It is now well understood in the legal and business communities that environmental statutes may impose liability on current owners of contaminated property without regard to the fact that the environmental damage may have resulted from activities of prior occupants that predated the current owner's acquisition of the site.¹ A business that acquires a contaminated property and consequently inherits such liability may attempt to recover under its occurrence-based comprehensive general liability (CGL) policies that were in effect during the time that pollution occurred but that expired before the insured acquired the property. Such policies are called pre-acquisition policies because the policies expired prior to the policyholder's acquisition of the contaminated site. Until recently, the few reported judicial decisions on point held that pre-acquisition policies did not provide coverage for a policyholder subject to liability for environmental pollution occurring during the effective policy period.² The U.S. Court of Appeals for the Ninth Circuit, however, dramatically altered the field by issuing K.F. Dairies, Inc. & Affiliates v. Fireman's Fund Insurance Co.,³ which applied California law to decide, in express contravention of California appellate precedent, that the plain language of the CGL policy at issue did not condition coverage on the existence of a connection between the insured and the contaminated property during the policy period.⁴ Although the California Court of Appeals subsequently issued a decision disagreeing with K.F. Dairies,⁵ the Supreme Court of Washington later embraced K.F. Dairies, becoming the first state high court to decide the pre-acquisition issue in favor of coverage.⁶

This Dialogue analyzes the policyholder's pro-coverage arguments and the insurance carrier's typical response to those arguments. The Dialogue first examines pre-acquisition policies generally, focusing on the coverage extended by the plain language of the policies as well as the factors that trigger coverage. The Dialogue then analyzes the arguments carriers have asserted to deny coverage. Lastly, the Dialogue explores the policyholder's arguments for coverage under pre-acquisition policies, paying particular attention to the policy language and to interpreting its arguable ambiguities. Upon weighing both the policyholders' and the carriers' viewpoints, this Dialogue concludes that pre-acquisition policies, by their language and purpose, ought to cover an insured who is liable for environmental harm resulting from occurrences during the policy period.