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Aetna Casualty & Sur. Co. v. Pintlar Corp.

ELR Citation: 22 ELR 20134
Nos. Nos. 89-35286, -35287, 948 F.2d 1507/34 ERC 1604/(9th Cir., 11/07/1991, 12/30/1991)

The court holds that insurance companies have a duty to defend an insured chemical company under its comprehensive general liability (CGL) policies against claims by the U.S. Environmental Protection Agency (EPA) for response costs and natural resource damages under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and that the term "damages" in the policies includes CERCLA response costs related to property damage. EPA notified the insured that it was a potentially responsible party (PRP) in connection with the contamination of a 21-square-mile site in northern Idaho where the company owned and operated mining and smelting facilities until 1982. The court first holds that the term "damages" in the policies includes response costs under CERCLA §107(a)(4)(A), because dictionary definitions indicate that in the lexicon of the ordinary person, the plain meaning of the term includes response costs. If an insurer intends the term to be construed to exclude such coverage, it should indicate that in the policy. The court next holds that CERCLA response costs are sums sought "because of . . . property damage" as that term is used in the policies. Although the policies exclude coverage for property damage to property owned or occupied by the insured, the government also sustained "property dmage" to its quasi-sovereign interest in environmental resources. Further, most courts that have dealt with the issue have rejected the theory that response cost claims merely seek to recover economic loss to the Superfund. Additionally, the ordinary person would find that the environmental contamination alleged by EPA falls within the plain meaning of "property damage" as that term is used in the policies. The court holds that a genuine issue of material fact exists as to whether the CGL policies provide coverage for government natural resource damage claims allowable under CERCLA §107(f)(1), and remands this issue to the district court. Finally, the court holds that EPA's administrative claims against the insured trigger the insurers' duty to defend under the CGL policies, because an ordinary person would believe that the receipt of a PRP notice is the effective commencement of a suit necessitating a legal defense. The notice forced the insured to hire technical experts and lawyers to protect its interests in connection with EPA's actions. Further, if the receipt of a PRP notice is held not to trigger the duty to defend under CGL policies, then insureds might be inhibited from cooperating with EPA in order to invite the filing of a formal complaint.

[The district court's decision is published at 19 ELR 21063.]

Counsel for Defendants-Appellants
Stephen W. Greiner, Richard Mancino, Melissa A. Robertson
Wilkie Farr & Gallagher
1 Citicorp Ctr., 153 E. 53rd St., New York, NY 10022
(212) 935-8000

Fred M. Gibler, Charles L.A. Cox
Evans, Keane, Koontz, Boyd, Simko & Ripley
111 Main St., P.O. Box 659, Kellogg ID 83837
(208) 784-1105

Counsel for Plaintiffs-Appellees
R.B. Kading Jr., Warren E. Jones, Scott D. Hess
Eberle, Berlin, Kading, Turnbow & Gillespie
300 N. 6th St., P.O. Box 1368, Boise ID 83701
(208) 344-8535

Robert T. Wetherell
Quane, Smith, Howard & Hull
W. One Plaza, 16th Fl., P.O. Box 519, Boise ID 83701
(208) 345-0960