ELR Citation: ELR 20442
No(s). 90-SC-242-DG (Ky. Jul 3, 1991)

The court holds that comprehensive general liability insurance policies purchased for three wood preserving treatment plants require the insurers to defend and indemnify the plants' owner against claims under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) arising from contamination to areas surrounding the plants, unless the insurers can prove that the insured subjectively expected or intended the property damage. The court first holds that the lower court inappropriately granted summary judgment for the insurers. The record indicates that there are substantial disputed areas of fact, including the factual question of intent, and the record does not compel only one reasonable inference. The court further holds that in concluding that there was no genuine issue of material fact concerning the plant owner's expectations and intent, the testimony was impermissibly weighed and the evidence of damage was disregarded. The court holds that contamination at the plants cannot be dismissed as de minimis, because the policies did not contain such a clause.

The court holds that the plant owner is entitled to coverage under its policies unless it had specific and subjective intent to cause the pollution giving rise to the CERCLA claims. The policies state that the insurer has a duty to indemnify or defend the insured for damage if the damage was neither expected nor intended from the standpoint of the insured. The policies do not define "expected" or "intended," but those are common words and clearly indicate subjective awareness. The court further holds that the insurers did not abide by their independent duty of good faith and fair dealing even if they were not obliged to defend or indemnify the plant owner. Having purchased the policies and having permitted the insurers to defend it, the plant owner may reasonably expect that the insurers will abide by the contract.

Counsel for Appellant
Lively M. Wilson
Stites & Harbison
600 W.Main St., Louisville KY 40202
(502) 587-3400

Counsel for Appellees
Charles S. Cassis, Mark R. Feather
Brown, Todd & Heyburn
1600 Citizens Plaza, Louisville KY 40202
(502) 589-5400

William S. Bowman
Stiles & Bowman
Ste. 550 Starks Bldg., Louisville KY 40202
(502) 587-6943

STEPHENS, C.J., and COMBS, LAMBERT, and SPAIN, JJ., concur.

LEIBSON, J., files a separate opinion concurring in part, dissenting in part, in which REYNOLDS, J., joins.