8.5.5 The Owned Property Exclusion

• Jurisdiction: Arizona

Standard general liability policies contain what is commonly referred to as an "owned property exclusion." Most CGL policies exclude coverage for property damage to "property owned or occupied by or rented to the insured." This exclusion was intended to prevent general liability policies from serving as first-party insurance. Insurance companies have routinely relied on this exclusion, arguing that it voids coverage for the discharge or spill of pollutants because abatement measures are often necessary on the insured's own property in order to forestall further discharges or spills. However, many courts have been unwilling to exclude coverage on that basis, and have found various rationales for allowing coverage. Typically, these courts have determined that the exclusion does not apply because either the clean-up was performed to prevent damage to third parties (a horizonal analysis), or the damage or contaminated water did not belong to the insured (a vertical analysis).

The court in Broadwell Realty Services, Inc. v. Fidelity & Casualty Co. of New York,^[342] for example, adopted a horizontal analysis, holding that environmental clean-up costs on...