The court determined that the pollution exclusion did not bar defense or indemnity for the insured's obligation to clean up a superfund site. Decker Mfg. Corp. v. The Travelers Indem. Co., 2015 U.S. Dist. LEXIS 12169 (W.D. Mich. Feb. 3, 2015).
From 1966 to 1981, Decker disposed of its waste materials at the township landfill. The landfill was closed in 1981. Decker was insured under a CGL policy for a four year period from January 1, 1973, through January 1, 1977.
After the landfill was closed, the EPA began an investigation which eventually led to a Unilateral Administrative Order in 1995 in which Decker was ordered to remove drums, construct a landfill cap, and monitor groundwater. Decker notified Travelers of the EPA's order on November 14, 1995. Travelers responded that it had no duty to defend or indemnify Decker.
In 1998, Decker was joined in the EPA's litigation against the City. Decker entered a consent decree in the EPA litigation. The consent decree denied liability, but required Decker to reimburse the EPA for past and future response costs, and to finance and perform operation and maintenance activities for thirty years. Travelers agreed to contribute to the defense of Decker under a reservation of rights. Travelers paid $98,067.00 towards Decker's defense costs.
Decker filed suit demanding that Travelers reimburse it for all alleged defense and indemnity costs, including past and future costs. Travelers moved for summary judgment that the policy's pollution exclusion precluded coverage. The exclusion barred coverage for property damage arising out of any discharge of any water or pollutant that is "either expected or intended from the standpoint of any insured . . . ." Travelers contended that because Decker intentionally discharged its waste into the landfill, the pollution exclusion applied. Decker argued that the pollution exclusion did not apply because it placed its waste in what it believed was a safe location, and Decker did not expect or intend the waste to leave the landfill. Therefore, the court considered whether the relevant "discharge" was Decker's initial placement of its waste into the landfill, or the escape of waste from the landfill.
There was no evidence that Decker was aware of any problems with discharge from the landfill. The landfill was poorly located in an area where the soils were permeable and the ground water was shallow. At the time the landfill was constructed, it confirmed to the then contemporary standards. Further, it was licensed by the State throughout the time it was used by Decker.
Therefore, Travelers' motion for summary judgment on the pollution exclusion was denied.
The court also found that Decker had no expectation, intent, or knowledge that the wastes would migrate from the landfill. Accordingly, there was an occurrence because the property damage was the result of an accident that was neither expected or intended.
Next, the court addressed whether a pro rata, time-on-the-risk allocation or an "all sums" allocation was appropriate. Under the time-on-the-risk method, insurers were responsible for the portion of the underlying injury that occurred during their policy period. Decker advocated the "all sums" method, which would make insurers jointly and severally liable for all defense costs. The court rejected the "all sums" approach, however, because it ignored the policies' definitions of the terms "property damage" and "occurrence," which limited coverage to property damage or occurrences "during the policy period." Instead, the pro rata, time-on-the-risk allocation was consistent with the policy language.
The final issue was how to apply the pro rata, time-on-the-risk allocation to the facts of the case. Travelers' expert testified that the property damage occurred over a 40-year period, from 1965 to 2004. There was contradictory evidence, however, concerning disposal at the site prior to the landfill's opening in 1966. Therefore, the court was not in a position to determine how to apply the pro rata time-on-the risk formula to the facts at this time. Further development of the facts and legal argument was needed.
