No CGL Covered Costs or Fees for CERCLA Cleanup ...

... Fourth Circuit holds in Federal Case Under Maryland Law.

   In Industrial Enterprises, Inc. v. Penn America Insurance Co., 2011 WL 925451 (4th Cir. Opinion Filed Friday, March 18, 2011)(authorized password required to access Westlaw), the Fourth Circuit was confronted with an Insurance Coverage issue for Pollution.  The Insurance Coverage Question it faced was whether a standard Comprehensive General Liability Insurance Policy ("CGL") provided Coverage for response costs including defense attorney's fees concerning a CERCLA cleanup.

   In other words, did the standard CGL Policy at issue in this case provide Defense Coverage for costs incurred by the Policyholder-Insured in response to an apparent PRP or potentially responsible party letter sent to it by the Federal Environmental Protection Agency, to remediate the presence of hazardous substances on the Policyholder's land..

   The United States District Judge answered this question "yes" and, on summary judgment, awarded the Policyholder $465,774.50 in defense attorney's fees plus additional, other response costs.

   The Fourth Circuit reversed in this case arising under Maryland law, in a split 2-to-1 panel decision:

On appeal, we reverse. Based on the decision of Bausch & Lomb, Inc. v. Utica Mutual Insurance Co., 625 A.2d 1021 (Md.1993), where the Maryland Court of Appeals held that a similar CGL policy did not cover expenses incurred in response to the State's regulatory order to remove soil containing hazardous chemicals, we conclude that Industrial Enterprises' liability under CERCLA is not liability for “property damage,” but rather regulatory liability for response costs. Accordingly, we conclude that Penn America's CGL policy does not cover Industrial Enterprises' regulatory liability and, therefore, Penn America has no duty to provide Industrial Enterprises with a defense.

Id. at *1.  For those facing this and similar Insurance Coverage Questions, this case provides perhaps the most recent addition to a long list of decisions addressing this Question.

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