Opinion ID: 2634716
Heading Depth: 4
Heading Rank: 2

Heading: Analysis to Determine Whether Qualified Pollution Exclusion Clauses Preclude Coverage

Text: Having established that the court of appeals prematurely ended its inquiry into whether the qualified pollution exclusion clauses preclude coverage, we now explain that, under Compass, to decide whether qualified pollution exclusion clauses preclude coverage, we ask whether an insured placed wastes in unlined disposal areas with the expectation contaminants would be fully contained through filtration. We ultimately conclude that to determine whether the clauses preclude coverage in this case, we only must ask whether Cotter expected or intended that pollutants migrate into the groundwater or onto neighboring property. In Compass, we explained that an insured's expectation of containment is critical to discerning whether a relevant polluting event occurred. There, we defined a relevant polluting event as the release of pollutants from a containment area. Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 617 (Colo.1999). We then instructed courts to focus on the insured's intent to discharge pollutants from the containment area to decide whether a relevant polluting event occurred. Id. (citing Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1092 (Colo.1991)). We now conclude from these statements that the necessary inquiry to determine whether a relevant polluting event occurred is whether an insured placed wastes in a disposal area with the expectation that the area would fully contain any contaminants through filtration. If an insured placed wastes in unlined ponds with such an expectation, but contaminants are not contained, a relevant polluting event occurs when contaminants seep beyond the intended containment area. Here, Cotter advances this very argument, claiming that it expected contaminants to be contained through filtration, but that contaminants seeped outside of the containment area. Although it may be difficult to precisely define the boundaries of the containment area associated with Cotter's unlined ponds, we need not struggle to do so because a relevant polluting event occurred either if contaminants reached neighboring property through soils or if contaminants migrated into the groundwater. In this case, we conclude a relevant polluting event occurred if the contaminants migrated off Cotter's property, because Cotter's comprehensive general liability policies only provide coverage for damage to another's property. See 12 Couch on Insurance § 172:26 (Lee R. Russ & Thomas F. Segalla eds., 3d ed.1997). Additionally, the parties do not dispute that a relevant polluting event occurred when contaminants migrated off Cotter's property. Cotter has maintained that it intended to contain contaminants and did not expect or intend their escape off its property. Similarly, the insurers accept Cotter's argument that it placed wastes in containment areas on its property, but contend that Cotter did not intend to fully contain wastes and thus expected the escape of contaminants off its property. [7] Consequently, we conclude that a relevant polluting event occurred in this case if the contaminants migrated off Cotter's property. In addition to concluding that a relevant polluting event occurred if contaminants migrated off Cotter's property, we can also conclude that a relevant polluting event occurred if contaminants reached groundwater. Unlike soils underneath tailings ponds that were understood to trap contaminants, groundwater can never constitute a containment area. Once contaminants reach groundwater, the contaminants will continually migrate. Therefore, because contaminants cannot be contained in groundwater, a relevant polluting event will always occur when contaminants reach groundwater. For these reasons, we conclude that a relevant polluting event occurred if contaminants migrated either off Cotter's property through the soil or into the groundwater. Thus, to determine whether coverage exists, we look to whether the relevant polluting event was unexpected and unintended. If Cotter placed wastes in the tailings ponds with the expectation contaminants would remain within its property and out of the groundwater, but they in fact migrated off Cotter's property or into the groundwater, then the relevant polluting event was unexpected and unintended. If Cotter placed the wastes in tailings ponds with the expectation that wastes would migrate off its property or into the groundwater, then we can conclude that the relevant polluting events were expected and intended. Therefore, to decide whether the qualified pollution exclusion clauses preclude coverage, the trial court can simply inquire whether Cotter expected or intended contaminants to migrate off its property or into the groundwater.