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TBG, Inc. v. Commercial Union Ins. Co.

Citation: 23 ELR 20489
No. No. C 89-2374 FMS, 806 F. Supp. 1444/(N.D. Cal., 06/04/1990)

The court holds that under California law, environmental response costs for actions taken by the U.S. Environmental Protection Agency (EPA) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) constitute "damages" within the meaning of a comprehensive general liability insurance policy, and coverage was triggered each time materials containing hazardous substances were released onto the site. The California Civil Code defines "damages" as compensation in money for detriment caused by an unlawful act or omission. Each of these elements — compensation, detriment, and an unlawful act — is present in this case. The expenditure of cleanup costs is in the nature of compensation to the government and to the people of California for damage done to the environment. As California court decisions have emphasized, the terms of the insurance policy itself and the reasonable expectations of the insured as to the meanings of those terms are key in determining whether environmental response costs are insured under a general liability policy. The terms of the policies provide coverage for any expenses that must be paid as damages, and it is reasonable to expect that response costs incurred as a result of CERCLA liability would fall into the area of coverage. The court rejects the argument that coverage is precluded because polychlorinated biphenyls (PCBs) released onto the site have not yet caused any "damage." The contamination of property with toxic materials causes immediate and tangible damage to the water and air supply of the state, which is the property of the public, and poses an immediate and continuing threat to the public welfare. Next, the court concludes that there is no single theory of when coverage is triggered that is universally applicable in comprehensive general liability policies. The critical issue in determining whether coverage was triggered is whether there was an occurrence that caused property damage during the policy period. Relying on the exposure theory, the court holds that each time a release of materials containing PCBs occurred at the site, coverage under the policies was triggered.

Counsel for Plaintiff
Fredric W. Yerman
Kaye, Scholer, Fierman, Hays & Handler
425 Park Ave., New York NY 10022
(212) 836-8000

Paul A. Zevnik, Michel Y. Horton
Kaye, Scholer, Fierman, Hays & Handler
Fox Plaza, 2121 Avenue of the Stars, 21st Fl., Los Angeles CA 90067
(213) 552-6400

Counsel for Defendant
Jeffrey N. Haney, Mark L. Nissenbaum
Bishop, Barry, Howe, Haney & Ryder
Merchants Exchange Bldg.
465 California St., 11th Fl., San Francisco CA 94104
(415) 421-8550