Thursday, January 28, 2010

Appeals Court holds that exception to pollution exclusion allows coverage for common law liability, even when such liability overlaps 21E liability

In Clean Harbors Envtl. Servs., Inc. v. Boston Basement Techs., Inc., 75 Mass. App. Ct. 709 (2009), Basement Technologies, while installing a waterproofing system in the home of Silva, broke a heating oil line and caused 150 gallons of oil to leak into Silva's basement. The oil collected in a sump pump, which then pumped the oil into Silva's yard.

Basement Technologies hired Clean Harbors to clean up the oil spill. Clean Harbors billed Basement Technologies $12,638.40 for its services.

The Massachusetts Department of Environmental Protection issued a notice of responsibility to Basement Technologies pursuant to G.L. c. 21E, which identified Basement Technologies as a potentially responsible party, and therefore strictly liable, for the costs of remedial actions at the property.

Basement Technologies sought payment of Clean Harbors' invoice under its commercial general liability policy with Admiral. Admiral denied the claim on the basis of a pollution exclusion.

The pollution exclusion excluded coverage for "(a) Request, demand, order or statutory or regulatory requirement that any insured or others . . . in any way respond to, or assess the effects of, 'pollutants'; or (b) Claim or 'suit' by or on behalf of a governmental authority for damages . . . in any way responding to the effects of 'pollutants.'"

The pollution exclusion had an exception for "damages because of 'property damage' that the insured would have in the absence of such request, demand, order or statutory or regulatory requirement, or such claim or 'suit' by or on behalf of a governmental authority."

The Massachusetts Appeals Court noted that absent the action by the DEP, Basement Technologies would still be liable in negligence to the property owner for damages caused by the oil spill.

Admiral argued that the Clean Harbors expenses were not covered, because those costs were part of the response actions required by the DEP. Basement Technologies argued that damages recoverable against it at common law, including clean up costs, were covered.

The court noted that liability under 21E often exceeds common law liability. It concluded that the exception to the pollution exclusion extends coverage to common law liability which would exist if there was no liability under 21E, even if liability under common law and 21E overlap.

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