Pennsylvania Trial Court Finds Coverage Triggered Prior to First Manifestation of Environmental Contamination

May 15, 2017

A trial court in Pennsylvania has rejected an insurance company’s argument that it had no obligation to cover a civil action seeking to hold its insured responsible for contamination at a site where the contamination had not been detected during the policy periods, ruling that coverage had been triggered prior to “first manifestation.”

The Case

On May 12, 2010, the Pennsylvania Department of Environmental Protection (“DEP”) named Johnson Matthey Inc. (“JMI”) as a defendant in a civil action alleging that, from 1951 through April 1, 1969, a JMI predecessor company had owned property in Chester County, Pennsylvania, and had manufactured and processed metal alloy tubes and associated equipment there. The DEP alleged that the JMI predecessor companies and a corporation unaffiliated with JMI that owned the site from 1969 to 1974 had “used hazardous substances, including trichloroethylene (‘TCE’)” in their operations and that “hazardous substances, including TCE,” had been disposed into the environment.

Based on these allegations, the DEP asserted that JMI and the later owner of the property were liable to the DEP under the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) and the Hazardous Sites Cleanup Act for costs incurred in remediating the environmental damage caused by the release of hazardous substances at the site.

The insurer that had issued comprehensive general liability (“CGL”) policies insuring JMI’s predecessor companies from at least April 1, 1969 to April 1, 1979 went to court, seeking a declaratory judgment that it had no duty to defend or indemnify JMI in the DEP’s action. It argued that its policies did not provide coverage because the contamination at the site had not been detected during the period that those policies had been in effect.

The insurer moved for summary relief granting the declaratory judgment it sought.

The Court’s Decision

The court denied the insurer’s motion. It rejected the insurer’s position that Pennsylvania law called for a multiple trigger only in the context of bodily injury claims, and that only first manifestation can trigger coverage for environmental contamination claims.

In its decision, the court explained that the damage alleged in the DEP’s complaint was soil and water contamination that had occurred “gradually at indefinite points in time as a result of a JMI’s predecessor’s use of TCE and other hazardous substances at the [property] between 1951 and 1969.” The court added that the first date that the DEP’s complaint alleged that there had been any awareness of possible property damage was 1980, when the federal government listed the property as potentially contaminated. The court also noted that the insurer contended that the TCE contamination from the site had first been found in 1988.

Given these allegations, the court ruled that the case presented the “long latency of continuing, undetected injury or damage” that supported a trigger of insurance coverage prior to “first manifestation.”

It should be noted that the court also decided that applying the rule that only first manifestation triggered coverage in this case “would be contrary to the policy language,” reasoning that the policies provided coverage for “property damage which occurs during the policy period” and not for property damage that had been discovered or that had manifested itself during the policy period. In the court’s view, if contamination had occurred within a policy period, the coverage requirement of “property damage which occurs during the policy period” was satisfied, regardless of whether the contamination had been detected or known at the time.

The court concluded that because the DEP’s complaint against JMI alleged gradual contamination that had begun before and that had continued through the policy periods and because the insurer had “not shown” that the contamination had not occurred in the policy periods or that it had first manifested before the policy periods, the insurer was not entitled to a declaratory judgment that it had no duty to defend or indemnify JMI.

The case is Pennsylvania Manufacturers’ Ass’n Ins. Co. v. Johnson Matthey, Inc., No. 330 M.D. 2015 (Pa. Comm. Ct. Apr. 21, 2017).

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