ELR Citation: ELR 21025
No(s). Y-84-4426 (D. Md. Aug 1, 1985)

The court holds that leakage of drums containing hazardous wastes is an "occurrence" under a general liability insurance policy, and the insurance company has a duty to defend a chemical solvent recycling company in an action under the Comprehensive Emergency Response, Compensation, and Liability Act to recover governmental costs expended at the facility. The court first rules that the dumping and resulting damages constitute an "occurrence" within the meaning of plaintiff's general liability insurance policy. The leaking of the waste into the environment and the resulting damage were "unexpected or unintended," even if the dumping itself was intentional. The court then rules that the insurance company's duty to defend starts when the potential for liability begins, rejecting defendant's argument that since damages were discovered years after the dumping occurred, there was no loss during the policy period. The court rules that the damages are property damages within the meaning of the policy, noting that other cases have so held.

The court also holds that plaintiff satisfied the policy's requirements that it give timely notice of its claims and take steps to prevent further injury. Although the dumping occurred in 1969 and plaintiffs did not inform the insurance company of its claim until 1981, plaintiffs gave notice "as soon as practicable." Defendant was notified within one week of the filing of the related main action and did not show that it suffered any prejudice. Plaintiff complied with the requirement that it prevent further injury, since its clay pit disposal site was considered the best disposal method at the time.

The court rules that policy exclusions for "property damage to the named insured's product" and "completed operations" do not apply. The wastes were not part of plaintiff's "product"; they were not intended for consumption, sale, or use by others. Although plaintiff no longer disposes of chemicals at the site in question, the "completed operations" exclusion does not apply since the burial of the drums at a separate site did not involve plaintiff's construction or service operations and the buried waste is not a product. The court also rules that exclusions for damages to work performed by the insured, damages arising out of operations performed for insured by independent contractors, and damages to wires occurring during the use of mechanical equipment for the purpose of grading land, do not apply.

The court rules that this action is not time barred. The statute of limitations began to run when plaintiffs should have known that defendant would not defend. That the insurance company refused to defend a 1970 tort suit for injuries caused by fumes emanating from plaintiff's plant did not mean that plaintiff knew defendant would not defend a hazardous waste cleanup action. Lastly, the court rules that a release signed in connection with the earlier action does not release defendant from the obligation to defend plaintiff in this suit.

Counsel for Plaintiff
Thomas R. Kline
Brown, Roady, Bonvillian & Gold
Suite 300, 1300 19th St. NW, Washington DC 20036
(202) 331-9420

Counsel for Defendant
Hartman J. Miller
Rollins, Smalkin, Richards & Mackie
401 N. Charles St., Baltimore MD 21201
(301) 727-2443