Insurers Win

In a move expected to increase costs to businesses, the California Supreme Court ruled that insurers do not have to defend their policyholders from government orders and other administrative proceedings that fall short of a lawsuit.

The case stemmed from a pesticide company’s battle with county and state environmental officials over DDT and other toxins found on its Coachella site. The fight culminated in a 1992 order from the California Environmental Protection Agency, demanding that Foster-Gardner Inc. prepare and implement a remedial plan or face fines of $25,000 a day. Foster-Gardner filed suit against four companies that insured it between 1980 and 1992, saying the insurers failed to adequately fund its defense against the order.

All the companies’ policies required the insurers to defend Foster-Gardner against a “suit,” but allowed them discretion to investigate and settle a “claim.” Foster-Gardner contended that the government’s order constituted a suit, but the Supreme Court, in a 4-3 decision, disagreed.

“While we agree that it is in everyone’s best interests to have hazardous wastes cleaned up, we do not agree that a California court may rewrite an insurance policy for that purpose,” wrote Justice Janice R. Brown.

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Times staff writer Liz Pulliam, who covers personal finance, banking and insurance, can be reached at liz.pulliam@latimes.com.