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

ELR Citation: 18 ELR 20819
Nos. No. 85-1940, 842 F.2d 977/27 ERC 1233/(8th Cir., 02/26/1988) Reh'g en banc

The court holds that the term "damages" in the standard comprehensive general liability policy does not include cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Resource Conservation and Recovery Act (RCRA). This is a rehearing en banc of a prior decision by a panel of the Eighth Circuit, which held that cleanup costs at the Denney farm site in Missouri were compensable damages under the insurance policy language. The court first holds that the issue of what are "damages" under the policy is properly before the court because it was expressly raised by an amicus curiae in its initial brief, responded to by a party in its reply brief, was discussed in the panel opinion, and the issue is one of substantial importance to the insurance market and the public. The court next holds that it must apply Missouri law in interpreting the insurance contract.

The term "damages" is not ambiguous in the insurance context. Its plain meaning in the comprehensive general liability policies refers to legal damages and does not cover cleanup costs. Although a lay insured may reasonably view the term "damages" as including all monetary claims, regardless of how described, the term has a special, more limited meaning in the insurance context that excludes claims for equitable relief. Moreover, the policy provides that the insurer agrees to pay "all sums which the insured shall become legally obligated to pay as damages"; if "damages" were read expansively, "all sums" would become virtually meaningless and "damages" would be surplusage. Courts have traditionally found no insurance coverage for the cost of complying with an injunction. Moreover, CERCLA distinguishes between cleanup costs and damages for injury to natural resources. Recovery of cleanup costs under CERCLA and RCRA is essentially an equitable action for monetary relief in the form of restitution or reimbursement of costs.

A minority opinion would hold that CERCLA cleanup costs are "damages" under the comprehensive general liability insurance policy.

[Related opinions appear at 13 ELR 20992; 14 ELR 20212; 15 ELR 20756; and 17 ELR 20603, 20616; and related pleadings are digested at ELR PEND. LIT. 65853.]

Counsel for Appellant
Shelly A. Woods, Attorney General
Supreme Court Bldg., P.O. Box 899, Jefferson City MO 65102
(314) 751-3321

Counsel for Appellee
Gary R. Long
Shook, Hardy & Bacon
1201 Baltimore, Kansas City MO 64105
(816) 474-6550

Before LAY, HEANEY, ROSS,[*] McMILLIAN, FAGG, BOWMAN, WOLLMAN, and MAGILL, Circuit Judges, en banc.