IBCA
proceedings are considered the trial of a ?suit.?
In Foster-Gardner, the Colorado River Basin Regional Water Quality
Control Board and the Riverside County Health Department ordered Foster-

Gardner to perform a series of preliminary environmental site investigations at its
wholesale pesticide and fertilizer business. (Foster-Gardner, supra, 18 Cal.4th at
pp. 861-862.) These investigations confirmed pervasive contamination at the site.
(Id. at p. 862.) The California Department of Toxic Substances Control (DTSC)
found that during Foster-Gardner’s ownership of the site, it disposed of hazardous
substances that impacted groundwater, surface water, soil, and air. (Ibid.) The
DTSC then issued Foster-Gardner an ?Imminent and Substantial Endangerment
Order and Remedial Action Order? (Order) that commanded it to remediate the
site. (Id. at pp. 861-863.)
DTSC issued the Order under the Carpenter-Presley-Tanner Hazardous
Substance Account Act (HSAA; Health & Saf. Code, ? 25300 et seq.), which is
California?s version of the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA; 42 U.S.C. ? 9601 et seq.; Foster-
Gardner, supra, 18 Cal.4th at p. 861.) The Order required Foster-Gardner to
continue monitoring contamination at the site, to prepare and submit a remediation
plan for DTSC approval, and, after receiving that approval, to implement the plan
to remediate the site. (Foster-Gardner, supra, at pp. 861-863.)
Foster-Gardner tendered its proposed defense to the Order to four of its
insurers, who either refused to defend or agreed to defend subject to a reservation
of rights. (Foster-Gardner, supra, 18 Cal.4th at pp. 863-864.) All had issued
CGL policies containing essentially similar language; none of the policies defined
the term ?suit? or ?claims.? (Ibid.) Foster-Gardner brought suit against its
insurers, asserting they were obligated to defend, and seeking summary
adjudication as to their obligation. (Id. at p. 864.) However, the trial court
disagreed and granted the insurers? cross-motions for summary judgment based on
its determination that the Order was not a ?suit.? (Ibid.) The Court of Appeal
reversed the judgment, interpreting the policies using a ? ?nontechnical . . .

analysis? ? (id. at p. 865) to find the Order was the ? ?functional equivalent? ? of a
?suit? that triggered the insurers? duty to defend. (Id. at p. 879.)
Rejecting a ?functional? or ?hybrid? methodology that other states had
adopted in interpreting the meaning of the term ?suit? (Foster-Gardner, supra, 18
Cal.4th at pp. 871-874), this court reversed the Court of Appeal judgment, holding
that the term in the insurance policies at issue referred, unequivocally, to a lawsuit
or, more accurately, ?a civil action commenced by filing a complaint.? (Id. at p.
878.) We cited two authorities: Black?s Law Dictionary and Webster?s Ninth
New Collegiate Dictionary. Black?s defines ?suit? as ? ?[a] generic term, of
comprehensive signification, referring to any proceeding by one person or persons
against another or others in a court of law in which the plaintiff pursues, in such
court, the remedy which the law affords him . . . .? ? (Foster-Gardner, supra, at p.
879, quoting Black?s Law Dict. (6th ed. 1990) p. 1434, col. 1.) Similarly,
Webster?s defines ?suit? as ? ?an action or process in a court for the recovery of a
right or claim.? ? (Foster-Gardner, supra, at p. 879, quoting Webster?s New
Collegiate Dict. (9th ed. 1987) p. 1180.)
In considering the coverage issue, we observed that other jurisdictions take
different approaches to interpreting CGL policies. Some take a ?functional? view,
holding that the receipt of any EPA-type cleanup letter or order constitutes a
?suit.? (See Aetna Cas. & Sur. Co., Inc. v. Pintlar Corp. (9th Cir. 1991) 948 F.2d
1507, 1517; Mich. Millers Mut. Ins. v. Bronson Plat. (Mich. 1994) 519 N.W.2d
864, 872.) Other states take a ?hybrid? approach, holding that an agency?s letter,
order, or precomplaint action is a ?suit? if it is sufficiently coercive and
threatening. (See Mich. Millers, supra, 519 N.W.2d at p. 874, fn. 8 (dis. opn. of
Griffin, J.) [mere notice of alleged contamination does not trigger coverage under
the hybrid test].) Foster-Gardner sided with the jurisdictions taking the third,
? ?literal meaning,? ? approach and held that a ?suit? refers to an actual court

complaint only. (Foster-Gardner, supra, 18 Cal.4th at pp. 869, 879.) This view
emphasized that the insurer has undertaken to defend suits, not mere threats ? ?to
initiate legal action? ? (id. at p. 882) or a ? ?functional equivalent? ? (id. at p. 879).
Foster-Gardner reasoned that the literal meaning approach preserves and
underscores the distinction between a ?suit? and a ?claim,? as the insurer is
required to defend the former but has the discretion to investigate the latter. (Id. at
pp. 878, 880.) Under this literal interpretation, and in the absence of a
corresponding definition within a CGL policy, Foster-Gardner determined that a
?suit? is a proceeding brought in a court of law by the filing of a complaint. (Id. at
p. 878.)
As the Court of Appeal observed, we extended our ? ?bright-line rule? ?
(Foster-Gardner, supra, 18 Cal.4th at p. 887) in Certain Underwriters at Lloyd?s
of London v. Superior Court (2001) 24 Cal.4th 945, 960-961 (Powerine I), to the
insurer?s duty to indemnify the insured under the same standard CGL insurance
policies. Powerine I limited the insurer?s duty to indemnify for all sums the
insured was ? ?legally obligated to pay as damages? ? to sums ordered by a court,
as opposed to expenses required by an agency?s cleanup order. (Id. at p. 951.)
Like policies in Foster-Gardner, the policies in Powerine I used the terms ?suit?
and ?damages? but did not define either. Next, in Powerine Oil Co., Inc. v.
Superior Court (2005) 37 Cal.4th 377 (Powerine II) we emphasized that the
specific language used in the policies is determinative; thus, where the coverage
provisions included the word ?expenses,? as well as ?damages,? the policy
required the insurers to indemnify the insured for cleanup of contaminated sites.
(Id. at pp. 383, 398-405.) We also looked to specific policy language in County of
San Diego v. Ace Property & Casualty Ins. Co. (2005) 37 Cal.4th 406, but reached
the opposite conclusion to find no coverage because the ?literal insuring language?

of the excess/umbrella policies in that case neither referenced nor incorporated the
term ?expenses.? (Id. at p. 411.)
In addition, the Court of Appeal considered two appellate decisions applying
our authority. (Lockheed Martin Corp. v. Continental Ins. Co. (2005) 134
Cal.App.4th 187, 200 [concluding that insuring phrase ? ?any suit or action? ?
referred to a court proceeding, and thus there was no coverage for agency cleanup
orders]; CDM Investors v. Travelers Casualty & Surety Co. (2006) 139
Cal.App.4th 1251, 1263 [insurance clause for ? ?ultimate net loss? ? which the
insured was obligated to pay ? ?as damages? ? (italics omitted) did not provide
coverage for environmental response costs incurred pursuant to an administrative
order because the ? ?as damages? ? phrase limited the duty to court proceedings].)
Applying these cases, the Court of Appeal discussed the coverage issues for
the multiple types of policies the 11 insurers provided to Ameron over the years.
In parts I through IX of the opinion, the Court of Appeal found coverage under
some insurance policies it likened to that in Powerine II, but found no coverage as
to other policies more akin to the Foster-Gardner and Powerine I policies. Of
importance here is part I.A. There, the Court of Appeal considered a primary CGL
policy issued by INA for the years 1988-1989. That policy indemnified Ameron
for ? ?all sums which [Ameron] shall become legally obligated to pay as
damages? ? and provided a defense duty for ? ?any suit against the Insured seeking
damages . . . .? ? The insuring provision also stated the insurer ? ?may make such
investigation and settlement of any claim or suit as it deems expedient, but the
Company shall not be obligated to pay any claim or judgment or to defend any suit
after the applicable limit of the Company?s liability has been exhausted by
payment of judgments or settlements.? ?Suit? and ?claim? are not defined in the
policy.? The Court of Appeal observed that the INA policy language was
substantially the same as the Foster-Gardner and Powerine I policy language.

Although the court held that Foster-Gardner precluded coverage under that INA
policy?s definition of ?suit,? it did so with obvious dissatisfaction. The Court of
Appeal observed that Ameron?s IBCA action?a quasi-judicial administrative
agency board hearing conducted by an administrative law judge?was
significantly different from the environmental cleanup orders of Foster-Gardner
and Powerine I. Indeed, the court found ?much to commend? in Ameron?s
contention that the IBCA hearing is a ?suit.? It also found ?compelling? a similar
distinction embraced in Justice Spencer?s concurring opinion in Fireman?s Fund
Ins. Co. v. Superior Court (1997) 65 Cal.App.4th 1205, opining that ?merely an
investigative administrative proceeding seeking a negotiated settlement and a
consent decree? ?did not qualify as a suit.? (Id. at p. 1222 (conc. opn. of Spencer,
J.).) But ?the common, ordinary meaning of ?suit? is broad enough to cover . . .
adjudicatory administrative hearings . . . .? (Ibid.)
In eventually denying Ameron all coverage under those insurance policies
that did not define the term ?suit,? the Court of Appeal observed that the IBCA
proceeding is trial-like in nature, and that Foster-Gardner?s concerns of
uncertainty are not present where the administrative action is adjudicatory. The
court noted that ?[t]he IBCA proceeding at issue here was, by any measure, an
adjudicative administrative hearing. It was commenced by the filing of a notice
and complaint and was presided over by a judge governed by federal evidence
rules and charged with setting damages for an alleged contract breach.? The court
concluded that because the administrative proceedings in Foster-Gardner involved
a pollution remediation order, it could ?fairly regard its broad rule as dicta when
applied to the very different administrative proceedings in this case.? But the
court observed that ? ? ?[e]ven if properly characterized as dictum, statements of
the Supreme Court should be considered persuasive.? ? ? In sum, the Court of
Appeal concluded that although a contractor like Ameron would reasonably expect

the IBCA litigation to be considered a ?suit? seeking ?damages,? Foster-
Gardner?s bright-line rule compelled the court to interpret the word ?suit? as used
in that policy as limited to a court proceeding.
The Court of Appeal addressed a wide range of insurance policy language
and discussed at length the coverage provisions in each of those policies that were
applicable to the appeal. Ameron?s petition for review, however, focused on the
narrow but fundamental question whether an adjudicative administrative action like
the IBCA action is a ?suit? for purposes of coverage under a liability policy.
Ameron asserts that the rule in Foster-Gardner and its progeny does not apply to the
IBCA action. That action, Ameron claims, is a ?suit? even under Foster-Gardner?s
bright-line rule approach. The specific post-Foster-Gardner question ? whether a
liability policy covers adjudicative administrative hearings like the hearing before
the IBCA under policies that do not specifically define ?suit? or limit the application
of coverage to preclude administrative adjudicative hearings ? is one of first
B. Analysis
1. The Obligation to Defend a Suit
Ameron contends that Foster-Gardner is not applicable here because the
IBCA proceeding was a ?suit? as a reasonable insured would understand the term,
in contrast to the pollution remediation order for which the insured sought
coverage in Foster-Gardner. Ameron points out that the IBCA is a quasi-judicial
administrative agency board, proceedings before which require the filing of notice
and a complaint setting forth ?simple, concise and direct statements of each
claim.? (43 C.F.R. ? 4.107(a) (2009).) During hearings before the IBCA, parties
may subpoena witnesses and introduce evidence; the IBCA swears in witnesses,
and party representatives may cross-examine them; and all evidence is subject to
the ?generally accepted [federal] rules? of admissibility. In addition,

administrative law judges on the IBCA are empowered to grant the same relief
that would be available to a litigant asserting a contract claim in the Court of
Federal Claims. As the United States Supreme Court noted, the role of
the administrative law judge within this framework is comparable to that of a trial
judge. ?[The judge] may issue subpoenas, rule on proffers of evidence, regulate
the course of the hearing, and make or recommend decisions.? (Butz v. Economou
(1978) 438 U.S. 478, 513; see also 5 U.S.C. ? 556(c).)
Therefore, in order to determine whether proceedings before the IBCA are
a ?suit? we must decide if the concerns that led us to conclude that issuance of a
pollution remediation order was not a ?suit? also apply to hearings before a federal
administrative adjudicative body. In conducting this analysis, we compare the
IBCA?s complaint requirements to those of the California Code of Civil
Procedure. We also look briefly both to Congress?s intent in setting up the IBCA,
and to the structure of IBCA proceedings themselves.

2. The IBCA?s Complaint Requirements
It is a ?settled rule that the insurer must look to the facts of the complaint
and extrinsic evidence, if available, to determine whether there is a potential for
coverage under the policy and a corresponding duty to defend.? (Waller, supra,
11 Cal.4th at p. 25.) In Foster-Gardner, the court pointed out that ?[i]t is because
the insurer?s duty to defend depends on the allegations in the complaint that the
insurer may or may not owe a duty to defend those allegations.? (Foster-Gardner,
supra, 18 Cal.4th at p. 880, original italics, citing Waller, supra, 11 Cal.4th at p.
26.) This link between the complaint and an insurer?s duty to provide coverage
was crucial to Foster-Gardner?s holding that the pollution remediation order,
which did not amount to a complaint, provided insurance companies insufficient
notice of the parameters of the action against the insured. (Foster-Gardner, supra,
at p. 880.)

The IBCA complaint requirements distinguish the case from Foster-
Gardner. As noted, the Contract Disputes Act established the IBCA and
authorized it to conduct trials, determine liability, and award money damages. (41
U.S.C. ? 607.) The legislative history shows that Congress intended the IBCA to
serve as an alternative means to resolve contract disputes in an informal,
expeditious, and inexpensive way. (Sen.Rep. No. 95-1118, 2d Sess., pp. 1, 12
(1978), reprinted in 1978 U.S. Code Cong. & Admin. News, p. 5235.) As
previously noted, Congress created ?concurrent jurisdiction? in the United States
Court of Claims (now called the United States Court of Federal Claims) and the
IBCA to review appeals from contracting officers? decisions. (Coco Bros., Inc. v.
Pierce (3d Cir. 1984) 741 F.2d 675, 678; 41 U.S.C. ?? 606, 609(a)(1).) In other
words, Ameron had a choice of forums for appealing the liability decision of the
Bureau?s contracting officer, and it chose the IBCA.
The IBCA procedure at issue here requires the contractor appealing from an
adverse decision by the Bureau?s contracting officer to file a complaint, ?setting
forth simple, concise, and direct statements of each claim, alleging the basis with
appropriate reference to contract provisions for each claim, and the dollar amount
claimed.? (43 C.F.R. ? 4.107(a) (2009).) The complaint requires ?no particular
form or formality,? and it ?shall fulfill the generally recognized requirements of a
complaint.? (Ibid.) Although the contractor thus initiates the IBCA proceeding,
the purpose of the proceeding is to resolve the claim against the contractor, who is
therefore in the position of a defendant. The factual issues are then framed for
adjudication by the pleadings, which consist both of the contractor?s complaint
and the government?s answer. Together, these pleadings serve the purpose
ascribed to the court complaint as described in Foster-Gardner, namely, informing
the insurer of the nature of the dispute so that it can determine its defense duties
under the insurance policy.

In addition, not only does the Code of Federal Regulations call the required
pleading before the IBCA a ?complaint,? but the requirements for that
?complaint? serve the same notice purpose as California?s civil litigation
complaint requirement. (See 43 C.F.R. ? 4.107(a) (2009).) Under the California
Code of Civil Procedure, a complaint must contain a ?statement of the facts
constituting the cause of action, in ordinary and concise language.? (Code. Civ.
Proc., ? 425.10, subd. (a).) This requirement forces parties to give fair notice of
their claims to opposing parties so they can defend. (Doheny Park Terrace
Homeowners Assn., Inc. v. Truck Ins. Exchange (2005) 132 Cal.App.4th 1076,
It is clear that the IBCA pleading requirements meet the standards for a
complaint under our Code of Civil Procedure. The IBCA pleading must ?set[]
forth simple, concise, and direct statements of each claim, alleging the basis with
appropriate reference to contract provisions for each claim. . . .? This level of
specificity gives as much, if not more, notice to insurers making coverage
decisions regarding claims as does the specificity required by our Code of Civil
Procedure. If there were any doubt whether the ?complaint? before the IBCA was
meant to serve the same purpose as a complaint in a court of law, the Code of
Federal Regulations spells it out for us: ?This pleading shall fulfill the generally
recognized requirements of a complaint.? (43 C.F.R. ? 4.107(a) (2009).) It would
exalt form over substance to find such a complaint before the IBCA insufficient
simply because the IBCA is not a court of law, particularly when the basis of the
insurers? position is that they rely on the substantive contents of a complaint in
order to make their coverage decisions.
Respondents rely on the fact that a contractor can choose to access article
III courts (U.S. Const., art. III) directly, by filing an action with the Federal Claims
Court rather than with the IBCA. (Sen.Rep. No. 95-1118, supra, p. 3.)

Respondents claim that this alternative procedure means that Congress intended to
distinguish an action filed with the IBCA from one filed with the Federal Claims
Court. They assert that the ?degree of due process desired? is weighed against
?the time and expense considered appropriate for the case.? In other words,
respondents claim that the contractor that chooses the IBCA as a forum must give
up some of the due process rights that it would have received in a court, such that
the IBCA proceedings stop short of being a ?suit.? Not so. Congress allowed for
these two avenues of review in order to ?cut down the present traffic between the
boards and the courts . . . [to] reduc[e] the points of friction and eliminat[e]
delays.? (Sen.Rep. No. 95-1118, supra, p. 12.) In addition, Congress expected
that agency boards would handle ?better than 90 percent of contract claims,?
?since they should be the least expensive, most expeditious forum available to the
contractor.? (Ibid.) Due process rights are adequately protected in the IBCA
quasi-judicial proceedings. (Id. at p. 13.) With regard to appeals to the IBCA,
Congress states: ?The contractor should feel that he is able to obtain his ?day in
court, . . . and at the same time [save] time and money through the agency board
process. If this is not so, then contractors would elect to go directly to court and
bypass the boards since there would be no advantage in choosing the agency board
route for appeals.? (Id. at p. 25.)
Respondents next assert that language referring to the transfer of ?suits?
between boards like the IBCA and the Federal Claims Court is an anomaly.
Insurers cite language from previous drafts of the Contract Disputes Act where the
word ?suits? in title 41 United States Code section 609(d) referred to transfers
between the federal district court and the Federal Claims Court instead of between
the Federal Claims Court and agency boards, and argue that the word ?suits? is,

essentially, a drafting error.9 The insurers are correct that section 609(d) is
anomalous in referring to the administrative remedy as a ?suit? when the rest of
the statutory scheme consistently characterizes it as an ?appeal.? We note,
however, that in enacting the Contract Disputes Act, Congress completely
redrafted this section, and we are not inclined to, nor are we in a position to, find
that a typographical error appears in the legislation.
3. Reasonable Expectation of Coverage
Under the statutory rules of contract interpretation, any ambiguity in the
policy terms will be construed against the insurer to protect the insured?s
reasonable expectation of coverage. Based on the reference to ?suits? in 41 United
States Code section 609(d) and (e), a reasonable policyholder would believe that a
policy providing coverage for a ?suit? would provide coverage for the IBCA
As the legislative purpose indicates, the IBCA proceeding provides
contractors with their ?day in court.? As noted, this case proceeded in a 22-day
IBCA hearing, in which witnesses testified and were cross-examined. The parties
then decided to mediate, and reached a settlement in which Ameron agreed to pay
the government $10 million. A reasonable policyholder would recognize such
proceedings as a suit and would expect to be defended and, if necessary,
indemnified by its insurer. It is safe to assume that Ameron would not have
proceeded under the IBCA appeals process if it had known that coverage would
not be extended to its $10 million settlement with the government.

Section 609(d) states as follows: ?Consolidation. If two or more suits
arising from one contract are filed in the United States Claims Court [U.S. Ct. of
Federal Claims] and one or more agency boards, for the convenience of parties or
witnesses or in the interest of justice, the United States Claims Court [U.S. Ct. of
Federal Claims] may order the consolidation of such suits in that court or transfer
any suits to or among the agency boards involved.?

Given insurers? reliance on a ?complaint? for coverage determinations,10
and our policy of emphasizing substance over form in characterizing pleadings,11
it is reasonable for all parties to a liability insurance policy that does not define the
term ?suit? to expect a federal adjudicative administrative agency board
proceeding to trigger the defense and indemnity provisions in the policy. Foster-
Gardner notes that ?[a]lthough insureds certainly deserve no less than the benefit
of their bargain, insurers should be held liable for no more,? and its rule 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.? (Foster-
Gardner, supra, 18 Cal.4th at p. 882.) In this case, the agency board proceeding
was not a ?threat? to take legal action; it was an administrative adjudicative action
that dictates our departure from Foster-Gardner?s rule. The duty to defend and
indemnify, if necessary, under the policies was therefore activated by the IBCA
proceedings here.

See page 16, ante (insurers rely on complaint for determining duty to cover
an action against the insured parties).
See page 7, ante, citing AIU, supra, 51 Cal.3d at page 840 (reimbursement
and injunctive relief costs are ? ?damages? ? for insurance coverage purposes,
despite not being within the ordinary definition of ? ?damages? ?).

For the foregoing reasons, we reverse the Court of Appeal judgment, and
remand the matter for proceedings consistent with this decision.



* Associate Justice of the Court of Appeal, First Appellate District, Division
Three, assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.

I concur in the judgment. In Foster-Gardner, Inc. v. National Union Fire
Ins. Co. (1998) 18 Cal.4th 857, a decision signed by four justices, this court used a
? ?literal meaning? approach? in construing the term ?suit? in a standard
comprehensive general liability (CGL) insurance policy that did not define that
term. (Id. at pp. 869-870, 878-880.) Adopting what it termed a ? ?bright-line
rule? ? (id. at p. 887), the Foster-Gardner majority held that as used in a CGL
policy to define the insurer?s duty of defense, ?suit? unambiguously refers only to
court proceedings, and CGL insurers are therefore not obligated to undertake the
defense of their policyholders in responding to an administrative agency?s
pollution remediation order. (Id. at pp. 881-882.) I was among the three
dissenting justices. (Id. at p. 888 (dis. opn. of Kennard, J.).)
When it was decided in 1998, Foster-Gardner represented a distinctly
minority view. (See Governmental Interinsurance Exch. v. City of Angola
(N.D.Ind. 1998) 8 F.Supp.2d 1120, 1130 [? ?The vast majority of courts around
the United States . . . have found that all kinds of coercive administrative actions
are ?suits? covered by general liability insurance policies.? ?].) Since Foster-
Gardner was decided, no sister state court has adopted its ?literal meaning
approach,? or its resulting ?bright-line rule,? in construing the term ?suit? in a
CGL insurance policy, while courts in nine sister states and federal courts
applying the law of two other sister states have rejected that approach, instead
adopting either the ?functional equivalent? approach or the ?hybrid? approach that
the Foster-Gardner majority rejected. (Compass Ins. Co. v. City of Littleton

(Colo. 1999) 984 P.2d 606, 622; R.T. Vanderbilt Co., Inc. v. Continental Casualty
Co. (Conn. 2005) 870 A.2d 1048, 1058; Travelers Indem. Co. v. Summit Corp. of
America (Ind.App. 1999) 715 N.E.2d 926, 934; Aetna Cas. & Sur. Co. v. Com.
(Ky. 2005) 179 S.W.3d 830, 837-838; Dutton-Lainson Co. v. Continental Ins. Co.
(Neb. 2010) 778 N.W.2d 433, 446-449; Carpentier v. Hanover Ins. Co. (N.Y.A.D.
1998) 670 N.Y.S.2d 540, 542; Schnitzer Invest. Corp. v. Certain Underwriters at
Lloyd?s of London (Or.App. 2005) 104 P.3d 1162, 1168-1169; State v. CNA Ins.
Companies (Vt. 2001) 779 A.2d 662, 667; Johnson Controls v. Employers Ins. of
Wausau (Wis. 2003) 665 N.W.2d 257; Briggs & Stratton Corp. v. Royal Globe
Ins. Co. (M.D. Ga. 1999) 64 F.Supp.2d 1340, 1345 [applying Ga. law]; Pacific
Employers Insurance Co. v. Servco Pacific Inc. (D. Hawaii 2003) 273 F.Supp.2d
1149, 1156 [applying Hawaii law].) Thus, over the past 12 years, it has become
increasingly apparent that Foster-Gardner lies far outside the mainstream of
American insurance law.
Here, the court limits Foster-Gardner?s ?bright-line rule? by holding that it
does not apply to administrative agency adjudicative proceedings. The court
reaches this result by concluding that the word ?suit,? when used in a CGL policy
that does not define that word, is sufficiently ambiguous that it should be
construed to protect the insured?s reasonable expectation of coverage. (See maj.
opn., ante, at p. 18.) In so doing, the court implicitly rejects Foster-Gardner?s
reasoning that ?suit? unambiguously refers only to court proceedings. (Foster-
Gardner, supra, 18 Cal.4th at pp. 878-879.) Although I would prefer that Foster-
Gardner be overruled, the decision here is at least a step in the right direction.

See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Ameron Internat. Corporation v. Insurance Company of the State of Pennsylvania

Unpublished Opinion

Original Appeal
Original Proceeding
Review Granted
XXX 150 Cal.App.4th 1050
Rehearing Granted


Opinion No.

Date Filed: November 18, 2010


County: San Francisco
Judge: Ellen Chaitin



Stanzler Funderburk & Castellon and Jordan S. Stanzler for Plaintiff and Appellant.

Weston, Benshoof, Rochefort, Rubalcava & MacCuish and Richard Giller for The California Cast Metals
Association as Amicus Curiae on behalf of Plaintiff and Appellant.

McCurdy & Fuller, Kevin G. McGurdy and Rosemary J. Springer for Defendant and Respondent Insurance
Company of the State of Pennsylvania.

Hinshaw & Culbertson, Robert J. Romero, Paul E. Vallone and Joseph J. De Hope, Jr., for Defendants and
Respondents Century Indemnity Company, Insurance Company of North America, Pacific Employers
Insurance Company, St. Paul Surplus Lines Insurance Company, Insurance Company of the State of
Pennsylvania, Harbor Insurance Company and Transcontinental Insurance Company..

Charlston, Revich & Chamberlin, Charlston, Revich & Wollitz, Ira Revich and Nicholas R. Andrea for
Defendants and Respondents International Insurance Company and Puritan Insurance Company.

Burnham Brown, Thomas M. Downey, Tyler G. Olpin and James Y. Higa for Defendants and Respondents
Transcontinental Insurance Company and Harbor Insurance Company.

Ericksen, Arbuthnot, Kilduff, Day & Lindstrom and Andrew P. Sclar for Defendant and Respondent Old
Republic Insurance Company.

Hogan & Hartson, David R. Singer, Jonathan S. Franklin, William J. Bowman and Catherine E. Stetson for
Defendant and Respondent Twin City Fire Insurance Company.

Sonnenschein Nath & Rosenthal, Michael A. Barnes, Sonia Martin and Lee L. Kaster for Defendant and
Respondent Great American Surplus Lines Insurance Company.

O?Melveny & Myers, Richard B. Goetz and A. Patricia Klemic for Defendants and Respondents Insurance
Company of North America and Pacific Employers Insurance Company.

Page 2 ? S153852 – counsel continued


Foley & Lardner, Eileen R. Ridley and Patrick T. Wong for Lloyd?s and The Reinsurance Association of
America as Amici Curiae on behalf of Defendants and Respondents.

Wiley Rein, Laura A. Foggan; Sinnott, Dito, Moura & Puebla, Randolph P. Sinnott and John J. Moura for
Complex Insurance Claims Litigation Association as Amicus Curiae on behalf of Defendants and

Sinnott, Dito, Moura & Puebla, Blaise S. Curet and Stephen R. Wong for Zurich American Insurance
Company as Amicus Curiae on behalf of Defendants and Respondents.

Counsel who argued in Supreme Court (not intended for publication with opinion):

Jordan S. Stanzler
Stanzler Funderburk & Castellon
2275 E. Bayshore Rd., Suite 100
Palo Alto, CA 94303
(650) 739-0200

Richard B. Goetz
O?Melveny & Myers
400 South Hope Street
Los Angeles, CA 90071-2899
(213) 430-6000