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Morrow Corp. v. Harleysville Mut. Ins. Co.

ELR Citation: 31 ELR 20091
Nos. No. Civ.A. 99-1782-A, 110 F. Supp. 2d 441/(E.D. Va., 08/24/2000) Aff'd that one insurer has duty to defend

The court holds that under Virginia law, an insurer has a duty to defend operators of a dry cleaning business from a suit seeking to hold the operators liable for soil and groundwater contamination. The insurer issued a comprehensive general liability policy to the operators for the period of 1991 to 1995, and the policy stated that a covered pollution occurrence arises when property damage first manifests itself. Because the contamination was discovered in 1996, the insurer argued that 1996 is the date that the contamination manifested itself thereby excusing the insurer from the duty to defend under the 1991 to 1995 policies.

The court first holds that the plain meaning of the term manifest means discoverable or subject to being discovered by reasonable means, not actually discovered or perceived. With respect to contamination in soil or groundwater, contamination manifests itself when it reaches a detectable and legally significant level in soil or groundwater. Therefore, although the contamination at issue was not actually known or discovered by the operators until 1996, it may have manifested itself—that is, it may have been discoverable through reasonable testing—during the effective terms of the insurer's policies. The court next holds that the insurers must receive the benefit of the doubt if there is any uncertainty over the extent of the coverage or the reach of any exclusions. Therefore, even though the insurer argued that the term manifest is ambiguous because it can mean both discoverable and discovered, the policies must be construed to provide coverage when property damage becomes discoverable. The court then holds that the insurer has a duty to defend the operators because the complaint against the operators leaves open the possibility that the contamination first manifested itself during the period that the policies were in effect. However, when the property damage actually first manifested itself—that is when it became reasonably detectable in the soil—is a question of fact, which will have to be resolved at the duty to indemnify stage.

The full text of this decision is available from ELR (16 pp., ELR Order No. L-263).

[The district court's decision in this litigation is published at 30 ELR 20657.]

Counsel for Plaintiffs
Michael O. Hill
Collier, Shannon, Rill & Scott
3050 K St. NW, Ste. 400, Washington DC 20007
(202) 342-8400

Counsel for Defendants
Edward H. Grove III
Brault, Palmer, Grove, Zimmerman, White & Mims
10533 Main St., Fairfax VA 22030
(703) 273-6400

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