Paying for Cleanup of Contaminated Land:
Damages, Cost Recovery, Contribution Claims;
Coverage Under Historical Insurance Policies
PLLC
Thomas M. Kilbane Attorney at Law PLLC 8164 NE Yeti Lane Bainbridge Island, WA 98110 206.484.1307
tom@kilbanelaw.com www.kilbanelaw.com
THOMAS M. KILBANE ATTORNEYAT LAW
Overview
Focus on Potential Sources of Funding
Available to Private & Public Parties:
• Claims/Actions for Damages, Cost Recovery, and/or Contribution
• Pursuit of Coverage for Environmental Claims Under Historical Insurance Policies
THOMAS M. KILBANE ATTORNEYAT LAW
PLLC
Potential Claims
Primary Sources/Types of Claims:
• Contract
• Tort
• Federal and State Cleanup Laws
Contract Claims
Under Real Estate Purchase & Sale /
Other Acquisition Agreements:
• Breach of contract
• Breach of representation & warranty
• Failure to disclose
• Hold harmless, defense, indemnity
• Holdback/escrow portion of price
THOMAS M. KILBANE ATTORNEYAT LAW
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Contract Claims
Potential Pitfalls:
• Failure to Survive Closing
• As-Is Clause
• Waiver and/or Release
• Time Limits
• Insufficient Reserves Other Potential Defenses
THOMAS M. KILBANE ATTORNEYAT LAW
Tort Claims
Potential Common Law/Statutory Claims:
• Trespass
• Nuisance
• Negligence
• Other
Potential Defenses and Other Considerations
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PLLC
CERCLA & MTCA Claims
• CERCLA
= The ComprehensiveEnvironmental Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq., a/k/a the federal Superfund law
• MTCA
= The Model Toxics Control Act, Chapter 70.105D RCW, a/k/a theWashington state Superfund law
CERCLA & MTCA Claims
CERCLA and MTCA impose liability for:
• A Release
• Of a Hazardous Substance
• At or from a Facility
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CERCLA & MTCA Claims
CERCLA & MTCA liability is generally:
• Strict
• Joint and Several
• Retroactive
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CERCLA & MTCA Claims
CERCLA potentially responsible parties / MTCA potentially liable persons include:
• Current Owner or Operator
• Past Owner or Operator at time of release
• Arrangers for Disposal/Generators
• Transporters to TSD facility they selected
THOMAS M. KILBANE ATTORNEYAT LAW
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CERCLA & MTCA Claims
Private parties may bring claims against other PRPs/PLPs for:
• Recovery of remedial action costs incurred
• Contribution toward remedial action costs
“Remedial action” is defined broadly to include any action or expenditure to identify, eliminate, or minimize any threat to human health or the
environment resulting from the actual or threatened release(s) of any hazardous substance(s)
CERCLA & MTCA Claims
Potential Recovery of Attorneys’ Fees
• Under CERCLA:
• Attorneys’ fees and expenses as such are not recoverable
• Fees and expenses incurred in non-litigation cleanup- related activities may be recoverable remedial action costs
• Under MTCA:
• Recoverable remedial action costs “shall include reasonable attorneys’ fees and expenses”
• The prevailing party “shall recover its reasonable attorneys’ fees and costs”
THOMAS M. KILBANE ATTORNEYAT LAW
PLLC
CERCLA & MTCA Claims
Potential Defenses and Exemptions:
• Act of God, act of war, act or omission of unrelated third party
• Contiguous property exclusion (CERCLA);
groundwater migration exclusion (MTCA)
• Innocent purchaser defense
• Bona fide prospective purchaser settlement
• Lender and fiduciary liability exemptions Other Potential Pitfalls and Considerations
THOMAS M. KILBANE ATTORNEYAT LAW
Historical Insurance Policies
Overview/Key Points:
• Historical insurance policies may provide coverage for environmental claims
• Focus on Comprehensive/Commercial General Liability policies issued before 1986-87
• Such policies may provide funds for investigation and cleanup as well as other defense costs and/or indemnity
• Investigate and identify historical insurance coverage and search for policies/evidence of policy terms
• Provide timely notice and tender of claim to insurers
THOMAS M. KILBANE ATTORNEYAT LAW
PLLC
Historical Insurance Policies
Types of policies that may provide coverage for environmental claims:
• Comprehensive/Commercial General Liability (CGL) policies
• Other primary liability policies
• Umbrella policies
• Excess policies
Historical Insurance Policies
Vintages of CGL policies more likely to provide coverage:
• Policies issued before about 1970, when policies began to include “qualified pollution exclusion”
• Policies issued before about 1986-87, when policies began to include so-called “absolute pollution exclusion”
THOMAS M. KILBANE ATTORNEYAT LAW
PLLC
Historical Insurance Policies
Types of parties whose old CGL policies may provide coverage:
• Current and former property owners and tenants (named insureds)
• Current and former landlords required to be named as additional insureds
• Other potentially responsible parties (e.g., neighboring landowner whose contamination migrated onto property)
THOMAS M. KILBANE ATTORNEYAT LAW
Historical Insurance Policies
Basis for coverage of environmental
claims under old CGL policies:
• Broad grant of coverage subject to bargained for limits of liability
• Further limited by numerous definitions, exclusions, conditions, and endorsements, which Washington courts have often found ambiguous and construed against insurers
THOMAS M. KILBANE ATTORNEYAT LAW
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Historical Insurance Policies
• Coverage applies in the event of an
“occurrence” that results in property damage during the policy period (vs. “claims made”
during the policy period), which the insured
“neither expected nor intended”
• Pre-1970 policies typically do not exclude property damage resulting from pollution that otherwise falls within the scope of coverage
Historical Insurance Policies
• Policies issued from 1970 to 1986 typically contain a “qualified pollution exclusion”
that excludes property damage arising out of the discharge of pollutants, but which does not apply if the discharge was
“sudden and accidental”
• Washington courts have held the phrase
“sudden and accidental” to be ambiguous and interpreted those terms to mean
“unexpected” and “unforeseen”
THOMAS M. KILBANE ATTORNEYAT LAW
PLLC
Historical Insurance Policies
Liability insurance policies generally include both:
• A duty to defend the insured if there is any potential for coverage, and
• A duty to indemnify the insured if coverage is established
The duty to defend is generally broader than the duty to indemnify, but perhaps not always:
• Compare Weyerhaeuser Co. v Aetna Cas. & Sur. Co., 123 Wn.2d 891, 874 P.2d 142 (1994) with
• Gull Industries, Inc. v State Farm Fire & Cas. Co., __ Wn. App.
__, __ P.3d __, 2014 WL 2457236 (Div. I, June 2, 2014)
THOMAS M. KILBANE ATTORNEYAT LAW
Historical Insurance Policies
Elements potentially needed to trigger duty to defend and/or duty to indemnify:
• Strict liability imposed by CERCLA or MTCA on the insured for remedial action costs incurred to comply with such law
• A “claim” against the insured, or its functional equivalent
• A “suit” against the insured, or its functional equivalent
• An “occurrence” resulting in unexpected and unintended damage to another’s property during the policy period
• Timely notice to insurer of any occurrence and tender of any claim or suit to insurer for defense and/or indemnity
THOMAS M. KILBANE ATTORNEYAT LAW
PLLC
Conclusion
Questions or Comments?
• Please hold for Q & A/discussion period following presentations
• See me after and/or give me your business card
• Contact me by phone (206.484.1307) or email (tom@kilbanelaw.com)