Chapter 10: Environmental Insurance
This chapter presents an overview of some key issues arising under insurance policies for environmental damage claims, including coverage for liability asserted against insureds pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) as modified by the Superfund Amendments and Reauthorization Act of 1986 (SARA), as well as the Resource Conservation and Recovery Act (RCRA).
An explosion in litigation concerning scope of coverage under Comprehensive or Commercial General Liability (CGL) insurance policies occurred over the past two decades, with policyholders seeking to secure coverage for liability as a result of “occurrences” taking place during the applicable policy coverage term.
The specter of environmental claims litigation presents the insurance industry and policyholders with a “litigation crisis” of never-before-imagined proportions. EPA has estimated that the cost of cleaning up toxic waste at more than 60,000 disposal sites nationwide may run as high as $100 billion, leading policyholders and insurers to adopt a “scorched earth” litigation posture. In many jurisdictions, courts are venturing into unchartered areas of insurance coverage, knowing that the stakes for both policyholder and insurer are high. The very survival of insurers, public and private companies and, in some instances, entire communities is threatened by staggering response costs designed to achieve a safe and clean environment.
§ 10.1 Overview
§ 10.2 Types of Policies and How Courts Interpret Them
§ 10.2.1 First Party Property Policies
§ 10.2.2 Standard Form Comprehensive General Liability Policy
§ 10.2.3 How to Locate Policies
§ 10.2.4 The Pollution Exclusion—Operation of the “Sudden and Accidental” Clause
§ 10.2.5 Insurance Company’s Duty to Defend
§ 10.2.6 Early Case Law
§ 10.2.7 Whether the Insured Subjectively Expected or Intended Environmental Damage
§ 10.2.8 Colorado Adopts the Subjective Standard
§ 10.2.9 The Colorado Supreme Court Adopts “Second Discharge” Analysis
§ 10.2.10 The Duty to Defend and the “Second Discharge” Analysis
§ 10.2.11 Anticipatory Declaratory Judgment Actions
§ 10.2.12 Attendant Physical Injury, Toxic Exposure, and Triggering Coverage Over Multiple Years
§ 10.2.13 Multiple Coverage Years and the Allocation of Benefits
§ 10.2.14 The Duty to Indemnify
§ 10.2.15 The Notice-Prejudice Rule
§ 10.3 Environmental Impairment and Specialized Environmental Liability Insurance
§ 10.4 Directors and Officers (D & O) Liability Insurance Policies
§ 10.5 Conclusion
WILLIAM J. BRADY, ESQ.
Grimshaw & Harring P.C.
William J. Brady is a trial lawyer with more than twenty-nine years experience in litigating environmental, insurance coverage, and hazardous waste disposal cases on behalf of corporations, local governments, mining companies, aircraft manufacturers and individual clients. He has appeared in courts throughout the United States and in the Royal Courts of Justice in England, litigating against London Market insurance companies and Lloyd’s of London syndicates. He also practices municipal law in representing cities, counties, and special districts around the country. Testifying in Congress on Superfund and environmental law issues, Mr. Brady has participated in conferences sponsored by the White House, the EPA, and CDPHE. Mr. Brady currently serves as an adjunct professor at the University of Denver College of Law, as well as teaching in DU’s Graduate Environmental Policy and Management Program. He has authored over twenty-five professional journal articles, including the Professor’s Manual for the text, The Regulation of Toxic Substances and Hazardous Wastes, University Casebook Series, Foundation Press, September 2002 (author of chapters on Superfund and Toxic Torts).
