The California Supreme Court has made an important ruling that is expected to benefit those dry cleaners, manufacturers, suppliers or others who purchased general liability policies in years past and are faced with property damage or bodily injury claims from the release of pollutants into the environment. In its decision in State v. Allstate Ins. Co., Case No. S149988 (Cal. Sup. Ct., March 9, 2009), the Court ruled that where multiple acts or events cause indivisible damage and at least one such act is a covered event, the insurer must provide coverage for the entire amount of damages.
This pollution case involved the disposal of pollutants at the Stringfellow acid pits. Hazardous wastes had seeped from evaporation ponds at the site into soil and groundwater outside the ponds. The relevant occurrence-based general liability insurance policies defined “occurrence” as an “accident, event or happening including continuous or repeated exposure to conditions which result, during the policy period, in Property Damage neither expected nor intended from the standpoint of the insured.” The language in these policies alsoprovided that the policies did not exclude pollution if the discharge of pollutants had been “sudden and accidental.”
Where the Court found the insured’s negligence had caused a release of pollutants to soil and groundwater outside the ponds,and where this damage was a covered “occurrence” under the policy,and the damage was indivisible from the damages extending from this act, the insured could be found jointly and severably liable for the entire site cleanup.
California policyholders who had previously thought that covered damages might be too remote from subsequent polluting events to trigger coverage under their general liability insurance policies should now reexamine their policies in light of this decision. Where coverage has been denied in the past, it may now be in order.