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Continental Ins. Cos. v. Northeastern Pharmaceutical & Chem. Co.

Citation: 17 ELR 20616
No. No. 85-1940, 811 F.2d 1180/25 ERC 1521/(8th Cir., 01/22/1987) Aff'd in part, rev'd in part

The court holds that cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) that were incurred after the expiration of an insurance policy are recoverable under the policy where disposal and environmental contamination took place during the policy period. The court holds that CERCLA cleanup costs incurred by state and federal governments constitute "property damage" under the comprehensive general liability policy. The court rejects the insurance company's argument that only the owners of land on which hazardous wastes are improperly disposed sustain "property damage." The existence of state and federal government property interests in natural resources has been recognized by the Supreme Court, as well as by a wide array of cases and statutes. The court also rejects the argument that while a government may be able to recover under the policy for any diminution in value of natural resources under CERCLA § 107(a)(4)(C), cleanup costs themselves are not recoverable. The court holds that actions for cleanup costs under §§ 107(a)(4)(A) and (B) are also actions for property damage within the meaning of the policies. Further, the language of the policy suggests that once there is property damage, any sums that the insured becomes obligated to pay as a result are recoverable. The court next holds that there was an "occurrence" of property damage even though the cleanup costs were not incurred until after the policies expired. The court finds that Missouri courts would adopt the majority view that environmental damage occurs when hazardous wastes are improperly released and that a policy in effect at that time provides coverage for subsequently incurred cleanup costs.

Applying these principles, the court holds that the property damage proved in the federal government's cost recovery action occurred during the period when the first insurance policy was in effect and that the insurance company may also be liable for the continuing spread of the damage at the Denny Farm site. The court holds, however, that the insurer is not liable to defend or indemnify its insured for liability arising from a suit seeking to recover cleanup costs at the Minker/Stout/Romaine Creek site, which was contaminated after the policies had expired.

One judge, dissenting in part, would hold that the insurer has no obligation to pay cleanup costs because they constitute equitable monetary relief, not legal damages.

[The district court decision is published at 15 ELR 20756. Related decisions appear at 13 ELR 20992, 14 ELR 20212, 15 ELR 20161, and 17 ELR 20604.]

Counsel for Appellant
William L. Webster, Attorney General
P.O. Box 899, Jefferson City, MO 65102
(314) 751-3321

Counsel for Appellee
Gary R. Long
Shughart, Thomson & Kilroy
12 Wyandotte Plaza, 120 W. 12th St., Kansas City MO 64105
(816) 421-3355

Thomas W. Brunner
Piper & Marbury
888 16th St. NW, Washington DC 20006
(202) 785-8150

Before HEANEY and McMILLIAN, Circuit Judges, and MURPHY,* District Judge.