8.5.6 Response Costs as Damages

• Jurisdiction: Arizona

Standard CGL policies provide coverage to "pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages . . ." Significant litigation has focused on whether the remedies sought by the Environmental Protection Agency were damages that the insured was legally obligated to pay. There is a split of authority on this question. Courts rejecting coverage have adopted a traditional view of damages as meaning monetary damages and not equitable relief.^[347] Those courts that have found that clean-up costs are essentially compensatory damages for injury to property, even though the costs may be characterized as seeking equitable relief.^[348]

The current division of authority about this issue is difficult to measure. Although various courts and commentators have tried to count the decisions on either side of this issue, inconsistent claims continue to be made concerning the weight of authority and the trend of the cases. One commentator has concluded that most of the cases denying coverage for environmental response costs as damages have been decided by federal district courts, while state courts, by the clear weight of authority, support the conclusion that response costs are damages.^[349]

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Notes:

[347]See, e.g, Aetna Cas. & Sur. Co. v. Hanna, 224 F.2d 449 (5th Cir. 1955); Continental Ins. Co. v. Northeastern Pharm. & Chem. Co., 842 F.2d 977 (8th Cir. 1988), cert. denied, 109 S. Ct. 66 (1988); Patron's Oxford Mutual Ins. Co. v. Marios, 573 A.2d 16 (Maine 1990); Maryland Cas. Co. v. Armco, Inc., 822 F.2d 1348 (4th Cir. 1987), cert. denied, 484 U.S. 1008 (1988).

[348]See Newcastle County, 673 F. Supp. 1359 (applying Delaware law); United States Aviex, 125 Mich. App. 579, 336 N.W.2d at 843; United States Fid. & Guar. Co. v. Thomas Solvent Co., 683 F. Supp. 1139, 1168 (W.D. Mich. 1988); CPS Chem. Co., 222 N.J. Super. 175, 536 A.2d at 316; Intel...