ELR Citation: ELR 21135
No(s). 91-F-1984 (D. Colo. Nov 9, 1992)

The court holds that an insurer had a duty under Colorado law to defend and indemnify a company that sold recycled wet-cell batteries for defense costs and attorney fees in an action arising out of a lawsuit brought against the company under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court first holds that the insurer had a duty to defend the company in the underlying CERCLA suit, because the incidences were unexpected and unintended from the standpoint of the insured, there being no evidence that the insured knew that environmental damage would result from its sale of the batteries, and an "occurrence" exists within the meaning of the comprehensive general liability (CGL) policies issued by the insurer to the insured. Moreover, CERCLA "response costs" are "damages under the CGL policies as the latter term would be defined by the Colorado Supreme Court, such that the insured incurred damages as that term is defined in the policies when it was sued for CERCLA response costs. Also, the pollution exclusion clause in each of the policies does not provide a basis for the insurer to avoid its duty to defend, because the pollution was "sudden and accidental" from the perspective of the insured. The court holds that the insurer must indemnify the insured because the insured's settlement of its CERCLA liability for less than one percent of its $6 million joint and several liability exposure was reasonable. Although the insured has not fully established that the environmental injury occurred during the policies' periods, the court finds that public policy and practicality require the conclusion that the insurer forfeited its right to establish that the underlying claims were outside the policies' coverage when it failed to comply properly with its duty to defend. The court also holds that the insured can recover the costs and attorney fees in bringing this lawsuit, because the insurer's failure to comply properly with its duties requires that it reimburse the insured for these expenses. Finally, the court holds that the insurer failed to submit evidence that there exist genuine issues of material facts regarding the validity and supportability of the numerous defenses it raised.

[A prior decision in this litigation is published at 23 ELR 21091.]

Counsel for Plaintiff
Edward J. McGrath, William D. Watson, Robert Tuchman
Holme, Roberts & Owen
1700 Lincoln St., Ste. 4100, Denver CO 80003
(303) 861-7000

Counsel for Defendant
Thomas L. Roberts, John L. Wheeler, Susan Speichinger
Pryor, Carney & Johnson
6200 S. Syracuse La., Ste. 400, Englewood CO 80111
(303) 771-6200