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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

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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

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THOMAS M. KILBANE ATTORNEYAT LAW

PLLC

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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THOMAS M. KILBANE ATTORNEYAT LAW

PLLC

CERCLA & MTCA Claims

• CERCLA

= The Comprehensive

Environmental 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 the

Washington 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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THOMAS M. KILBANE ATTORNEYAT LAW

PLLC

CERCLA & MTCA Claims

CERCLA & MTCA liability is generally:

Strict

Joint and Several

Retroactive

THOMAS M. KILBANE ATTORNEYAT LAW

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

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THOMAS M. KILBANE ATTORNEYAT LAW

PLLC

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”

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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

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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”

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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

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THOMAS M. KILBANE ATTORNEYAT LAW

PLLC

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”

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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

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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)

Thank you!

References

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