SITE INFORMATION AND CORRESPONDENCE

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Karen Kaika August 7, 1996 Page 10 For example, in Columbia Southern Chemical Corp. v. Manufacturers and Wholesalers Indemnity Exchange (1961) 190 Ca1.App.2d 194, the court held the duty to defend includes the duty to investigate the nature and extent of the damages or injuries alleged by a third party claimant. California courts have also recently addressed the issue in the context of an environmental claim. County of Santa Clara v. U.S. Fidelity and Guarantee Company (N.D. Cal. 1993) 993 U.S. Dist.; Lexis, 19019, the court held that the insurer's duty to defend the insured against an underlying remedial action order issued by the California EPA included the duty to pay for the cost of investigating the nature and extent of the site contamination. The Southern District of California recently followed the County of Santa Clara holding that the insurer had to pay costs reasonably related to site investigation as part of the insurer's duty.to defend the insured against the underlying corrective action order issued to the insured by the County Department of Environmental Health Services. Sou west Coaches Inc. v. American. NAT Rre Ins. Company No, 94-1563 J (S,D. Cal. March 27, 1995). Courts outside of California have also held that insurers must pay for site investigation expenses, including expenses associated with developing proposed site remediation alternatives as part of the insurer's duty to defend the administrative proceedings. Fireman's Fund Insurance Company v Ex-Cello Corp (E.P. Mich. 1992) 790 F.Supp. 1318, 1321; 1333-1339; Fireman's Fund Insurance Company v. x-Cello Corp.orp. (E.P. Mich. 1992) 790 F.Supp. 1344-45 (subsequent opinion); United States Aviex Co. v. Traveler's Insurance Company (1983) 125 Mich.App. 579, 585, 336 N.W.2d 838. In Ex-Cello Corp., the District Court stated "defense costs include not only those reasonable and necessary to defeat or limit liability, but also those costs, including consulting fees, that are reasonable and necessary to limit the scope and/or costs of remediation, even if similar or identical studies have been ordered by the government." 79 F.Supp. at 1321. In a subsequent opinion, the Ex-Cello Corp. court held attorneys' fees related to hydrogeological studies performed to determine the nature and extent of the contamination and/or limit the scope and cost of the remediation were also payable by the insurers as part of their duty to defend. 790 F.Supp. at 1344-1345. Accordingly, insurers are liable to pay expenses and attorneys' fees associated with investigating the nature, extent and source of the contamination of the site, including the fees and costs that are incurred in seeking to limit the scope of and the cost of remediating the site. CT iTT •J C 1WTnnCCW . I1naCW LIHTIITM 1J•OT OC.. /R 9RH