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Mraz v. Canadian Universal Ins. Co.

Citation: 17 ELR 20372
No. No. 85-2399, 804 F.2d 1325/25 ERC 1193/(4th Cir., 11/04/1986) Rev'd

The court holds that an insurance company does not have a duty to defend the insureds, who are defendants in a cost recovery action under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), because there was no occurrence during the insurance policy period, there was no property damage within the meaning of the insurance policy, and the insureds previously released the insurance company from liability. Turning first to whether there was an occurrence during the policy period, the court rules that leakage of hazardous substances that results in property damage is an occurrence within the meaning of the insurance policy when the leakage and damage are first discovered. The court holds that since the CERCLA suit does not seek recovery from the insureds for hazardous substance releases discovered during the policy period, the insurer has no duty to defend the insureds for these claims.

The court next holds that the CERCLA § 107 cost recovery suit against the insureds is not a suit for property damage, but that the property damage it alleges is merely a factual predicate to the CERCLA cost recovery claim. The court distinguishes CERCLA response costs from damage to natural resources under CERCLA and the insurance policy's requirement that there be damage to tangible property. Finally, the court also holds a provision in the settlement of a prior lawsuit involving these parties released the insurance company from liability for any future claims.

One judge concurs in the finding that the insureds had previously released the insurance company from liability under the policy, but would decline to reach the other issues raised in the opinion.

[The district court opinion is published at 15 ELR 21025.]

Counsel for Appellees
Robert Faron
Barnett & Alagia
Suite 600, 1000 Thomas Jefferson St. NW, Washington DC 20007
(202) 342-0342

Counsel for Appellant
Hartman J. Miller
Rollins, Smaekin, Richards & Mackie
401 N. Charles St., Baltimore MD 21201
(301) 727-2443

Before ERVIN, CHAPMAN and WILKINSON, Circuit Judges.