Insurance Coverage Under Cgl Policies for Environmental Liabilities
| Publication year | 1989 |
| Pages | 635 |
| Citation | Vol. 04 No. 1989 Pg. 635 |
1989, April, Pg. 635. Insurance Coverage under CGL Policies For Environmental Liabilities
Concerns about the environment have gained national attention in recent years. In part, these concerns are the result of the growing realization that the United States is littered with an abundance of hazardous waste sites, such as Love Canal and the Rocky Mountain Arsenal, which pose a major threat to public health.
To address this aspect of the harzardous waste problem, Congress in 1980 enacted legislation that requires nearly anyone connected with a hazardous waste site to contribute to the cleanup of the contaminated property.(fn1) Those affected include past or present owners or operators of the site (or facility) and generators and transporters of the hazardous substances disposed of at the site. The funds required to study and reclaim each site can be staggering, often running into millions and even billions of dollars.
In light of the astronomical costs involved in remediating even a single toxic waste site, it is not surprising that parties faced with cleanup responsibility are busily contacting insurance companies in an attempt to secure coverage for this (and other environmental) liability. Most hazardous waste disposal sites were created long before the advent of "pollution liability" or other modern forms of insurance coverage. Therefore, these parties must pursue coverage under comprehensive general liability (CGL) insurance policies that were in existence at the time the waste was disposed, while the facility was operated or during any other potentially relevant time period. In turn, this rash of insurance claims for environmental damages has generated "an uproar in the insurance industry, divisiveness between insurers and insureds and . . . 'spectacular judicial confusion.'"(fn2) It also has created a new legal specialty---environmental insurance litigation.
This article briefly describes some of the many issues that arise when CGL policies, including those that were in effect years before the contamination problem "surfaced," are construed in light of recent environmental problems.(fn3) Specifically, this article focuses on the following issues:
1) whether the insured provided timely notice to the insurer;
2) whether bodily injury or property damage "occurred" during the policy period, thereby triggering coverage;
3) whether the policyholder "expected or intended" bodily injury or property damage to occur, thereby precluding coverage; and
4) whether coverage for the environmental harm is excluded by the "pollution exclusion" provision.(fn4)
Under standard CGL policies, the policyholder is required to provide written notice to its insurer of an occurrence, claim or suit and to "immediately forward to the. . . [insurer] every demand, notice, summons or other process received by ... [the insured]."(fn5) Compliance with these obligations is a condition precedent to a policyholder's right to coverage under the policy. As a result, an insurer will deny coverage when an insured, without justification, fails to comply with any notice requirement set forth in the CGL policies.
One key aspect of this written notice requirement is that the insured must provide notice to the insurer within a reasonable time, given the facts and circumstances of the particular case. To determine whether notice was timely, Colorado courts have focused on the following factors:
1) whether the policyholder was sophisticated concerning insurance matters;
2) whether the insured orally notified its insurer prior to submitting written notice;
3) whether the insurer requested information from the policyholder concerning the occurrence, claim or suit; and
4) whether the insured gave any justification for its delay in providing notice.(fn6)
However, in assessing the timeliness of notice, Colorado courts, unlike courts from many other jurisdictions, have refused to consider the degree to which
While generally requiring strict compliance with the notice requirements, Colorado courts have held that the conditions are satisfied, even though the insured technically violated the notice requirements.(fn8) Thus, a policyholder may counter a late notice allegation by establishing that it substantially complied with the notice provisions or that the late notification was excused. In addition, two Colorado appellate panels have justified a failure to notify the insurer when the policyholder, acting as a "reasonably prudent person," believed that it was not liable for any damage resulting from an occurrence.(fn9)
However, the courts appear to differentiate between the insured's belief of nonliability for the alleged damage, which is excusable, and the insured's belief that coverage does not exist, which is inexcusable.(fn10) This distinction is important in the environmental context because of the uncertainty as to the extent of environmental problems or ultimate liability at the early stages of a site investigation.
For instance, several courts in other jurisdictions have held that receiving a letter from the EPA indicating that the insured is a "potentially responsible party" at a Superfund site does not constitute a notice of a ripened "suit" for insurance purposes.(fn11) Drawing on the rationale of these cases, an insured may in good faith believe it is not yet liable for the site cleanup at this point and that it need not comply with the CGL policy's notice provisions...
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