ELR Citation: ELR 21457
No(s). 5231 (Mass. Jun 14, 1990)

The court holds that an Environmental Protection Agency (EPA) notice letter to a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) constitutes a "suit" under comprehensive general liability insurance policies and thus triggers the insurer's duty to defend, but that a letter from a Massachusetts agency is not a suit under the policy. The court initially notes that factual questions remain concerning whether the releases were "sudden and accidental" under an exception to the policy's pollution exclusion clause. The court then holds that insurer has a duty to defend the claims asserted in the EPA letter, but not in the letter sent by the Massachusetts Department of Environmental Quality Engineering (DEQE). The EPA letter asserts that actual releases of hazardous substances occurred at the site, while the DEQE letter claims only a threatened release. Failure to respond to the EPA letter and become involved early in the settlement process could severely limit the insured's ability to limit its CERCLA liability. The court holds that the issue of whether cleanup costs incurred in response to property damage are "damages" within the meaning of the policy is a question of state law. Construing the policy in favor of the insured, the court holds that the DEQE letter, which seeks the removal of stored drums of allegedly hazardous materials, does not assert a claim for "damages on account of property damages" within the policy. However, the court holds that the EPA letter, which alleges soil and groundwater contamination from the release of hazardous materials, does assert a claim for damages on account of property damages. Soil and groundwater contamination involve property damage, and environmental cleanup costs incurred in response to demands of governmental agencies are "damages" when there has been a discharge of pollutants that has caused property damage. Thus, the insured PRP would have policy coverage for EPA cleanup costs in response to offsite contamination.

[A lower court decision is published at 19 ELR 20364.]

Counsel for Plaintiff
Paul F. Ware Jr.
Goodwin, Procter & Hoar
Exchange Pl., Boston MA 02109
(617) 570-1000

Counsel for Defendant
J. Norman O'Connor
Donovan & O'Connor
One Commercial Pl., P.O. Box 230, Adams MA 01220
(413) 743-3200

Before LIACOS, C.J., and WILKINS, ABRAMS, LYNCH, and GREANEY, JJ.