Opinion ID: 1929143
Heading Depth: 2
Heading Rank: 3

Heading: because of ... property damage to which this insurance applies

Text: A hallmark of the comprehensive general liability policy is that it insures against injury done to a third party's property, in contradistinction to an all-risks policy also covering losses sustained by the policy-holder. See Schlosser v. INA, supra, 325 Md. at 306-07, 600 A.2d 836. The policy at issue defines property damage as a physical injury to or destruction of tangible property ... including the loss of use thereof. The instant question of insurance coverage turns, therefore, on whether a third party has sustained injury to, or destruction of, its own property with respect to the Diecraft pollution. We thus focus on whether the State of Maryland possessed the requisite property interest in the groundwater affected by the TCE contamination to qualify it as a third party whose property was damaged by the pollutants emanating from the Diecraft site. In regard to surface waters, although the State is said to be the owner of the navigable waters within its boundaries, it holds them not absolutely, but as a quasi trustee for the public benefit and to support the rights of navigation and fishery to which the entire public are entitled therein. Baltimore City v. Steamboat Co., 104 Md. 485, 494, 65 A. 353 (1906). See Browne v. Kennedy, 5 H. & J. 195 (1821) (citing grant of lands and waters in the original Charter to Lord Baltimore); see also Bd. of Pub. Works v. Larmar Corp., 262 Md. 24, 46, 277 A.2d 427 (1971) (navigable waters and the land under them have always been a part of the public domain); State of Maryland, Dept. of N. Res. v. Amerada Hess Corp., 350 F. Supp. 1060 (D.Md. 1972) (State has property interest sufficient to recover damages resulting from oil discharge into Baltimore harbor). Such is the extent of the State's proprietary interest in harbors, bays, rivers, and similar waters. There exists another body of law, however, pertaining to subterranean waters. The groundwaters under the Diecraft facility are considered to be percolating waters, that is, those which ooze, seep or filter through soil beneath the surface, without a defined channel, or in a course that is unknown and not discoverable from surface indications. Finley v. Teeter Stone, Inc., 251 Md. 428, 432, 248 A.2d 106 (1968). Two lines of authority apply to interests in groundwater. Under the older English Rule, the owner of the freehold was deemed to own absolutely all of the percolating waters beneath the surface of the land, just as he owned the soil and minerals beneath the surface and the air and sky above it. Id. at 434-435, 248 A.2d 106. Under the more modern American Rule, the landowner is limited to a reasonable exercise of the owner's proprietary right in the water, i.e., such an exercise as may be reasonably necessary for some useful or beneficial purpose, before obstructing, diverting, or removing percolating water to the injury of a neighbor. Id. at 436, 248 A.2d 106. [8] While having suggested a preference for the American Rule, see id. at 439, 248 A.2d 106; Western Md. R.R. Co. v. Martin, 110 Md. 554, 566, 73 A. 267 (1909), this Court has never designated one rule or the other as the law of Maryland. There is no need to do so here. The commonlaw principles of groundwater were created to adjudicate disputes between neighboring property owners who claimed a right to use the waters beneath their lands. That is not the case before us now. The instant case concerns the nature and scope of the State's interest in the groundwater as it bears on the meaning of the standard CGL insurance policy. This is a question of first impression for the Court. Neither the Maryland Constitution nor any statute proclaims the State to be the owner of waters within its borders. This silence contrasts with the laws of many of the Western states, which explicitly confer ownership of water resources upon the State or its people. See, e.g., AIU Ins., supra, 274 Cal. Rptr. at 8, n. 6, 799 P.2d at 1261, n. 6 (California); Minnesota Min. & Mfg., supra, 457 N.W.2d at 182 (Minnesota); Port of Portland, supra, 796 F.2d at 1193 (Oregon); see also Peter A. Fahmy, Note, The Public Trust Doctrine as a Source of State Reserved Water Rights, 63 Denver U.L.R. 585, 598-599 (1986). The statutes of Maryland contain many provisions pertaining to the State's regulatory maintenance of clean water. As part of the regulatory scheme, the legislature has defined waters of the State and waters of this State to include both surface and underground waters within the boundaries of Maryland subject to its jurisdiction. See Maryland Code (1973, 1990 Repl.Vol., 1992 Cum.Supp.) § 8-101(j) of the Natural Resources Article and (1982, 1987 Repl.Vol., 1992 Cum.Supp.) § 9-101( l ) of the Environment Article. It is reasonable to apply that definition as well to State waters. See, e.g., § 4-401(d) of the Environment Article. In regard to water pollution control, the legislature has stated as public policy that the quality of the waters of this State is vital to the public and private interests of the citizens of its citizens and ... pollution constitutes a menace to public health and welfare. Sections 4-402, 9-302(b) of the Environment Article. It is the policy of the State to control the appropriation or use of State waters [i]n order to conserve, protect, and use water resources of the State in accordance with the best interests of the people of Maryland. Section 8-801(a) of the Natural Resources Article. Respecting the 1978 Environmental Standing Act, the General Assembly found that improper use and exploitation of natural resources represented an invasion of the right of every resident of Maryland to an environment free from pollution. Section 1-502 of the Natural Resources Article. The 1973 Maryland Environmental Policy Act declared that the protection of the environment is necessary for the public health and welfare as a matter of the highest public priority, and that each person has a fundamental and inalienable right to a healthful environment. Section 1-302(b), (d) of the Natural Resources Article. The same statute in Section 1-302(c) directs that State agencies must conduct their affairs as stewards of the air, land, [and] water ... resources; in common usage, a steward is one who cares for the property or interests of another. Thus the legislature has attributed to the State broad powers in respect to water resources, including groundwater. Taken collectively, with due regard to the statutes' articulation of the State's interests in preserving the environment, these legislative pronouncements demonstrate that the State has committed itself to regulatory oversight of the groundwaters of Maryland to benefit its citizens. We do not share the view of B & L and its supporters among the amici curiae that such statutory references to waters of the State or State waters imply a proprietary interest in groundwater vested in the State. These phrases are simply generic usage addressing the location of waters within State borders, just as one might refer to Johns Hopkins University, a private institution, as one of the colleges of Maryland subject to appropriate regulation. We also observe that in some instances the phrases waters of the State and waters in the State are used in a single statute, with no apparent difference between the two. See, e.g., § 8-704(b-1)(1) of the Natural Resources Article. Courts in other jurisdictions have construed the two terms to have the same meaning. See Dargan v. Richardson, Game Warden, 229 S.C. 135, 92 S.E.2d 167, 170 (1956); State v. Taylor, 358 Mo. 279, 214 S.W.2d 34, 37 (1948); Caldwell v. Erickson, 61 Utah 265, 213 P. 182, 184 (1923). Moreover, there is nothing in these environmental statutes' legislative history, which we have painstakingly reviewed, to indicate that the legislature ascribed ownership of groundwater to the State. The term waters of the State has no significance with respect to the proprietary ownership of such waters. 44 Op.Atty.Gen. 178 (Md. 1959). Secondly, the proponents of coverage cite dicta pronounced by Justice Holmes in a dispute over an injunction to abate air pollution, which they would have us apply to the instant case involving groundwater pollution: This is a suit by a state for an injury to it in its capacity of quasi-sovereign. In that capacity the state has an interest independent of and behind the titles of its citizens, in all the earth and air within its domain. Georgia v. Tennessee Copper Co., 206 U.S. 230, 237, 27 S.Ct. 618, 619, 51 L.Ed. 1038 (1907). This argument is answered by the more recent line of cases culminating in Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941, 102 S.Ct. 3456, 73 L.Ed.2d 1254 (1982), which specifically addressed the question of groundwater. As part of a larger Commerce Clause analysis, the Supreme Court stated that while the surface owner who withdrew groundwater enjoyed a lesser ownership interest in it than the captor of game birds or fish, [9] the state claim to the water rested nonetheless on the legal fiction of state ownership. 458 U.S. at 951, 102 S.Ct. at 3461. The Supreme Court has definitively recast the public ownership theory as `but a fiction expressive in legal shorthand of the importance to its people that a State have power to preserve and regulate the exploitation of an important resource.' Id., quoting Hughes v. Oklahoma, 441 U.S. 322, 334, 99 S.Ct. 1727, 1735, 60 L.Ed.2d 250 (1979). See Toomer v. Witsell, 334 U.S. 385, 402 n. 37, 68 S.Ct. 1156, 1165 n. 37, 92 L.Ed. 1460 (1948) (noting that the fiction apparently gained currency partly as a result of confusion between the Roman term imperium or governmental power to regulate, and dominium or ownership). Here the question of groundwater ownership arises in the context of a potentially insurable injury by pollution, rather than commercial exploitation of the resource. Yet the tenet animating Sporhase informs the instant case as well. The State's activities at the Diecraft site vindicated its regulatory prerogatives. The State's interest in groundwater rests on its power to preserve and regulate. That power does not constitute a property interest within the contemplation of the insurance policy in dispute. We hold, in sum, that in the absence of third-party property damage, Utica was not obliged by the standard terms of the CGL contract to pay B & L's abatement expenses incurred at the State's behest.