Opinion ID: 1438987
Heading Depth: 1
Heading Rank: 5

Heading: the majority's holding violates public policy

Text: In addition to misapplying pertinent rules of construction, the majority opinion also ignores relevant public policy considerations. [T]his case implicitly presents a grave question of policy, namely who should bear the cost of polluting our environment[.] Majority, at 876 n. 1. In interpreting an insurance contract, the court will look to public policy expressed in a relevant legislative enactment. State Farm Gen. Ins. Co. v. Emerson, 102 Wn.2d 477, 481, 483, 687 P.2d 1139 (1984). Nevertheless, the majority opines that [i]t is important to note the absence of public policy in the construction of insurance contracts. Majority, at 876 n. 1. The majority's interpretation of these insurance policies ignores the public policy expressed by the United States Congress in enacting CERCLA.
Congress enacted CERCLA's extraordinarily novel liability provisions in order to impose the cost of cleaning up hazardous waste on those who have profited or otherwise benefited from commerce involving [hazardous] substances. S. Rep. No. 848, 96th Cong., 2d Sess. 98, reprinted in Senate Comm. on Env't & Pub. Works, Legislative History of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, Public Law 96-510, at 308, 320, 97th Cong., 2d Sess. (1980) (statement of EPA administrator Costle). Congress intended that those who financially benefited from polluting activity internalize the health and environmental costs of that activity into their cost of doing business. S. Rep. No. 848, at 34, 13 n. 2. This congressional intent is summarized in the slogan make the polluter pay. See Developments in the Law, Toxic Waste Litigation, 99 Harv. L. Rev. 1458, 1477 (1986). Congress clearly recognized that corporate polluters have reaped enormous benefits from their past inadequate waste disposal practices. These practices created significant short-term savings for polluters, resulting in higher profits for them, but caused enormous long-term harm in the form of environmental degradation. CERCLA response cost liability forces these polluters to disgorge these profits. The insurers from whom these polluters now seek indemnification, in contrast, did not charge a premium to cover response cost liability. See Note, CERCLA Cleanup Costs Under Comprehensive General Liability Insurance Policies: Property Damage or Economic Damage, 56 Fordham L. Rev. 1169, 1176 (1988). As Congress itself has recognized CERCLA's innovative provisions were simply unforeseeable at the time these policies were issued. See Superfund Amendments and Reauthorization Act of 1986, H.R. Rep. No. 253(I), 99th Cong., 2d Sess. 1, 109, reprinted in 1986 U.S. Code Cong. & Ad. News 2835, 2891 (disapproving judicial trends regarding policy interpretation that have called upon old policies to pay for claims that were not envisioned at the time the policies were written). By requiring these insurers to indemnify the corporate polluters for the cost of cleanup, the majority permits the polluters to both reap the benefits and avoid the costs attributable to their pollution. This directly violates the congressional intent that polluters internalize their pollution costs. See Brett, Insuring Against the Innovative Liabilities and Remedies Created by Superfund, 6 J. Envtl. L. 1, 52 (1986).
The majority holding also violates public policy because it requires insurers to insure liability which is fundamentally uninsurable. The innovative new features of CERCLA's liability scheme simply prevent insurers from calculating and charging premiums that bear any real relation to the risk of CERCLA liability. CERCLA's liability provisions differ from ordinary tort liability in many important respects. First, CERCLA imposes an especially strict liability upon responsible parties. Liability attaches even to those who nonnegligently dispose of a hazardous substance using state of the art procedures. See, e.g., United States v. Monsanto Co., 858 F.2d 160 (4th Cir.1988); United States v. Price, 377 F. Supp. 1103, 1114 (D.N.J. 1983). Second, CERCLA liability is retroactive. Responsible parties who disposed of hazardous waste in a completely legal, nonactionable manner before the enactment of CERCLA are now potentially liable for response costs. See, e.g., United States v. Hooker Chems. & Plastics Corp., 680 F. Supp. 546 (W.D.N.Y. 1988). Third, CERCLA regularly makes individuals liable for harms they did not cause. CERCLA imposes joint and several liability upon every responsible party connected with a hazardous waste site. 42 U.S.C. § 9607. Therefore, both the government and private parties may recover response costs from a responsible party with virtually no showing of causation. 1 C. Schraff & R. Steinberg, RCRA and Superfund: A Practice Guide with Forms, ¶ 2.05[3], at 2-26 (1989). See also New York v. Shore Realty Corp., 759 F.2d 1032 (2d Cir.1985) (CERCLA requires no showing of causation). Fourth, private citizens without any proprietary interest in the property harmed have standing to sue to enforce CERCLA. 42 U.S.C. §§ 9607(a)(4)(B), 9659(a). To recover response costs, a private party need only show an outlay of costs and that the costs were incurred consistently with the National Contingency Plan promulgated by the EPA. See Brett, supra at 16 & n. 87. Fifth, CERCLA authorizes the initiation of response action in response to the threat of a hazardous waste release. 42 U.S.C. § 9604. For example CERCLA authorizes the government to recoup the costs of health assessment and health effects studies. 42 U.S.C. § 9607(a)(4)(D). Therefore, responsible parties may be held liable for CERCLA response costs even in the absence of any actual harm to persons or property. See, e.g., United States v. Northeastern Pharmaceutical & Chem. Co., 579 F. Supp. 823 (W.D. Mo. 1984). Sixth, CERCLA response cost liability is inevitable. Every hazardous waste containment system eventually will leak. Because CERCLA imposes liability even if hazardous waste is disposed of in a state of the art manner, every responsible party should expect eventually to be subject to CERCLA response liability. Seventh, CERCLA response cost liability is essentially boundless, both in amount and duration. The EPA has an almost unfettered discretion to incur and recoup whatever response costs it believes are necessary to clean up a site. 42 U.S.C. §§ 9604, 9621(a). Moreover, because the EPA currently refuses to grant settling parties releases from further litigation, a responsible party's liability exists indefinitely into the future regardless of how much it has paid to clean up a site. See Developments in the Law, Toxic Waste Litigation, 99 Harv. L. Rev. 1458, 1509 (1986). But see 42 U.S.C. § 9622(f) (providing EPA with discretion to enter into covenant not to sue). CERCLA's broadly worded provisions mean that insurers have no way of predicting what insured conduct may lead to liability. For example, CERCLA defines pollutant or contaminant to include any element, substance, compound, or mixture ... which after release into the environment ... will or may reasonably be anticipated to cause ... [a toxic effect]. 42 U.S.C. § 9601(33). Because the toxic characteristics of any substance are dose dependent: [t]he application of the statute is highly dependent upon ad hoc and post hoc characterizations of a substance as a pollutant or contaminant. ... [Therefore], a party has literally no ability to conform his conduct to the requirements and prohibitions of the Act. A party also has little or no ability to avoid liability for the release of a pollutant or contaminant because he cannot know, in advance, whether any release will constitute actionable or prohibited conduct under CERCLA. C. Schraff & R. Steinberg, RCRA and Superfund: A Practice Guide With Forms ¶ 1.02[5], at 1-11 (1989). CERCLA's other broadly defined terms create similar problems. See, e.g., RCRA and Superfund, ¶ 1.07. CERCLA's conferral of standing upon parties who do not satisfy traditional requirements multiplies this uncertainty. The broad liability provisions give enormous discretion to the responding party in deciding how to incur response costs with virtually no limit on the amounts recoverable. Brett, supra at 18. CERCLA's retroactive strict liability provisions result in liability for the failure to reduce risks that cannot be discovered through the exercise of reasonable care. An insurer who undertakes to insure response cost liability will therefore be liable for risks that are undiscovered and largely undiscoverable at the time the actions are taken. Because the magnitude of such risks is inestimable  they are unknowable when insured against  it is impossible confidently to set a price for insurance against them. Abraham, Environmental Liability and the Limits of Insurance, 88 Colum. L. Rev. 942, 958 (1988). Another factor making response costs particularly difficult to insure is CERCLA's imposition of liability for harms a party did not cause. Such liability: creates special uncertainty, because the probability of liability  and of consequent loss for the insurer  is affected by the behavior of nonpolicyholders whom the insurer cannot necessarily identify in advance. When the scope of liability is potentially very large, that uncertainty is magnified.... .... ... In order to insure against this threat, insurers would have to make nearly impossible calculations based on both the potential behavior of the other parties whose activities might combine with the insured's to cause damage, and on the probability that these parties would prove to be judgment proof. Abraham, at 959-60. Finally, the inevitability of CERCLA response costs renders them totally uninsurable under traditional occurrence-type policies (such as the ones at issue in this case): [I]nsurance contracts do not ordinarily cover economic detriment of a type occurring so regularly in relation to an insured enterprise or activity that it is commonly regarded as a cost rather than a risk of that activity or enterprise. Second, insurance contracts do not cover economic detriment that is not fortuitous from the point of view of the person (usually the insured) whose detriment is asserted as the basis of the insurer's liability. (Footnote omitted.) R. Keeton, Insurance Law § 5.3(a), at 278-79 (1971). For example, it is an elemental proposition under Washington law that insurance policies do not cover losses which are expected or intended from the standpoint of the insured, this generally being ... against public policy to insure. Detweiler v. J.C. Penney Cas. Ins. Co., 110 Wn.2d 99, 105, 751 P.2d 282 (1988). Thus, where an insured took a calculated business risk that pollution from a sewage plant would contaminate nearby property, we have held that the insured could not look to its insurer to indemnify it for its liability resulting from its failure to prevent the event. Tieton v. General Ins. Co. of Am., 61 Wn.2d 716, 722, 380 P.2d 127 (1963). Because no containment system can permanently prevent the escape of hazardous waste, polluters who dump their wastes at the very least take a calculated business risk of eventually incurring CERCLA response cost liability. A congressionally authorized study group report on the availability of private insurance for CERCLA liability recognizes that CERCLA's radically unique approach to the imposition of response costs renders the insured's potential liability so limitless that such liability cannot be assessed by prospective insurers seeking to set premium levels. See U.S. Dep't of Treasury, Adequacy of Private Insurance Protection Under Section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980: A Report in Compliance With Section 301(b) of P.L. 96-105, at 83-87, 94-95 (June 1983). In fact, since the enactment of CERCLA, pollution insurance has become unavailable in any insurance market. E.g., Brett, at 44; Smith, Weishaar, Ledbetter & Light, Hurricane SARA: An Introduction to the 1986 Superfund Amendments, Toxics L. Rep. 1104, 1110 (1987). The fact that insurers are unable to provide coverage for response cost liability even today highlights the fundamental unfairness of finding such coverage in policies written years before CERCLA's radical new liabilities could possibly have been anticipated.