Case Name: Certification From the United States District Court for the Western District of Washington in The Boeing Company, Plaintiff, v. Aetna Casualty and Surety Company, et al, Defendants; Northwest Steel Rolling Mills, Inc., Plaintiff, v. Fireman's Fund Insurance Company, et al, Defendants; RSR Corporation, Plaintiff, v. Granite State Insurance Company, et al, Defendants; John Fluke Manufacturing Company, Inc., Plaintiff, v. Hartford Accident & Indemnity Company, et al, Defendants; Hartford Accident & Indemnity Company, Plaintiff, v. John Fluke Manufacturing Company, Inc., et al, Defendants; Davis Walker Corporation, Plaintiff, v. Aetna Casualty and Surety Company, Defendant
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1990-01-04
Citations: 113 Wash. 2d 869
Docket Number: No. 55700-4
Parties: Certification From the United States District Court for the Western District of Washington in The Boeing Company, Plaintiff, v. Aetna Casualty and Surety Company, et al, Defendants. Northwest Steel Rolling Mills, Inc., Plaintiff, v. Fireman's Fund Insurance Company, et al, Defendants. RSR Corporation, Plaintiff, v. Granite State Insurance Company, et al, Defendants. John Fluke Manufacturing Company, Inc., Plaintiff, v. Hartford Accident & Indemnity Company, et al, Defendants. Hartford Accident & Indemnity Company, Plaintiff, v. John Fluke Manufacturing Company, Inc., et al, Defendants. Davis Walker Corporation, Plaintiff, v. Aetna Casualty and Surety Company, Defendant.
Judges: 
Reporter: Washington Reports
Volume: 113
Pages: 869–912

Head Matter:
[No. 55700-4.
En Banc.
January 4, 1990.]
Certification From the United States District Court for the Western District of Washington in The Boeing Company, Plaintiff, v. Aetna Casualty and Surety Company, et al, Defendants. Northwest Steel Rolling Mills, Inc., Plaintiff, v. Fireman's Fund Insurance Company, et al, Defendants. RSR Corporation, Plaintiff, v. Granite State Insurance Company, et al, Defendants. John Fluke Manufacturing Company, Inc., Plaintiff, v. Hartford Accident & Indemnity Company, et al, Defendants. Hartford Accident & Indemnity Company, Plaintiff, v. John Fluke Manufacturing Company, Inc., et al, Defendants. Davis Walker Corporation, Plaintiff, v. Aetna Casualty and Surety Company, Defendant.
Charles C. Gordon, William A. Gould, and Nicholas P. Gellert (of Perkins Coie); Robert N. Sayler, James R. Murray, and Eric C. Bosset (of Covington & Burling)-, Paul R. Carlson, for plaintiff Boeing.
Sylvester, Ruud, Petrie & Cruzen, by John T. Petrie and Robert W. Bryan, for plaintiff Northwest Steel.
Don M. Gulliford and Robert R. Cole (Philip H. Gitlen, Jonathan P. Nye, and Whiteman, Osterman & Hanna, of counsel), for plaintiff RSR.
Stevan D. Phillips and Stoel, Rives, Boley, Jones & Grey (George Berger, Judith S. Roth, and Philips, Nizer, Benjamin, Krim & Ballon, of counsel), for plaintiff John Fluke Manufacturing.
Jeffrey W. Leppo, Ruth L. Piekarska, and Bogle & Gates, for plaintiff Davis Walker Corp.
Williams, Kastner & Gibbs, Jerry B. Edmonds, Patrick M. O'Loughlin, Roy A. Umlauf, Frankie A. Crain, and Colleen M. Cook; Carney, Stephenson, Badley, Smith, Mueller & Spellman and Sylvia Luppert; Carr, Goodson, Lee & Foret, Margaret Warner, and Michael Hooks; Thorsrud, Cane & Paulich, Mark Thorsrud, and Patrick M. Paulich; Merrick, Hofstedt & Lindsey, Sidney R. Snyder, Jr., and Ronald Dinning; Wilson, Smith, Cochran & Dickerson, Dennis Smith, and David M. Jacobi; Hallmark, Keating & Abbott, William Fitzharris, Jr., and Pamela Lang; Dunlap & Soderland and David Soderland; Sedgwick, Detert, Moran & Arnold and Mark C. Raskoff, for defendants insurers.
Bassett & Morrison, by W. George Bassett, Philip R. Croessmann, and Margaret A. Morgan, for defendant Granite State Insurance.
Betts, Patterson & Mines, by Jeffrey C. Grant and Margaret E. Wetherald, for defendant Highlands Insurance.
Lane Powell Moss & Miller, by Robert L. Israel, David M. Schoeggl, and Douglas J. Ende, for defendants London Underwriters, et al.
Rivkin, Radler, Dunne & Bayh, by Richard S. Feldman, Jeffrey Silberfeld, and Steven Brock; Bradbury, Bliss & Riordan, by John H. Bradbury and Carl E. Forsberg, for defendant Hartford.
David M. Brenner, Peter J. Kalis, Thomas M. Reiter, and James R. Segerdahl on behalf of CIBA-Geigy Energy Corp., Dow Chemical Co., IBM, and NI Industries; Carol A. Wardell on behalf of PUD 1 of Chelan County; Kenneth 0. Eikenberry, Attorney General, Jerry Ackerman and Lee Rees, Assistants, George E. Greer, Linda R. Larson, Molly B. Burke, and Mark S. Parris on behalf of the State, Pierce County, Port of Tacoma, Port of Seattle, Land Recovery, Inc., and Leichner Brothers Land Reclamation; Norm Maleng, Prosecuting Attorney for King County, and James L. Brewer, Senior Deputy, on behalf of King County, Clark County, and Washington Association of Prosecuting Attorneys; Douglas N. Jewett, Seattle City Attorney, Terrence J. Cullen, Assistant; William J. Barker, Tacoma City Attorney, G. Stephen Karavitis, Assistant, and Robert F. Hauth on behalf of Washington State Association of Municipal Attorneys, amici curiae for plaintiffs.
William R. Hickman on behalf of Safeco Insurance Co.; Thomas S. James, Jr., P. Cameron DeVore, Donald S. Kunze, Thomas W. Brunner, James M. Johnstone, and Frederick S. Ansell on behalf of Insurance Environmental Litigation Association, amici curiae for defendants.

Opinion:
Dore, J.
The United States District Court for the Western District of Washington has certified the following question of state law to this court:
Whether, under Washington law, the environmental response costs paid or to be paid by the insureds, as the result of action taken by the United States and the State of Washington under CERCLA, 42 U.S.C. § 9601 et seq., constitute "damages" within the meaning of the comprehensive general liability policies issued by the insurers.
Answer: Yes.
Facts
In 1983, the United States Environmental Protection Agency designated the Western Processing hazardous waste facility at Kent, Washington, as one of 400 hazardous waste sites requiring cleanup. On February 25, 1983, the EPA filed a complaint against Western Processing and its owners in the United States District Court for the Western District of Washington. In May 1983, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. § 9601 et seq., the EPA notified the appellants (hereinafter policyholders) that they were generators of hazardous waste at the Western Processing site and were responsible parties for the "response costs" at this site. On July 17, 1984, the EPA and the State of Washington, as an additional plaintiff, named the policyholders in a "Second Amended Complaint" as '"generator and transporter defendants' facing potential liability for all monies expended by the government at the Western Processing site." Certification order app., at 141. On August 28, 1984, the court entered a "Partial Consent Decree" between the EPA and the policyholders for the cleanup of the surface of the Western Processing site. On April 13, 1987, the court entered a "Consent Decree" between EPA and policyholders for the cleanup of hazardous waste contamination of the subsurface of the Western Processing site.
EPA, in its complaint, alleged that the policyholders generated or transported hazardous substances found at the site. Further, that the migration of such wastes has contaminated the groundwater, aquifer (water-bearing geological zone), commercial and agricultural property adjoining the site, and nearby surface waters. Certification order app., at 324-73, "Third Amended Complaint" filed by United States Attorneys in United States v. Western Processing Co. It further alleged that the United States, in order to combat the effects of contaminated groundwater, aquifer and property adjoining the site, had incurred and was incurring "response costs" as defined by CERCLA for which policyholders were liable. CERCLA defines the costs of "response" to include costs of removal of hazardous substances from the environment and the costs of other remedial work. 42 U.S.C. § 9601(25). CERCLA provides that any person or business entity responsible for a release or threatened release of hazardous substances "shall be liable for . all costs of removal or remedial action incurred by the United States Government or a State . . .".42 U.S.C. § 9607(a)(4)(A). Pursuant to the action by EPA, the policyholders have paid and will continue to pay environmental response costs relating to the Western Processing hazardous waste facility.
During the period of time that the policyholders generated and transported hazardous wastes to Western Processing, they carried Comprehensive General Liability (CGL) insurance purchased from the respondents (hereinafter insurers). The operative coverage provision of four of the policies provide that the insurer " 'will pay on behalf of the insured all sums which the insured shall become obligated to pay as damages because of bodily injury or property damage to which this policy applies, caused by an occurrence. . . .'" Certification order, at 3. In one case, the policy provides indemnification "'for all sums which the Assured shall be obligated to pay . . . for damages . all as more fully defined by the term "ultimate net loss" on account of: (i) Personal injuries . . . [or] (ii) Property Damage . . and goes on to define "ultimate net loss" as '"the total sum which the Assured, or any company as his insurer, or both, become obligated to pay by reason of . . . property damage . . . either through adjudication or compromise . . Certification order, at 3. The policies do not specifically define "damages."
The policyholders sued the insurers for indemnification for the "response costs" they incurred relating to the Western Processing facility. In each case, motions for summary judgment were filed in the United States District Court. Since the motions raised a determinative question of state law, the question of whether "response costs" constitute "damages" within the CGL policies issued by insurers, this question was certified to this court. No extrinsic evidence touching upon the parties' interpretation of the coverage clause was provided in this certification. It was the intent of the district court that extrinsic evidence not be considered by this court, since the certification procedure is authorized to obtain answers to questions of law, not questions of fact.
Analysis
Under CERCLA any person responsible for an "actual release" or "threatened release" of hazardous substances is liable for response costs. The response costs paid by the insureds in the case before us concern responses to an "actual release" of hazardous substances which have already contaminated the groundwater and real property surrounding the Western Processing site. The question before us is whether these response costs to remedy an actual release of hazardous substances constitute damages within the meaning of the insureds' comprehensive general liability policies issued by insurers. In order for the policyholders to be indemnified, the plain meaning of the contract must provide coverage for the subject "response costs." Alternatively, before the insurers can avoid indemnifying the policyholders, this court must be satisfied that the plain meaning of "damages", as it would be understood by the average lay person, unmistakably precludes coverage for response costs, and any ambiguity is to be construed against the insurer.
The insurers have attempted to meet this burden by drawing lines, increasingly limited, around the word "damages." First, insurers draw a bright line between law remedies and equity remedies under common law. They assert that the legal technical meaning of "damages" includes monetary compensation for injury but not monetary equitable remedies such as sums paid to comply with an injunction or restitution. The insurers conclude that costs incurred under CERCLA are like injunction and restitution costs; therefore, they are equitable rather than legal and they are not "damages" within the policy language because equity does not award damages. The linchpin to insurers' argument is that "damages" should be given its legal technical meaning. Next, they draw a line between law remedies, excluding restitution-type law damages, such as remedies like CERCLA. Finally, they draw a line through the available common law damages and exclude everything except the tort-type damages.
The court is not persuaded that, under the rules of insurance contract analysis in Washington, the words "as damages" communicate these restrictions.
In construing the language of an insurance policy, the entire contract must be construed together so as to give force and effect to each clause. Transcontinental Ins. Co. v. Washington Pub. Utils. Dists.' Util. Sys., 11 Wn.2d 452, 456, 760 P.2d 337 (1988). Here, the structure of the subject contracts defeats insurers' argument that "as damages" precludes coverage for cleanup costs. The subject clause, "as damages", is sandwiched into the general coverage provisions of policyholders' insurance contracts. This is an odd place to look for exclusions of coverage. See Dairyland Ins. Co. v. Ward, 83 Wn.2d 353, 358-59, 517 P.2d 966 (1974). Furthermore, there is nothing more in the contracts. Under the title "Exclusions", there is nothing in the enumerated exclusionary provision about "damages." Finally, there are long sections of the contracts defining all the key terms. However, there are no defining words about damages.
Undefined terms in an insurance contract must be given their "plain, ordinary, and popular" meaning. Farmers Ins. Co. v. Miller, 87 Wn.2d 70, 73, 549 P.2d 9 (1976); Prudential Property & Cas. Ins. Co. v. Lawrence, 45 Wn. App. 111, 724 P.2d 418 (1986). To determine the ordinary meaning of an undefined term, our courts look to standard English language dictionaries. See, e.g., Safeco Ins. Co. of Am. v. Davis, 44 Wn. App. 161, 165, 721 P.2d 550 (1986) (entitle); Transport Indem. Co. v. Sky-Kraft, Inc., 48 Wn. App. 471, 487, 740 P.2d 319, 328 (1987) (performance); Miebach v. Safeco Title Ins. Co., 49 Wn. App. 451, 454 n.1, 743 P.2d 845 (1987) (actual), review denied, 110 Wn.2d 1005 (1988); Sperry v. Maki, 48 Wn. App. 599, 602, 740 P.2d 342 (motor vehicle), review denied, 109 Wn.2d 1014 (1987).
The plain, ordinary meaning of damages as defined by the dictionary defeats insurers' argument. Standard dictionaries uniformly define the word "damages" inclusively, without making any distinction between sums awarded on a "legal" or "equitable" claim. For example, Webster's Third New International Dictionary 571 (1971) defines "damages" as "the estimated reparation in money for detriment or injury sustained". See also The Random House Dictionary of the English Language 504 (2d ed. 1987) (cost or expense). Indeed, even the insurers' own dictionaries define "damages" in accordance with the ordinary, popular, lay understanding: "Damages. Legal. The amount required to pay for a loss." Merit, Glossary of Insurance Terms 47 (1980); see also Rubin, Barrons Dictionary of Insurance Terms 71 (1987). Even a policyholder with an insurance dictionary at hand would not learn about the coverage-restricting connotation to "damages" that the insurers argue is obvious.
Numerous federal and sister-state decisions (counsel at oral argument stated over 56 judges across the country) agree that "damages" include cleanup costs. See Intel Corp. v. Hartford Accident & Indem. Co., 692 F. Supp. 1171, 1186-87 (N.D. Cal. 1988); Aerojet-General Corp. v. San Mateo Cy. Superior Court, _ Cal. App. 3d_, 257 Cal. Rptr. 621, 631 (1989) ("the great weight of authority is consistent with [Policyholder's position]"). This persuasive authority includes federal district courts in California, Colorado, Michigan, Pennsylvania, New Jersey, Missouri, Massachusetts, New York, Texas, and Delaware and state appellate courts in Wyoming, New Jersey, North Carolina, Michigan and Wisconsin. Intel Corp., 692 F. Supp. at 1188 n.24.
These cases have found that cleanup costs are essentially compensatory damages for injury to property, even though these costs may be characterized as seeking "equitable relief." United States Fid. & Guar. Co. v. Thomas Solvent Co., 683 F. Supp. 1139, 1168 (W.D. Mich. 1988); CPS Chem. Co. v. Continental Ins. Co., 222 N.J. Super. 175, 536 A.2d 311, 316 (1988); Intel Corp. v. Hartford Accident & Indem. Co., 692 F. Supp. 1171, 1186-87 (N.D. Cal. 1988). Or put another way, "coverage does not hinge on the form of action taken or the nature of relief sought, but on an actual or threatened use of legal process to coerce payment or conduct by a policyholder." Fireman's Fund Ins. Cos. v. Ex-Cell-O Corp., 662 F. Supp. 71, 75 (E.D. Mich. 1987). In United States Fid. & Guar. Co., the court found that once property damage is found as a result of environmental contamination, cleanup costs should be recoverable as sums that the insured was liable to pay. According to an earlier case, United States Aviex Co. v. Travelers Ins. Co., 125 Mich. App. 579, 589-90, 336 N.W.2d 838 (1983), the environmental cleanup costs are covered because they are equivalent to "damages" under state law:
If the state were to sue in court to recover in traditional "damages", including the'state's costs incurred in cleaning up the contamination, for the injury to the ground water, defendant's obligation to defend against the lawsuit and to pay damages would be clear. It is merely fortuitous from the standpoint of either plaintiff or defendant that the state has chosen to have plaintiff remedy the contamination problem, rather than choosing to incur the costs of clean-up itself and then suing plaintiff to recover those costs. The damage to the natural resources is simply measured in the cost to restore the water to its original state.
Courts consistently agree that the "common-sense" understanding of damages within the meaning of the policy "includes a claim which results in causing [the policyholder] to pay sums of money because his acts or omissions affected adversely the rights of third parties. . . . [i.e., the public.]" United States Fid. & Guar. Co. v. Thomas Solvent Co., 683 F. Supp 1139, 1168 (W.D. Mich. 1988). Even our own state trial courts have rejected the insurers' "damages" argument.
In contrast to the plain ordinary meaning accorded to damages by courts across the country, insurers insist upon an accepted technical and legal meaning of damages. Insurers rely primarily on Travelers Ins. Co. v. Ross Elec. of Wash., Inc., 685 F. Supp. 742 (W.D. Wash. 1988), Continental Ins. Cos. v. Northeastern Pharmaceutical & Chem. Co., 842 F.2d 977 (8th Cir. 1988), and Maryland Cas. Co. v. Armco, Inc., 822 F.2d 1348 (4th Cir. 1987), cert. denied, 484 U.S. 1008 (1988).
The definition of damages used by Armco was taken from Aetna Cas. & Sur. Co. v. Hanna, 224 F.2d 499, 503 (5th Cir. 1955) (damages include "only payments to third persons when those persons have a legal claim for damages"). As a very recent case stated "[i]t is not clear why the Armco court turned to a 30-year-old case for a definition of 'damages,' a definition which is essentially a tautology defining damages as payment to a person who has 'a legal claim for damages.'" Aerojet-General Corp., 257 Cal. Rptr. at 631. The Armco court did express the opinion that it is a "dangerous step" for courts to construe insurance policies to cover "essentially prophylactic" or "harm avoidance" costs. Armco, at 1353. However, a construction of "damages" which includes equitable relief "is not a boundless universe—such 'damages' still must be 'because of' property damage. Thus Armco's conclusion that an insurer would be held liable for prophylactic safety measures, taken in advance of any damage to property, is not applicable to the policies under review." Aerojet-General Corp., 257 Cal. Rptr. at 632.
In Northeastern Pharmaceutical, the Eighth Circuit in a sharply divided en banc decision reached a similar result as in Armco. The majority relied primarily on the narrow, technical decision espoused in Armco and Hanna. As with the Armco court, the Continental majority was concerned that absent a limited definition of damages, "'all sums which the insured shall become legally obligated to pay as damages.'" would be reduced to "'all sums which the insured shall become legally obligated to pay."' Northeastern Pharmaceutical, at 986. However, both Armco and Northeastern Pharmaceutical effectively sever "damages" from the additional restrictive phrase "because of property damage." Northeastern Pharmaceutical, Armco and insurers are in effect trying to write out of the CGL policy a concept that is expressly stated—that damages paid as a consequence of property damage caused by an occurrence are covered by the policy—and to write into the policy a condition that is not there—that such sums are covered only if they have been imposed pursuant to a "legal", as opposed to an "equitable" basis for liability. The court cannot ignore the operative language of the clause itself. Our responsibility is to interpret the coverage clause as a whole. Transcontinental Ins. Co. v. Washington Pub. Utils. Dists.' Util. Sys., 111 Wn.2d 452, 456, 760 P.2d 337 (1988).
Even Northeastern Pharmaceutical and Armco, which found that "damages" do not include cleanup costs, support the policyholders' position. The reason is that these cases admit that the common meaning of the word "damages" is broad and all inclusive. In Northeastern Pharmaceutical, at 985, the majority conceded that:
The dictionary definition does not distinguish between legal damages and equitable monetary relief. Thus, from the viewpoint of the lay insured, the term "damages" could reasonably include all monetary claims, whether such claims are described as damages, expenses, costs, or losses.
(Citation omitted.) See Armco, 822 F.2d at 1352 (limiting "the breadth of the definition of 'damages' somewhat more narrowly" than its "ordinary meaning.1').
Furthermore, these cases are not helpful to the insurers' position because they are inconsistent with Washington law. In this state, legal technical meanings have never trumped the common perception of the common man. "[T]he proper inquiry is not whether a learned judge or scholar can, with study, comprehend the meaning of an insurance contract" but instead "whether the insurance policy contract would be meaningful to the layman . . .''. Dairyland Ins. Co. v. Ward, 83 Wn.2d 353, 358, 517 P.2d 966 (1974). "The language of insurance policies is to be interpreted in accordance with the way it would be understood by the average man, rather than in a technical sense."
Insurers, perhaps in realizing the infirmities of Northeastern Pharmaceutical and Armco, try to argue that when legal words are used in a document, this court applies their usual legal interpretations. See R.A. Hanson Co. v. Aetna Ins. Co., 26 Wn. App. 290, 612 P.2d 456 (1980). However, before an insurance company can avail itself of a legal technical meaning of a word or words, it must be clear that both parties to the contract intended that the language have a legal technical meaning. Thompson v. Ezzell, 61 Wn.2d 685, 688, 379 P.2d 983 (1963). Otherwise the words will be given their plain, ordinary meaning. Farmers Ins. Co. v. Miller, 87 Wn.2d 70, 73, 549 P.2d 9 (1976).
Here, there is nothing about the language from the subject standard form policies that indicates the parties intended a legal meaning to apply to the disputed term. Therefore, the words "as damages" should be interpreted in accordance with its plain, ordinary meaning, as dictated by the well established rules of construction under Washington law.
Insurers also try to argue that this court, when it is dealing with corporations, analyzes the contract language and determines its meaning without reference to what the average lay person might understand. See Transcontinental Ins. Co.; Continental Ins. Co. v. Paccar, Inc., 96 Wn.2d 160, 634 P.2d 291 (1981). While Transcontinental Ins. Co. and Paccar did not talk about the average lay person, these decisions did not hold that a different rule should apply when corporations are involved. Furthermore, this court has applied the "layman" rule when dealing with corporations. See, e.g., Phil Schroeder, Inc. v. Royal Globe Ins. Co., 99 Wn.2d 65, 659 P.2d 509 (1983) (carpet cleaning company), modified, 101 Wn.2d 830, 683 P.2d 186 (1984); McDonald Indus., Inc. v. Rollins Leasing Corp., 95 Wn.2d 909, 631 P.2d 947 (1981) (crane company).
In any event, on the facts of this case, it is questionable whether these standard rules of construction are no less applicable merely because the insured is itself a corporate giant. The critical fact remains that the policy in question is a standard form policy prepared by the company's experts, with language selected by the insurer. The specific language in question was not negotiated, therefore, it is irrelevant that some corporations have company counsel. Additionally, this standard form policy has been issued to big and small businesses throughout the state. Therefore it would be incongruous for the court to apply different rules of construction based on the policyholder because once the court construes the standard form coverage clause as a matter of law, the court's construction will bind policyholders throughout the state regardless of the size of their business.
Insurers attempt to save themselves from these rules of construction by arguing that, in any event, criticism of Travelers Ins. Co. v. Ross Elec. of Wash., Inc., 685 F. Supp. 742 (W.D. Wash. 1988) fails since it relies heavily on Washington law. In Ross, the matter came before the court on the insurer's motion for partial summary judgment concerning response costs. In granting the motion, the court relied on Armco, Northeastern Pharmaceutical, and Seaboard Sur. Co. v. Ralph Williams' Northwest Chrysler Plymouth, Inc., 81 Wn.2d 740, 504 P.2d 1139 (1973).
The Ross court and the insurers rely on Seaboard for the proposition that any lawsuit that could be characterized as a claim for equitable relief cannot constitute a claim for "damages." However, Seaboard does not stand for this proposition; indeed, the court's analysis supports the policyholders' position.
In Seaboard, the State Attorney General sought a judgment for statutory penalties and to enjoin the insured automobile dealer from "unfair methods of competition." The Attorney General also alleged that the dealer had gained possession of, and unlawfully withheld, property of members of the public, and accordingly sought "such additional orders or judgments as may be necessary to restore to any person in interest any monies or property which may have been acquired by means of an act or conduct of [defendants] found to be in violation of RCW 19.86.020." 81 Wn.2d at 742. However, the Attorney General had no authority to recover damages, only statutory penalties. 81 Wn.2d at 741.
The dealer's insurer, Seaboard Surety, sought a judicial determination that it had no duty to defend the suit because its policy required Seaboard to pay "sums which the Insured shall become obligated to pay . as the result of any final judgment for money damages resulting from . . . unfair competition". (Italics ours.) 81 Wn.2d at 741. In denying coverage, the Seaboard court did not rule that "damages" cannot include sums paid in restitution; instead, the court looked to the substance of the damage claim to determine whether it constituted one for unfair competition as ordinarily understood. The court concluded that damages for unfair competition can only be recovered by a competitor, and that a suit brought by the State to require the return of property wrongfully withheld from customers did not constitute such a claim.
In contrast, the substance of the claim for response costs in the present case concerns compensation for restoration of contaminated water and real property. The cost of repairing and restoring property to its original condition has long been considered proper measure of damages for property damage. Koch v. Sackman-Phillips Inv. Co., 9 Wash. 405, 37 P. 703 (1894); Olson v. King Cy., 71 Wn.2d 279, 428 P.2d 562, 24 A.L.R.3d 950 (1967). Consequently, the substance of the claim for response costs constitutes a claim for property damage and falls within the scope of coverage afforded by a CGL policy. Thus Ross incorrectly applied the Washington law it relied on.
Furthermore, when Ross Electric's counsel became aware of two superior court cases that had addressed the same issue before the court, they moved for reconsideration of the damages ruling on the basis of these decisions. Judge Bryan then wrote counsel for additional briefing on whether these superior court decisions were binding or if they required certification to the State Supreme Court. Soon thereafter, the insurers settled with Ross Electric. Thus the Ross opinion was decided without the benefit of the reasoning of the only Washington court to have addressed the issue.
We are not persuaded with the cases relied on by the insurers. The Ross court relied almost exclusively on the logic of Northeastern Pharmaceutical, and Armco which we find faulty and it misconstrued Seaboard. Instead, we agree with the majority of cases across the country that the plain meaning of damages does not distinguish between sums awarded on a "legal" or "equitable" basis and that the plain meaning of damages may include cleanup costs to the extent that these costs are incurred because of property damage.
The policy defines property damage as "physical injury to or destruction of tangible property, which occurs during the policy period . . .". Certification order app., at 412. "Property damage" includes discharge of hazardous waste into the water. In Port of Portland v. Water Quality Ins. Syndicate, 796 F.2d 1188, 1196 (9th Cir. 1986), the court held that the discharge of pollution into water caused "damage to tangible property," within the meaning of the policy defining property damage as physical injury to or destruction of tangible property. In Broadwell Realty Servs., Inc. v. Fidelity & Cas. Co., 218 N.J. Super. 516, 528 A.2d 76, 81 (1987), the court held the insurer was liable to pay as damages government mandated cleanup costs, on the ground that the costs represented a legal obligation owing because of property damage.
The issue of when costs are or are not incurred "because of" property damage is illustrated in Aerojet, at 635, by the following hypothetical:
Petitioners have two underground storage tanks for toxic waste. Tank #1 has leaked wastes into the soil which have migrated to the groundwater or otherwise polluted the environment. Tank §2 has not leaked, but government inspectors discover that it does not comply with regulatory requirements, and could eventually leak unless corrective measures are taken. Response costs associated with Tank #1 will be covered as damages, because pollution has occurred. Tank #2 would not be covered. Likewise, the expense of capital improvements to prevent pollution in an area of a facility where there is none, or improvements or safety paraphernalia required by government regulation and not causally related to property damage, would not be covered as "damages."
Aerojet-General Corp. v. San Mateo Cy. Superior Court, _Cal. App. 3d_, 257 Cal. Rptr. 621, 635 (1989). Thus, costs owing because of property damages are remedial measures taken after pollution has occurred, but preventive measures taken before pollution has occurred are not costs incurred because of property damage.
The occurrence of the hazardous wastes leaking into the ground contaminating the groundwater, aquifer and adjoining property constituted "property damage" and thus triggered the "damages" provision of the policies carried by the policyholders. The costs assessed against the policyholders by the underlying lawsuits are covered by the subject policies to the extent that these costs are because of property damage. This duty to pay money is no different from the legal obligation that burdens a party who has been held liable to restore property to the condition it was in prior to the occurrence of the tortfeasor's conduct or damages consisting of amounts necessary to restore property to its status quo. See CPS Chem. Co. v. Continental Ins. Co., 222 N.J. Super. 175, 536 A.2d 311, 316 (1988).
Conclusion
Response costs in response to actual releases of hazardous wastes are "damages" within the meaning of CGL coverage clauses at issue. The term "damages" does not cover safety measures or other preventive costs taken in advance of any damage to property. Consequently, we concur with the great majority of judges across the country that response costs incurred under CERCLA are "damages" to the extent that these costs are incurred "because of" property damage within the meaning of the CGL coverage clauses at issue. The reported decisions across the country, the lay dictionary, the insurance dictionary, the failure of the insurance industry to write down what it meant, each of these facts lays waste to insurers' argument. For us to read the words "as damages" to exclude coverage for cleanup costs, would require this court to rewrite the principles of insurance contract analysis in Washington, and then to retroactively apply these rewritten principles to the policyholders that bought their policies decades ago. However, we decline to do this. The industry knows how to protect itself and it knows how to write exclusions and conditions. The words "as damages" do not stand exclusionary guard for the industry and represent a vast exclusion from coverage. The term "damages" is to be given its plain, ordinary meaning and not the technical meaning advocated by insurers.
The question certified by the District Court asks
[w]hether, under Washington law, the environmental response costs paid or to be paid by the insureds, as the result of action taken by the United States and the State of Washington under CERCLA, 42 U.S.C. § 9601 et seq., constitute "damages" within the meaning of the comprehensive general liability policies issued by the insurers.
In answer to this question, on the facts submitted to us, we conclude that under Washington law, "response costs" incurred under CERCLA are "damages" to the extent that these costs are incurred "because of" property damage and therefore fall within the meaning of the CGL policies issued by insurers.
We answer: Yes.
Utter, Brachtenbach, Andersen, Durham, and Smith, JJ., and Pearson, J. Pro Tern., concur.
It is important to note the absence of public policy in the construction of insurance contracts. While this case implicitly presents a grave question of policy, namely who should bear the cost of polluting our environment, the task presently before this court only requires us to construe the terms of the policies under Washington law. Washington courts rarely invoke public policy to override express terms of an insurance policy. State Farm Gen. Ins. Co. v. Emerson, 102 Wn.2d 477, 481-83, 687 P.2d 1139 (1984); Progressive Cas. Ins. Co. v. Cameron, 45 Wn. App. 272, 282, 724 P.2d 1096 (1986).
See, e.g., Queen City Farms, Inc. v. Aetna Casualty and Surety Company, King County cause 86-2-06236-0 (Sept. 4, 1987) (order denying defendants' motion: re: "Damages"), reported in Mealey's Litigation Reports—Insurance (Nov. 24,1987); Isaacson Corporation v. Holland-America Insurance Company, at 17-18, King County cause 85-2-12843-5 (Dec. 22, 1987).
In the Queen City Farms order at page 7, Judge Shellan rejected the insurers' argument: "[t]he average purchaser of insurance would understand the term 'damages', as used in the defendants' insurance policies, to include monies paid to clean up and remediate damage to the groundwater or other pollution damage affecting the rights of third parties . . .".
Carriers in their oral arguments also relied on Detweiler v. J.C. Penney Cas. Ins. Co., 110 Wn.2d 99, 104, 751 P.2d 282 (1988), for the proposition of applying a legal technical definition. In Detweiler, the court stated "[w]here, as here, the word 'accident' is not otherwise defined in a policy, we look to our common law for definition." (Footnote omitted.) While the court said we look to the common law, the cases interpreting accident employed the popular ordinary meaning of accident as defined in the dictionaries. See Evans v. Metropolitan Life Ins. Co., 26 Wn.2d 594, 605, 174 P.2d 961 (1946). Thus Detweiler does not support carriers' proposition that when this court is faced with a legal term, we employ the technical legal meaning of the word.
The carriers also cite Felice v. St. Paul Fire & Marine Ins. Co., 42 Wn. App. 352, 711 P.2d 1066 (1985), review denied, 105 Wn.2d 1014 (1986). In Felice, an attorney failed to remove himself as guardian of an elderly lady and paid himself attorney fees not owing to him. Therefore, the proceeding was an action to remove the guardian, not a proceeding to recover damages. Like Seaboard, Felice is not applicable to the issue of whether sums paid by a policyholder to clean up or to restore property damage are "damages" within the meaning of the subject CGL policy.
Queen City Farms, Inc. v. Aetna Casualty and Surety Company, King County cause 86-2-06236-0 (Sept. 4, 1987) (order denying defendants' motion: re: "Damages"), reported in Mealey's Litigation Reports—Insurance (Nov. 24, 1987); Isaacson Corporation v. Holland-America Insurance Company, at 17-18, King County cause 85-2-12843-5 (Dec. 22, 1987).