§17.14 - First-Party Property Coverage in Environmental Pollution Cases

• Jurisdiction: Washington

§17.14 First-Party Property Coverage in Environmental Pollution Cases

First-party property insurance insures the policyholder for damage to the insureds own property. Third-party liability coverage, on the other hand, protects the policyholder from liability for damages sustained by third parties as a result of the conduct of the policyholder. In short, if the policyholder is seeking coverage against its own losses or damages, the claim is first party in nature. See generally Mutual of Enumclaw Ins. Co. v. Dan Paulson Constr., Inc., 161 Wn.2d 903, 915 n.8, 169 P.3d 1 (2007).

The touchstone of coverage under a first-party property policy is physical loss or damage to the policyholders property. Coverage under property policies is triggered only upon the suffering of actual physical loss or damage, not at any earlier point in time when the peril might exist but prior to its causing damage. The only policy that should be triggered is that policy on the risk at the time a loss actually occurred. A mere potential for loss is insufficient to trigger a first-party policy. See Villella v. Pub. Emps. Mut. Ins. Co., 106 Wn.2d 806, 725 P.2d 957 (1986).

First-party property policies fall into two general types: (1) all risk and (2) named perils policies. Significant problems exist for policyholders attempting to establish causation under such policies. For example, pollution or contamination typically is not listed in named peril policies. Moreover, most current standard first-party property policies expressly exclude coverage for contamination or pollution. In addition, most standard first-party property policies also exclude coverage for damage to land, regardless of cause. Thus, contamination should be viewed as an excluded peril, and insurers should argue that coverage under such policies should be denied. See generally Mitchell L. Lathrop, Insurance Coverage for Environmental Claims §4.05 (1994).

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