ELR Citation: ELR 20574
No(s). 85-71371 (E.D. Mich. Aug 30, 1990)

The court holds that insurers have no duty to indemnify policyholders under comprehensive general liability (CGL) insurance policies for cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) at four sites in New Hampshire. The court first rules that Michigan law governs, since this is a diversity action and the place of performance is Michigan. The court holds that resolution of whether cleanup costs are "damages" under CERCLA and the New Hampshire Hazardous Waste Management Act is not necessary. The court should defer to the Michigan Supreme Court, which has not previously addressed this issue, as the final arbiter. The court next holds that the policyholders failed to prove that the environmental damage at the sites was an "occurrence" resulting in property damage during the policy coverage periods. The insurers established that the policyholders expected property damage to result from their day-to-day manufacturing process, which brings their claims within the policy exclusion for property damage expected or intended by the insured.

As to the Farmington site, the court finds that the policyholders' theory that the damage resulted from two "sudden and accidental" chemical spills cannot explain the contamination at the site, and it is as likely that the contamination occurred after the policy on the site expired. Moreover, the court notes that substantial doubt exists whether the two alleged spills ever occurred. Policyholders continuously discharged pollutants into the ground during periods after policy coverage expired. The court next holds that even if the policyholders could prove an "occurrence" during the policy periods, insurers are not obligated to indemnify the policyholders because the policyholders expected the resulting damage. The insureds' present and former employees' affidavits to the contrary are self-serving and not credible. The disposal practices carried out at the Farmington site over the years reveal that the policyholders knew the consequences to the environment from their ongoing actions. Because intent may be presumed in cases involving intentional acts that can only result in damage, the policyholders' denial of expectation or intent flies in the face of common sense.

As to the Cardinal and Dover sites, the court holds that the policyholders expected the resulting property damage and that the insurers have no duty to indemnify for those cleanup costs. As to the Ottati & Goss site, the court holds that the policyholders did not meet their burden of proving an "occurrence" that resulted in property damage. Finally, the court holds that, although case law to the contrary exists, an insurer's duty to defend and its duty to indemnify are separate contractual obligations under Michigan law, and an insurer's duty to defend may continue until the underlying actions are resolved. There is no language in the CGL policies issued by the insurers that terminates the insurers' obligation to defend the insured when it is determined that there is no obligation to indemnify the insured. It would have been simple for the insurer to insert such clarifying language into the insurance contracts had that been the intent of the parties.

[A prior decision in this litigation is published at 19 ELR 20911.]

Counsel for Plaintiffs
Jeffrey Silberfield
Rivkin, Radler, Dunne & Bayh
EAB Plaza, Uniondale NY 11556-0111
(516) 357-3000

Michael G. Costello
Plunkett & Cooney
900 Marquette Bldg., Detroit MI 48226
(313) 965-3900

Counsel for Defendants
Eugene R. Anderson
Anderson, Kill, Olick & Oshinsky
666 Third Ave., New York NY 10017
(212) 850-0700

Robert B. Webster
Hill Lewis
100 Renaissance Center, 32nd Fl., Detroit MI 48243
(313) 259-3232