Superior Court notes lack of standard for imminent threat of offsite migration of contaminants

From 1853 to 1952 FG&E owned and operated a plant that manufactured gas. The manufacturing process generated hazardous materials at the site.

FG&E filed a lawsuit seeking a declaration that several primary liability policies issued by OneBeacon and Travelers provide coverage for cleanup costs.

The insurers, relying on an owned property exclusion, argued that coverage is triggered for any policy period only if there was off-site property damage during that policy period.

In Fitchburg Gas & Elec. Light Co. v. OneBeacon Am. Ins. Co., 2010 WL 5490148 (Mass. Super.), Judge Neel of the Massachusetts Superior Court noted that under Massachusetts law coverage is triggered for a cleanup designed to prevent further migration of contaminants to off-site property, even when such migration has not yet occurred. However, there is no standard by which such a threat of migration is to be measured.

This case, however, would not set that standard. Noting that there were competing expert affidavits about whether the contaminants have or would migrate offsite, Judge Neel denied summary judgment to both sides.

Finishing up on Whittaker:

Finishing off my discussion of Whittaker Corp. v. Am. Nuclear Insurers, in which historic owners of property sought insurance coverage for costs associated with the property being declared a superfund site:

Having found that Endorsement 112 could not be considered, the court returned to the question of whether ANI had a duty to defend under the Facility Form. The court addressed three issues, all of which are so well-established under Massachusetts jurisprudence that there is no need to tarry over them.

First, the court held that the demand from the EPA that the plaintiffs investigate the contamination, and its accompanying warning of potential liability for response costs, gave rise to a duty to defend.

Second, the court then turned to Exclusion (f),the owned property exclusion, which barred coverage for "property damage to any property at the location." It held that the exclusion does not exclude coverage for costs incurred to remediate or prevent migration of contaminants off-site.

Third, the court held that the EPA notice, which demanded investigation and remediation of contamination "that exists at or near the Site," but did not directly allege any off-site migration, gave rise to a duty to defend because it raised the possibility that the owned property exclusion did not apply.

U.S. District Court holds that language of policy endorsement trumps reason endorsement was written

In my last post I started discussing Whittaker Corp. v. Am. Nuclear Insurers, __ F.2d __, 2009 WL 4342512 (D. Mass.).

Whittaker and Textron were former owners and operators of property that was declared a superfund site because of nuclear waste. They sought coverage for associated costs from American Nuclear Insurers, or ANI. At issue was an endorsement called a Facility Form in which ANI promised to pay "all sums which the insured shall become legally obligated to pay as damages because of . . . property damage arsing from the nuclear energy hazard."

ANI argued that there was no coverage for the loss. It argued that the Facility Form must be viewed in the context in which it was drafted. It contended that the Facility Form is a "creature of statute," intended to carry out the legislative goals of the Price Anderson Act, which was conceived in response to "the risk of potentially vast liability in the event of a nuclear accident of sizable magnitude." The Act required nuclear power licensees to purchase primary insurance of $60 million. The government agreed to act as an excess insurer, providing licensees with $500 million of indemnity over the primary policy. Licensees were relieved of any additional liability regardless of fault or causation.

ANI claimed that it developed the Facility Form to meet the primary policy requirement of the Price Anderson Act. It argued that if the Facility Form is interpreted to provide coverage for the "conventional" environmental cleanup, its ability to provide coverage for third-party claims in the event of nuclear catastrophe would be severely and possible fatally jeopardized.

The court rejected that argument. It noted that the Price Anderson Act is not a "nanny" act, in that it does not prohibit insurers from undertaking to provide coverage to nuclear plant operators for "conventional" environmental harm should they choose to do so. It did not dictate the terms of the Facility Form.

The court held that coverage under the Facility Form is determined by its terms, and that pursuant to those terms coverage was initially triggered.

As I will discuss in my next post, however, there was no coverage because the loss came within an exclusion.