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Maryland Casualty Co. v. Armco, Inc.

Citation: 17 ELR 21277
No. No. 86-3125, 822 F.2d 1348/26 ERC 1281/(4th Cir., 07/06/1987) Aff'd

The court holds that the costs of compliance with cleanup orders and reimbursement for Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) response costs are not "damages" within the meaning of a general comprehensive liability insurance policy. Noting that for insurance purposes "damages" includes only payments to third persons with a legal claim for damages, the court holds that injunctive relief and response costs under CERCLA §§ 106 and 107 are equitable relief rather than "damages" in the legal sense. It is irrelevant that the action for § 107 response costs might be described as one of quasi-contract and hence an action at law, not equity, since the insurance contract focuses on the relief sought rather than on the [17 ELR 21278] nature of the underlying cause of action. Moreover, the measure of response costs could be different than the measure of natural resource damages, so there is a distinction between the two forms of action. In addition, insurance contracts reimburse only for actual injuries, rather than harm-avoidance measures, and remedial action is an effort to avoid future harm to public health and the environment.

The duty to defend is coterminous with the duty to reimburse for damages, so the insurance company has no obligation to defend the insured from the government's CERCLA suit. The court also holds that costs of mitigation, even though they may avoid later higher amounts that would be reimbursable under the insurance contract, are not themselves reimbursable. Finally, a special master's vacated recommendations on insurance availability in this case are not a final judgment, and hence not available for res judicata or collateral estoppel.

[The lower court opinion is published at 17 ELR 20143. Other opinions regarding this hazardous waste site are at 12 ELR 20238; 14 ELR 20207, 20809; 16 ELR 20193; and 17 ELR 20158, 20167.]

Counsel for Defendant-Appellant
Benjamin Rosenberg
Venable, Baetjer & Howard
1800 Mercantile Bank & Trust Bldg., 2 Hopkins Plaza, Baltimore MD 21201
(301) 244-7400

Counsel for Plaintiff-Appellee
Thomas W. Brunner
Piper & Marbury
888 16th St. NW, Washington DC 20006
(202) 785-8150

Before WIDENER, SPROUSE, and CHAPMAN, Circuit Judges.