ELR Citation: ELR 20768
No(s). 90-1112 (10th Cir. Jan 8, 1992)

The court holds that under Colorado law, the pollution exclusion clause in a comprehensive general liability insurance policy bars coverage for environmental response costs sought by the U.S. Environmental Protection Agency (EPA) in connection with a wood product company's discharge of waste materials into containment ponds. EPA filed suit under the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation, and Liability Act against the limited partnership that succeeded the wood product company's rights and obligations. The court first holds that the jury properly determined that there was an "occurrence" under the policy. The district court properly instructed the jury to apply a subjective standard in determining whether the insured expected or intended the contamination resulting from its disposal practices and in assigning the burden to the insurance company to prove that the insured knew its disposal practices would cause environmental damage. Under Colorado law, environmental contamination constitutes an occurrence unless the evidence proves that the insured knew at the time that its practices would result in environmental damage. The court next holds that the policy's pollution exclusion clause bars coverage. The court holds that the company's placement of waste into the containment ponds was a "discharge" under the pollution exclusion clause. Whether the company intended the waste to seep into the groundwater and cause damage after the initial discharge into the land is irrelevant. The court holds that the property damage arose from the discharge. The court also holds that the initial discharge was not "sudden and accidental" under the exception to the pollution exclusion clause. The company admits that it intended to discharge the chemicals into the ponds and that the discharge was not unexpected.

Counsel for Defendant-Appellant
Thomas L. Roberts, Susan T. Smith, Joanne M. Zboyan
Pryor, Carney & Johnson
6200 S. Syracuse Way, Ste. 400, P.O. Box 22003, Englewood CO 80222
(303) 771-6200

Counsel for Plaintiffs-Appellees
Brooke Jackson, Camron R. Kuelthau
Holland & Hart
555 17th St., Ste. 2900, P.O. Box 8749, Denver CO 80201
(303) 295-8000

Elizabeth A. Phelan
Dubofsky & Phelan
1881 9th St., Ste. 210, Boulder CO 80302
(303) 447-3510

Before TACHA and SETH, Circuit Judges and BRATTON, District Judge.^*