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Gerrish Corp. v. Universal Underwriters Ins. Co.

ELR Citation: 22 ELR 20241
Nos. No. 91-7008, 947 F.2d 1023/34 ERC 1464/(2d Cir., 10/30/1991)

The court holds that an insurance policy, as amended by the insurer's agent to negate the policy's pollution exclusions, provides coverage of state claims for environmental cleanup costs. Although the original policy language excluded coverage of such claims, the court holds that the insurer implicitly empowered the agent to alter the policy to provide coverage for the claims. Construing general agency principles, the court notes that the insurer signed a broad authorization empowering the agent, an insurance rating organization that provides drafting and filing services for its members, to act on the insurer's behalf. Further, an internal memorandum demonstrates that the insurer was aware that the agent had received state approval of a new endorsement allowing coverage for pollution incidents in all policies held by the agents' members. The insurer failed to opt out of the endorsement and accepted premiums for the amended policy. The court holds that the state's environmental response costs are within the plain meaning of "damages" under the policy, and any ambiguities must be construed in favor of the insured under Vermont law. The court also holds that the policy does not exclude the insurer's liability for costs of abating seepage to neighboring property.

Counsel for Appellant
Karen McAndrew
Dinse, Erdmann & Clapp
209 Battery St., P.O. Box 988, Burlington VT 05402
(802) 864-5751

Counsel for Appellee
Robert E. Manchester, Patricia S. Orr
Manchester Law Offices
1 Lawson La., P.O. Box 1459, Burlington VT 05402
(802) 658-7444

Leo A. Bisson Jr., Richard N. Bland
Downs, Rachlin & Martin
199 Main St., P.O. Box 190, Burlington VT 05402
(802) 863-2375