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Gloucester, Township of v. Maryland Casualty Co.

ELR Citation: 18 ELR 20084
Nos. No. 83-4616 (SSB), 668 F. Supp. 394/26 ERC 1446/(D.N.J., 08/19/1987)

The court holds that insurance companies must indemnify the township of Gloucester for cleanup and closure costs at the township's landfill under the terms of a comprehensive general liability policy, but not for fines and penalties assessed against the township for violations of state environmental regulations. The court first holds that the cleanup and closure costs incurred by the township pursuant to an order issued by the New Jersey Department of Environmental Protection (DEP) constitute "damages" under the insurance policy. The court rejects the equitable relief/damages distinction as it applies to cleanup orders at hazardous waste sites. Although the policy excludes coverage for damage to the township's property, the township's complaint alleges groundwater contamination for a third party's property. The costs of compliance with DEP's cleanup order cannot be segregated into categories for on- and off-site damages. The court holds the cleanup and closure costs do not fall within the policy's exclusion for damage to property owned by the insured. Although the money will be spent in part to repair the insured's property, the repairs are covered by the policy because they will be an element of a comprehensive cleanup designed to remedy and prevent damage to a third party's property. The court holds that the groundwater contamination was an "occurrence" under the policy. The court holds that the insurance companies are not required to indemnify the township for fines and penalties assessed by the DEP for violations of state environmental regulations, since fines and penalties are not "damages" under the policy. The court holds that one insurance company is not liable for indemnification because an "occurrence" did not take place within the policy period. The township knew of the toxic contamination prior to the term of this policy.

Counsel for Plaintiff
Robert V. Paschon, Richard L. Costanzo
Paschon, Feurey & Rosetto
1005 Hooper Ave., Toms River NJ 08753-8381
(201) 341-3900

Counsel for Defendant
Francis K. Kearney
Maryland Casualty Insurance
3910 Keswick Rd., Baltimore MD 21211
(301) 366-1000