Court Opinion

ID: 8948543
Source: CourtListenerOpinion
Date Created: 2022-11-27 08:34:33.48502+00
Date Added: 2024-06-11T17:09:54.363525
License: Public Domain

McMILLIAN, Circuit Judge,
concurring in part and dissenting in part.
For the reasons discussed below, I would affirm the order of the district court, although for reasons different than those set forth in its memorandum order. This appeal presents difficult issues the resolution of which will have a substantial effect upon liability insurance cases involving hazardous waste disposal.
I agree with much of the analysis set forth in the majority opinion. Specifically, I agree that Missouri law applies to these insurance policies. Missouri is the state that has the most significant relationship with the comprehensive general liability (CGL) insurance policies at issue. Maj. op. at 1184, note 10. I also agree with the majority that environmental damage is “damage to property” and that the release into the environment of hazardous wastes may cause property damage not only to the actual owners of land, water and air, but also to the quasi-sovereign interests of governmental entities. Maj. op. at 1184-87.
I also agree with the majority, op. at 1184-93, that under Missouri law “the issue of liability under a policy insuring against ‘loss’ or ‘damage’ occurring during the policy period is determined by the time when the loss or damage occurs and not by the time of the negligent [or wrongful] act.” Hawkeye-Security Insurance Co. v. Iowa National Mutual Insurance Co., 567 S.W.2d 719, 720 (Mo.Ct.App.1978), citing Kirchner v. Hartford Accident & Indemnity Co., 440 S.W.2d 751 (Mo.Ct.App.1969).
Given the specific facts in the present case, I further agree that property damage “occurred” in mid-July 1971, at a time within the policy period of the first CGL policy. Maj. op. at 1191. Here, the crucial events — the wrongful act, the release of hazardous wastes into the environment (“property damage”) and the “occurrence” —all happened virtually simultaneously. In some hazardous waste disposal cases, the act of disposal may cause the release of hazardous wastes into the environment at some point in the future. For example, the initial disposal may not result in a release of hazardous wastes within the policy period but much later after the policy has lapsed. In the present case, however, the disposal of the hazardous wastes immediately resulted in their release into the environment and, because by definition hazardous wastes are extremely harmful, there was clearly an “occurrence” of “property damage” within the policy period. Here, the geological and hydrological characteristics of the site made it unsuitable for the disposal of hazardous wastes; the hazardous wastes had been stored in drums that at the time of disposal were in a deteriorated condition; the drums were simply buried in an excavated trench; a strong odor emerged shortly thereafter and persisted for several months. Thus, the “occurrence” issue is something of a false issue on these facts.
I do not agree, however, with the majority that “cleanup costs under CERCLA are compensatory damages for ‘property damage’ within the meaning of the CGL policies.” Maj. op. at 1189 (emphasis added). *1194I would hold that under these CGL policies the insurer has no obligation to pay cleanup costs because cleanup costs constitute equitable monetary relief but not legal damages.
“An insuring obligation is a contract, and coverage exists only if assumed by the terms of the policy.” Aetna Casualty & Surety Co. v. Hanna, 224 F.2d 499, 503 (5th Cir.1955). Here, under the terms of the CGL policies, the insurer is required to “pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... B. property damage to which this insurance applies caused by an occurrence____” “The obligation of the insurer to pay is limited to ‘damages,’ a word which has an accepted technical meaning in law.” Aetna Casualty & Surety Co. v. Hanna, 224 F.2d at 503. “The word ‘damages’ is not ambiguous in the insurance context. Black letter insurance law holds that claims for equitable relief are not claims for ‘damages’ under liability insurance contracts.” Maryland Casualty Co. v. Armco, Inc., 643 F.Supp. 430, 432 (D.Md.1986), citing Haines v. St. Paul Fire & Marine Insurance Co., 428 F.Supp. 435, 439-41 (D.Md.1977), Aetna Casualty & Surety Co. v. Hanna, 224 F.2d at 503-04, and Desrochers v. New York Casualty Co., 99 N.H. 129, 106 A.2d 196, 198-99 (1954). See also Garden Sanctuary, Inc. v. Insurance Co. of North America, 292 So.2d 75, 77-78 (Fla.Ct.App.1974); Ladd Construction Co. v. Insurance Co. of North America, 73 Ill.App.3d 43, 29 Ill.Dec. 305, 307-08, 391 N.E.2d 568, 570-73 (1979). But see United States Aviex Co. v. Travelers Insurance Co., 125 Mich.App. 579, 336 N.W.2d 838, 843 (1983) (rejecting analysis in Aetna Casualty & Surety Co. v. Hanna as interpreting “damages” too narrowly).
“Traditionally, courts have found no insurance coverage for the costs of complying with an injunction even in cases where the suits could have been brought for damages.” Maryland Casualty Co. v. Armco, Inc., 643 F.Supp. at 434. Here, the federal government in the EPA lawsuit and the state of Missouri in the IPC lawsuit seek recovery of cleanup or response costs pursuant to CERCLA § 107(a)(4)(A), 42 U.S.C. § 9607(a)(4)(A). These actions are essentially equitable actions for monetary relief in the form of restitution or reimbursement of costs. See United States v. Northeastern Pharmaceutical & Chemical Co., 810 F.2d 726, at (8th Cir.1986). The federal and state governments do not seek recovery of “damages for injury to, destruction of, or loss of natural resources,” pursuant to CERCLA § 107(a)(4)(C) (emphasis added), 42 U.S.C. § 9607(a)(4)(C) (emphasis added).
In short, I cannot agree that cleanup costs are the equivalent of “damages,” Maryland Casualty Co. v. Armco, Inc., 643 F.Supp. at 435. CERCLA defendants are liable for both cleanup costs under CERCLA § 107(a)(4)(A), 42 U.S.C. § 9607(a)(4)(A), and for damages to natural resources under CERCLA § 107(a)(4)(C), 42 U.S.C. § 9607(a)(4)(C); in a particular case, the measure of liability for cleanup costs and for damages to natural resources may be the same. Maj. op. at 1187-1190 & note 20, citing Jack L. Baker Cos. v. Pasley Manufacturing & Distributing Co., 413 S.W.2d 268, 273-74 (Mo.1967). Merely because “no practical difference exists between the sums which the insured [, that is, the CERCLA defendant,] must pay the court under some equitable remedy as opposed to sums payable for damages,” Maryland Casualty Co. v. Armco, Inc., 643 F.Supp. at 435 (emphasis added), does not mean that the sums constitute equivalent obligations to pay on the part of the insurer.
In United States Aviex Co. v. Travelers Insurance Co., 336 N.W.2d at 843, the court described as “merely fortuitous” from the standpoint of either plaintiff [insured] or defendant [insurer] whether the state chooses to pursue an equitable remedy rather than to sue to recover damages, because “the damage to the natural resources is simply measured in the cost to restore the [environment] to its original state.” In my view, that analysis must be limited to the liability of the insured and *1195the measurement of that liability under environmental laws like CERCLA. The liability of the insurer is a distinct issue, and I would argue that, at least with respect to the liability of the insurer under the CGL policies, whether the federal and state governments choose to pursue equitable remedies or to recover damages is not “merely fortuitous.”
I also agree that the insurer has no duty to defend the IPC lawsuit because the property damage occurred in 1974 after the policies lapsed, maj. op. at 1192-1193 and because, as discussed above, cleanup costs are not “damages.”
I also agree that the issues in the Capstick lawsuit require additional factfinding and analysis and are therefore unsuitable for summary disposition. Maj. op. at 1193. Because the private individuals in Capstick are seeking damages for personal injury and property damage due to the improper disposal of hazardous wastes and not cleanup costs consistent with the national contingency plan pursuant to CERCLA § 107(a)(4)(B), 42 U.S.C. § 9607(a)(4)(B), I would hold the insurer cannot refuse to defend the Capstick lawsuit for that reason.
Accordingly, I would affirm the order of the district court.