Opinion ID: 2318759
Heading Depth: 1
Heading Rank: 10

Heading: Recovery of Costs Relating to Incineration of Barrels of Waste

Text: When Vertac abandoned the site, it left behind 29,000 barrels containing hazardous materials. The EPA had the barrels repacked, but later determined that incineration was necessary. [85] Hercules contends that the trial court erred when it granted summary judgment for the insurers on whether Hercules could recover for costs incurred in connection with the EPA-ordered incineration of the more than 29,000 drums of waste. The trial court excluded coverage based on its conclusion that these costs were incurred for preventative measures. Alternatively, the trial court found that owned property and pollution exclusions barred coverage. Because we agree that the costs associated with incinerating the barrels were for preventative measures, we affirm. We need not, and do not, address whether the owned property and pollution exclusions would also bar coverage. This Court must determine whether the record shows that there is no genuine, material issue of fact and the moving party is entitled to judgment as a matter of law. [86] This Court's review is de novo, not deferential, both as to the facts and the law. [87] The facts of record, including any reasonable hypotheses or inferences to be drawn therefrom, must be viewed in the light most favorable to the non-moving party. [88] As described above, Hercules purchased the Jacksonville Site in 1961. In 1976, the site was purchased by Vertac Chemical Corp. Vertac owned and operated the site until 1987, when it abandoned the site due to bankruptcy. [89] From 1961 until 1986, manufacturing processes at the plant produced several hazardous wastes, including dioxin. In 1964 Hercules began storing the dioxin in solid form in steel drums that were buried in a landfill on the site. [90] This practice continued until 1975, at which time Vertac began storing the waste in barrels above ground at the site with the hope that it might someday be recycled. Most of the waste that was the subject of the incineration efforts was accumulated between 1979 and 1986, when Hercules had no involvement with the site. [91] In 1987, after Vertac had abandoned the site, [92] EPA initiated a removal action because the wastes on the site posed a threat to public health and welfare and the environment. [93] Eventually, the EPA ordered incineration of the barrels, a lengthy and multi-layered process that accounts for most of the $100 million incurred thus far in cleaning up the site. [94] As explained earlier, Hercules was initially found liable to the United States government for almost all of these costs, but the Eighth Circuit recently reversed and remanded the judgment against Hercules. [95] Thus the full extent of Hercules' current and future liability is not yet clear. These facts are preliminary to the issue whether the trial court erred in granting summary judgment to the insureds on the ground that Hercules' costs were incurred for non-covered preventative measures. Under Delaware law, coverage is excluded for preventative measures even in the absence of a mitigation clause in the insurance policies. [96] Strong public policy concerns favor placing a duty on insureds to act before environmental damage accumulates, rather than allowing insureds to recover under their policies after pollution has already occurred. [97] Moreover, the duty to mitigate gives meaning to the distinction between sums expended for prevention and those expended `because of property damage.' [98] Coverage is available for sums spent for remediating property damage but not for sums spent to prevent further damage. [99] The issue in this case is whether the barrel incineration operation was remedial or preventative. Cases examining this distinction provide useful guidance. In New Castle County v. Hartford Accident and Indemnity Co, [100] the underlying claims against the insured were for three remedies: (1) compensation for injury suffered by the respective plaintiffs; (2) injunctive relief forcing the County to cleanup the contaminants released by the landfill, or compensation for costs expended by plaintiffs to do the same; and/or (3) injunctive relief forcing the County to take the actions necessary to prevent the further release of contaminants from the landfill, or compensation for the costs incurred by the plaintiffs in doing the same. [101] The court held the insurer liable for the first two categories of costs, but denied coverage for the last category, which were essentially the costs required to remedy those `faults' in the landfills which lead to the release of contaminants. [102] Turning to the specifics of the underlying complaints, the court held that costs sought for (1) covering and grading of the landfill; (2) digging a drainage ditch around the landfill; and (3) treatment of the leachate prior to its discharge into [a creek] were all excluded preventative measures. [103] The court found coverage for costs for removal of escaped contaminants, [104] but, significantly, excluded coverage for costs for cleanup of the landfill to prevent the future escape of contaminants. [105] In this case, the federal court opinions in the underlying litigation could not be clearer that the reason why the barrels were repacked and then incinerated was the immediate threat of future harm. [106] As noted by the federal district court, the still bottom wastes had already been stored in barrels, which were stored in deteriorated sheds, on uncurbed concrete pads, and in open fields, with some of the drums stacked three high on deteriorating wooden pallets. [107] As in New Castle County, the wastes have been already been stored. The incineration actions are essentially the same as actions taken to clean up a landfill or dig a drainage ditch around a landfill to prevent further contamination. Hercules is simply paying for the costs required to remedy those `faults' in the current containment scheme that threaten nearby areas. [108] The storage of the wastes in barrels is analogous to storage in a landfill. Hercules has a duty to pay for measures taken to ensure safe disposal or safekeeping of waste that has already been stored but threatens to cause future damage. Hercules argues that there is a factual dispute regarding the nature of the incineration costs, precluding summary judgment. We disagree. What is at issue is not a factual dispute, but the legal conclusion to be drawn from the undisputed facts. For example, Hercules argues that a jury could find that the incineration costs were cleanup costs because the incineration cleaned or neutralized the hazardous material in the double-packed Vertac barrels by destroying all significant traces of dioxin that may have been contained in them. In a slightly different vein, Hercules argues that a jury could find that the mere presence of those barrels ... constituted property damage to the Vertac real estate, and that therefore the incineration restored the damaged property of a third party, Vertac, even though (as is usually the case with repair of existing property damage) it had the collateral effect of preventing further third-party injury. Hercules also claims that [O]nce the materials in the Vertac drums and the soils those drums had contaminated were double-packed into the secure Vertac barrels and warehoused, any threat of leaking or causing further third party property damage was eliminated. These arguments are at odds with the undisputed facts. As demonstrated above, the EPA cleanup for which the United States has sought to hold Hercules liable was overwhelmingly  not collaterally  concerned with removing the danger of future harm to nearby populations posed by the conglomeration of barrels. [109] It was certainly not a matter of restoring the soil in the barrels, as Hercules argues. Based on the undisputed facts, any restorative effect to third-party property was incidental to the preventative purposes of the incineration.