ELR Citation: ELR 20577
No(s). 59829 (Mich. Ct. App. May 5, 1983)

The court rules that a liability insurer is obligated to indemnify its insured for the costs of cleaning up groundwater contaminated as a result of a fire on the insured's overlying property. Rejecting appellant's contention that the trial court erred in issuing a declaratory judgment, the court rules that an actual controversy existed because appellee was faced with the threat of legal action by the state Department of Natural Resources. Next, the court affirms the trial court's order requiring appellant to pay for the costs of groundwater studies performed prior to entry of the judgment. Appellant waived its right to request an administrative hearing and it cannot now argue that its due process rights were violated. The court also rules that the policy's coverage of "liability imposed by law . . . as damages" includes costs imposed by equitable or injunctive orders to remedy the contamination. Such costs are equivalent to court imposed damages because the state could seek either damages or an injunction. Finally, the court rules that under the reasonable use doctrine, groundwater is not owned by the owner of the overlying property and, therefore, does not fit within the policy's exclusion of property owned by the insured.

Counsel for Appellant
Theodore E. Troff
Fisher, Troff & Fisher
Law & Title Bldg., P.O. Box 67, St. Joseph MI 49085
(616) 983-0161

Counsel for Appellee
William J. Fisher III
Tolley, Fisher & Verwys
5650 Foremost Dr. SE, Grand Rapids MI 49506-7081
(616) 942-8090

Joined by Burns and MacKenzie, JJ.