Opinion ID: 1877444
Heading Depth: 1
Heading Rank: 2

Heading: Trigger of Coverage, Scope of Coverage, and Allocation of Losses

Text: Domtar argues that the lower courts improperly allocated losses to years in which Domtar did not demonstrate that it was insured. Domtar contends that losses can be allocated only to the 15 years of triggered insurance coverage, not across the 64 years from the time that damage first occurred until the initiation of remediation. Under Domtar's reading of NSP, 523 N.W.2d at 662-64, this court has established rules only for triggering CGL policies and for allocating liability among triggered policies, but not for the scope of coverage. Domtar believes that each of its 1956-1970 CGL insurers is liable for the entire loss occasioned by the MPCA action because the policies promise to pay all sums for which the insured becomes legally obligated. Remedial expenditures mandated by the MPCA may properly fall within the definition of damages because of property damage in CGL policies. See Minnesota Mining & Mfg. Co. v. Travelers Indem. Co., 457 N.W.2d 175, 184 (Minn. 1990) ( 3M ). For the purposes of addressing this issue, the defendants do not disagree that their policies have been triggered, or that NSP offers the best method of allocating damages among the various insurance policies that have been triggered. Rather, the defendants argue that the language and logic of NSP dictate that Domtar bear the costs of remediation allocated to the years outside of their policy periods. Further, the defendants claim that, by their terms, the policies at issue do not respond to any damages that occur outside of the policy period. Based on the facts of this case, NSP is the starting point for analyzing whether Domtar is responsible for self-insured periods. Like Domtar, the insured in NSP was prompted by the MPCA to respond to environmental contamination. NSP, 523 N.W.2d at 658-59. The contamination arose from NSP's operation of two coal-tar gasification facilities; operations ceased sometime after 1933, the entire property was sold by 1978, and NSP sought coverage from its 1946-1985 insurers. Id. On appeal, we considered allocation and related issues with respect to NSP's 1958-1973 CGL insurer. Id. at 659-60. Like the CGL policies in this case, the policies at issue in NSP covered occurrences during the policy period, but also promised to pay all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property. Id. at 659. The policy limits applied to each occurrence or series of occurrences arising out of one event. Id. Domtar believes that NSP did not indicate whether an insured is liable for self-insured periods, but its reading of our decision is too narrow. NSP made three rulings relevant to continuous and indivisible environmental contamination cases: (1) we established a guiding principle for triggering standard CGL policies  a policy is triggered if property damage occurred during the policy period; (2) we indicated that, in such cases, an insurer's liability is limited to property damage occurring during its policy period or periods  insurers become consecutively liable rather than concurrently liable; and (3) we recommended a fair method for allocating losses among CGL insurers who are consecutively liable for continuing property damage, in the absence of applicable policy language  pro rata by time on the risk. Id. at 662-64. In these cases, the insured bears the burden of proving that a policy has been triggered, but if the insured proves when the contamination began and when it ended or was discovered, then the trial court should presume that property damage was continuous from its initiation until the time of cleanup or discovery. Id. at 662-63. The burden of proof then shifts to any party seeking to demonstrate that no appreciable damage occurred during a particular time period. Id. All policies in effect when damages occurred are triggered, and liability is allocated to each policy according to the proportion of time each was on the risk. Id. at 664. We did not use the label scope of coverage in NSP, but the substance of the opinion is clear enough. When the origins of environmental contamination are uncertain or indivisible and the property damage is continuous, insurers are consecutively, not concurrently, liable. Id. at 662-63. We also explained that soil and groundwater contamination should be regarded as a continuous process in which the property damage is evenly distributed over the period of time from the first contamination to the end of the last triggered policy (or self-insured ) period. Id. at 664 (emphasis added). In fact, we rejected the very same all sums policy language argument advanced by Domtar in this case, concluding that a pro-rata-by-policy-limits allocation method would violate the spirit of the actual-injury trigger theory in continuous environmental damages cases. Id. at 662. Each insurer is liable for that period of time it was on the risk compared to the entire period during which damages occurred. It was not error for the trial court to limit the defendants' liability to damages occurring during their policy periods. [5] Domtar further argues that there is an evidentiary difficulty with allocating damages to self-insured periods because the jury was not asked to determine whether there was some damage before 1956 or after 1970. The jury concluded that property damage commenced in 1933 and nothing in the record supports the conclusion that it abruptly discontinued at any point before 1956 or after 1970. To the contrary, Domtar's own expert testified that his opinion as to continuing damage was the same for years after 1970. Any party believing that no appreciable damage occurred during a particular time period bears the burden of proving that fact. See id. at 664. The factual presumption of continuous damage cannot be amended solely to benefit the insured. It should also be clear, however, that the defendants' reading of NSP is too broad. It is inaccurate to conclude that a CGL insurer is never liable for damages occurring outside of the policy period. CGL policies come in many forms and it is a mistake to read our case law as if the scope of coverage has been resolved for all such policies, no matter what their language. The proper scope of coverage also will depend on the facts of the case. When environmental contamination arises from discrete and identifiable events, then the actual-injury trigger theory allows those policies on the risk at the point of initial contamination to pay for all property damage that follows. See SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 318 (Minn.1995) (despite continuing damage from leaching of chemicals into the groundwater after the policy period, only the primary and excess policies on the risk at the time of the discharge were triggered, but those policies responded to the entire loss). This interpretation of the policies is in accord with the common understanding of the terms occurrence or accident. It is only in those difficult cases in which property damage is both continuous and so intermingled as to be practically indivisible that NSP properly applies. NSP provides a judicially manageable way for trial courts to adjudicate certain pollution-coverage disputes when it is difficult to determine when an event or occurrence or damage giving rise to legal liability has occurred. NSP does not establish hard-and-fast rules; it offers a practical solution in the face of uncertainty. NSP, 523 N.W.2d at 663, 665.