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JEFFERSON CITY, Mo.-The costs of a government-ordered cleanup of a polluted site are "damages" and are covered by general liability insurance policies, the Missouri Supreme Court has ruled.
In the ruling, the court rejected an insurer's argument that insurance policies do not cover equitable relief such as ordered cleanups.
In another pollution ruling, New York's highest court ruled that a Long Island-based policyholder could not redeem cleanup and defense costs under its liability policy.
The New York Court of Appeals ruled that the word "sudden" in the pollution exclusion included a temporal element.
This is the first ruling by the Missouri Supreme Court on insurance coverage for mandated cleanups.
The New York high court's ruling that the word "sudden" in the pollution exclusion included a temporal element had been held before. However, it is the first time that the state's highest court has ruled there is no duty to defend if the pollution was not sudden.
In Farmland Industries Inc. vs. Republic Insurance Co., the Missouri Supreme Court overturned a lower court's decision to exclude coverage for compulsory cleanup under Superfund.
The insurers argued that the term "damages" means legal damages and does not cover equitable relief. But, the Missouri Supreme Court ruled that a reasonable understanding of "damages" by a layperson would include a compulsory cleanup.
"Because the ordinary meaning of 'damages' includes legal and equitable relief, use of the term 'damages' is sufficient," said Chief Justice Ann K. Covington.
In Northville Industries vs. National Union, the New York Court of Appeals in Albany rejected a policyholder's pollution claim when it ruled that the term "sudden" in an insurance policy pollution exclusion includes a temporal element.
In upholding an appellate division ruling, the court also ruled that the insurers did not have a duty to defend the policyholder against claims from third parties.
The dispute arose from a claim filed by Northville for the cleanup of nearly 2 million gallons of gasoline that leaked from storage tanks at facilities in Holtsville and East Setauket, N.Y., in 1986 and 1987.
Northville claimed more than $100 million in cleanup and defense costs. "Eliminating the temporal aspect from the meaning of sudden in the exception to the pollution coverage exclusion would render the sudden and accidental contingencies of the exception unavoidably redundant for unintended pollutant discharges," said Judge Howard Levine.