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Harleysville Mut. Ins. Co. v. Sussex County

ELR Citation: 24 ELR 20296
Nos. Nos. 92-144-RRM et al., 831 F. Supp. 1111/(D. Del., 08/27/1993)

The court holds that two insurance companies have no duty to defend or indemnify a Delaware county for future costs resulting from the U.S. Environmental Protection Agency's (EPA's) administrative proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) addressing groundwater contamination at a county landfill. The county operated the solid waste landfill from 1970 until 1979, when it opened a transfer station on the site. The county carried insurance policies from various companies between 1970 and 1992. The county became aware as early as 1980 that leachate from the landfill was causing groundwater contamination, but it did not discover that nearby residential wells were contaminated until 1989. EPA placed the landfill on the national priorities list in 1989, notified the county of its potential liability under CERCLA in 1990, and entered into an administrative consent order with the county the following year. The county requested each of its insurers to defend it against EPA's proceedings under CERCLA to investigate and control the release or threatened release of hazardous substances, pollutants, or contaminants from the landfill site.

Applying Delaware law, the court first holds that the pollution exclusion clauses contained in two of the county's policies, which preclude coverage of discharges that are not "sudden and accidental," bar coverage for the county, because the discharges were not "unexpected and unintended." The county had knowledge before these policies were issued that the landfill was discharging leachate. Thus, the insurers have no duty to indemnify the county for liability it may incur as a result of EPA's CERCLA proceedings. The court rejects the county's attempt to distinguish, for the purposes of applying the pollution exclusion clause, discharges of benzene and other volatile organic compounds, of which the county had no knowledge prior to purchasing the policies. The court finds the fact that the county prohibited direct disposal of chemical wastes in the landfill to be irrelevant.

Turning to the third insurance company, the court holds that summary judgment on the issue of its duty to indemnify the county is not proper, because issues of material fact exist on all of the insurer's claims. The court first rejects the claim that the county's environmental cleanup costs are mere economic losses and do not constitute third-party property damage within the meaning of the comprehensive general liability policy. The insured does not have to allege that it suffered property damage; coverage may be triggered when the insured incurs costs because of property damage. Applying the "continuous trigger" theory of coverage, the court holds that there are factual issues regarding whether the leachate migration began during or after the period covered by the policies. Although the contamination of neighboring wells was not discovered until 1989, it is impossible to pinpoint the time that the property damage from the leaching of pollutants occurred. The court then rejects the insurer's argument that since the county expected to discharge waste, the pollution exclusion clauses apply, because disposal of wastes at a landfill does not bar coverage as a matter of law. The court also holds there are genuine issues of material fact as to whether the county intended to discharge leachate from the landfill prior to 1980 and whether the pollution clause's "sudden and accidental" exemption applies. The insurer has failed to establish conclusively that when the county purchased its policies, there was a substantial probability that operating the landfill would result in off-site property damage.

The court also denies the third insurance company's motion to certify a question of law to the Delaware Supreme Court, because doing so would delay the trial, thus hindering the purposes of the Civil Justice Reform Act of 1990, which was intended to expedite court actions. Finally, the court holds that none of the insurers has a duty to defend the county in EPA's administrative proceedings under CERCLA, because EPA's potentially responsible party letters do not constitute a "suit" within the meaning of the county's insurance policies. The meaning of "suit" is not ambiguous, and the court will not hold the insurers responsible for coverage broader than that bargained for, regardless of the proceedings' potentially serious consequences.

Counsel for Plaintiff
Daniel L. McKenty, Keith E. Donovan
Swartz, Campbell & Detweiler
300 Delaware Ave., Ste. 818, P.O. Box 330, Wilmington DE 19899
(302) 656-5935

Counsel for Defendant
Richard E. Poole, Gregory A. Inskip
Potter, Anderson & Corroon
350 Delaware Trust Bldg.
P.O. Box 951, Wilmington DE 19899
(302) 658-6771