Environmental Investigation Costs Were Not Considered Damages under Florida Law, Court Holds

An appellate court in Illinois has ruled that environmental investigation costs were not considered damages under Florida law for insurance coverage purposes.

The Case

After boron contamination was detected at a plant in Florida owned by Premark International, LLC, and at nearby property, the company agreed with the Florida Department of Environmental Protection (“FDEP”) that it would monitor the groundwater. Premark notified its insurance carriers and demanded indemnity under various insurance policies.

The insurers contested coverage, contending that the policies only covered damages Premark became legally obligated to pay to third parties and did not cover investigation costs incurred directly by Premark as a result of environmental regulatory and permitting requirements.

Premark filed a declaratory judgment action.

The trial court rejected Premark’s argument that the costs incurred were covered expenses, and Premark appealed.

The Appellate Court’s Decision

The appellate court affirmed, rejecting Premark’s contention that environmental investigation costs were “damages” under Florida law.

In its decision, the appellate court conceded that no Florida case had specifically addressed the issue of whether environmental response costs were considered damages under Florida law. The appellate court added, however, that, the Florida Supreme Court had ruled that the term “damages” in another context was “clear and unambiguous” and meant “compensation for loss or injury.” The appellate court then found that it was “clear” that under Florida law, environmental investigation costs were not considered damages for purposes of insurance coverage.

The appellate court noted that the policies qualified investigation costs as expenses only to the extent that they were related to suits or claims. It pointed out that Premark had incurred investigation and monitoring costs related to the boron contamination as a result of an agreement with the FDEP, and not as a result of a suit or claim. Therefore, the appellate court concluded, these costs were not covered expenses under the policies.

The case is Premark Int’l, LLC v. Cont’l Cas. Co., No. 1-13-2760 (Ill. Ct. App. Jan. 21, 2015).