Pollution Legal Liability Insurance More Valuable as a Result of High Court Ruling

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Insurance companies cannot recover environmental cleanup costs paid to their insured under the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, from another Potentially Responsible Party (unless their insured had first pursued a separate claim to recover the cleanup costs from that PRP).

CERCLA was enacted in the wake of the discovery of toxic waste dumping such as Love Canal and Times Beach in the 1970s, The CERCLA process can be complex and toxic waste cleanup costs commonly run into the Millions of dollars, but the aim is the cleanup of toxic sites.

Insurance has become a mechanism for managing the risk of unanticipated costs incurred to clean up a property that an owner may have acquired not knowing it was contaminated or that may later become contaminated from migration of toxics onto the property. Among the most common of the insurance coverages is a pollution legal liability policy.

In this potentially far reaching case, the U.S. Supreme Court declined to review a decision of the Ninth Circuit Court of Appeals in Chubb Custom Insurance Company v. Space Systems/Loral, et al, leaving that decision in place.

Chubb had issued a pollution legal liability insurance policy to Taube-Koret Campus for Jewish Life covering, among other things, possible remediation costs related to certain pollution incidents on its property.

Pursuant to the policy, Chubb ultimately paid Taube-Koret $2.4 Million as reimbursement for Taube-Koret’s cleanup costs of contaminants that migrated onto its property. The gravamen of Chubb’s complaint was that Loral and others should be held jointly and severally liable for Taube-Koret’s costs because they released the toxic substances that migrated to Taube-Koret’s property from surrounding land that they owned and operated at various times.

The Ninth Circuit held that the insurance company lacked standing to bring suit under CERCLA § 107(a) because “it” did not incur any “costs of response” related to the cleanup of a polluted site, and because the common law principle of subrogation does not apply to § 107(a). The court held that the insurance company could not bring a subrogation claim under CERLCA § 112(c) because the company did not allege that the insured was a “claimant,” or that it had made a claim either to the Superfund or to a potentially liable party.

This is clearly among the most definitive CERCLA decisions in recent years. And the Supreme Court’s denial of certiorari review makes certain that the CERCLA statute allows recourse to recover money spent on environmental cleanups as expressly authorized by Congress when creating the law; and, having the result of making environmental insurance more valuable.

Article by Stuart Kaplow, appearing courtesy Green Building Law Update.

About Author

Walter’s contributions to CleanTechies over the past 4 years have been instrumental in growing the publications social media channels via his ongoing editorial and data driven strategies. He is the founder and managing director of Sunflower Tax, a renewable energy tax and finance consultancy based in San Diego, California. Active in the San Diego clean technology community, participating in events sponsored by CleanTech San Diego, EcoTopics, and Cleantech Open San Diego, Walter has also been a presenter at numerous California Center for Sustainability (CCSE) programs. He currently serves as an adjunct professor at the University of San Diego School of Law where he teaches a course on energy taxation and policy.

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