Nebraska Supreme Court Rules oN Pollution Coverage Issues
One of the perils of appellate advocacy is asking a court to take on too many complicated issues at once. Inevitably, some issues don't get the attention they deserve or are dealt with as an after-thought. Such is the case with an environmental coverage opinion that the Nebraska Supreme Court issued today in Dutton-Lainson Co. v. Continental Ins. Co., No. S-09-164 (Neb. February 5, 2010).
First the headlines:
--Insured's shipment of drums to various landfills all arose out of one "occurrence" (handling of solvents)
--Loss allocated on a "time on the risk" basis (months)
--Insured's agreement to accept liability before giving notice deemed to be prejudicial.
--PRP letter is a "suit"
--Insured's dumping of drums was an "accident."
The discussion of allocation is particularly interesting. It appears that the court was assuming that only years in which disposal activity actually took place should be triggered. As a result, it ruled that if each of the sites was treated as a separate occurrence, the insured would lose CNA's coverage, since the disposal activity at some sites ended before its policies were issued. Conversely, the court rejected CNA's argument that the trial court should have tacked 30 years onto the denominator for allocation, as the clean up won't be finished until 2017. The Supreme Court ruled that the trial court correctly looked to the period (1947-87) when the contaminants were deposited, rather than the estimated time for the clean up. So is this an "exposure" trigger ruling?
The court also suggests that it might have agreed with Dutton that a "joint and several" approach was appropriate if the insured could have shown the amount of damage allocable to each year in question. But isn't the basic premise underlying the policyholders argument that long-tail claims involve indivisible injuries that all of their insurer are jointly liable for if they owe anything at all?
The "occurrences" analysis is also interesting. Even though the sites in question were operated independently of each other, the court ruled that they all involved the same underlying cause, namely the insured's manufacturing processes, without which the insured would not have had waste TCE/TCA that had to be disposed of. This is, at least to the best of my knowledge, the first state supreme court in which separate waste sites have been held to arise out a single "occurrence." Given the growing number of rulings on this issue, the limited case authority cited (two opinions from the Third Circuit and an old federal trial opinon from Massachusetts) is odd indeed.
Bottom line: a great result but one that reflects some incomplete analysis that may create headaches for carriers in other cases in the future.
