Compass Ins. Co. v. Littleton, City of
Citation: 29 ELR 21349
No. No. 96SC852, 984 P.2d 606/48 ERC 2058/(Colo., 06/28/1999)
The court holds that insurers have a duty to defend two cities that disposed of sewage sludge at a landfill that became a Comprehensive Environmental Response, Compensation, and Liability Act (CER-CLA) site. The court first holds that the sudden and accidental exception to the pollution exclusion clause in the cities' insurance policies applies and restores the cities' liability coverage. The phrase "discharge, dispersal, release, or escape" in the pollution exclusion clause to the cities' insurance policies does not apply to the cities' initial placement of waste in a containment area such as the landfill. In addition, the phrase "sudden and accidental" means unexpected and unintended, and the potentially responsible party (PRP) letters that initiated the CERCLA response action did not allege that the cities expected or intended the release of hazardous substances from the landfill.
The court next holds that the joint venture exclusion in some of the cities' insurance policies does not apply to bar coverage. Because the term "profits" as used in state law to define a necessary element of a joint venture is ambiguous, the term "joint venture" as used in the insurance contracts is also ambiguous. The court, however, construes "joint venture" as used in the policies to exclude an entity formed for the limited purpose of providing more efficient municipal services. Therefore, the cities, which jointly operated a plant for disposal of its municipal waste, were not a joint venture.
The court then holds that U.S. Environmental Protection Agency's actions under CERCLA constitute suits, and thereby trigger the insurers duty to defend. Under the policies, the insurers have the right and duty to defend any suit against the cities, and the term "suit" encompasses not only suits filed in court but also coercive administrative actions such as those initiated by CERCLA PRP letters. The court last holds that government-mandated CERCLA response or cleanup costs constitute damages under the policies.
Counsel for Petitioners
Scott R. Cook
Cook & Fitch
7887 E. Belleview Ave., Ste. 375, Englewood CO 80111
Counsel for Respondents
Daniel L. Brotzman
Law Offices of Daniel L. Brotzman
1629 York St., Denver CO 80206
Before Mullarkey, Scott, Hobbs, Martinez, and Rice, JJ.