An Introduction to Environmental and Toxic Torts and Insurance An Introduction to Tort Law University of Insubria, Como, Italy Jeffrey W. Stempel and Ann C. McGinley William S. Boyd School of Law University of Nevada, Las Vegas

Environmental Claims Toxic Torts Insurance Background to Erin Brockovich and A Civil Action

Lawsuits and Chemicals Historically the Tort of Nuisance Smokestacks blowing over neighborhoods Loud noises from construction Encroachment on property boundaries But little knowledge of non-immediate harms Mining Injuries an exception of sorts but with little compensation Hawk Mountain Silica Claims

With Knowledge Comes Attention – and Litigation and Regulation Asbestos Industry knows of danger – but does not disclose Small indestructible fibers in lungs doing years of damage Clarence Borel – a victim who took action Fred Baron – arguably a “heroic” lawyer

Borel v. Fibreboard Discovery unearths industry deception and manufacturer’s knowledge of danger Medical experts establish the injury caused by asbestos Borel wins a jury verdict Affirmed by U.S. Court of Appeals (1973) Establishes favorable law for plaintiffs

The Asbestos Mass Tort After Borel’s success, plaintiffs’ lawyers bring tens of thousands of claims – And much of the case is already established by the record in the Borel case The onslaught is too much for many defendants – All manufacturers eventually file for bankruptcy – Then come suits against the “secondary” defendants who used asbestos in products – And other ancillary suits (e.g., bad face masks)

The Parallel Concerns Over Pollution 1970 – “Earth Day” – Clean Water Act – Clean Air Act – U.S. established Environmental Protection Agency 1972 – OSHA (Occupational Safety and Health Administration) established 1973 – Asbestos banned from further use 1980 – Superfund (a/k/a CERCLA) (Comprehensive Environmental Response, Compensation, and Liability Act)

Private and Public Suits Against Pollution Federal (national) government seeks cleanup of contaminated sites pursuant to Superfund State governments enact state versions of Superfund and pursue similar suits Those injured by contamination bring private civil actions Another mass tort (but not as “mass” as asbestos)

A Quest for Compensation – and a Source of Funds to Provide It Defendants look for insurance coverage but meet resistance Toxic Tort (asbestos, PCBs, etc.) and Pollution defendants look to their liability insurers The large wave of new lawsuits brings a large wave of insurance coverage lawsuits Insurance Co. of North America v. Forty-Eight Insulations (1978) kicks off an era

The Insurance Coverage Wars Policyholders largely win for asbestos cases and most pollution cases on the big issues Trigger of coverage Number of Occurrences Rejection of key insurer defenses Expected or intended injury

The Pollution Exclusion None at all under 1955 and 1966 standardized policies for Comprehensive General Liability (CGL) insurance 1970 – “qualified” pollution exclusion appears as a common “endorsement” (amendment) to the 1966 standard form CGL policy 1973 – qualified pollution exclusion becomes part of new 1973 standardized CGL form

The Qualified Pollution Exclusion Bars insurance coverage for claims arising out of release or discharge of a pollutant Defines pollutant as “any” chemical or irritant But contains an exception if the discharge is “sudden and accidental” – then there is still insurance coverage

The Qualified Pollution Exclusion (continued) But does “sudden” mean “fast-abrupt” or merely unexpected or unintended? Courts divide – Some find coverage for slow but unintended pollution – Others require the pollutant to escape fast for insurance coverage to exist Insurers move to tighten/toughen the Exclusion

The “Absolute” or “Total” Pollution Exclusion Added to the 1986 Standard Form CGL Policy Name changed from “Comprehensive” General Liability Policy to “Commercial” General Liability Policy Contains an complete exclusion of asbestos- related claims And a complete exclusion of Superfund claims And a tougher pollution exclusion

The Absolute Pollution Exclusion Bars insurance coverage for any claim arising out of release or discharge of a “pollutant” Defines pollutant as “any” chemical or irritant, including dirt, smoke, etc. No exception for sudden, accidental, abrupt, unintended discharges of a pollutant

The Absolute Pollution Exclusion Clearly excludes coverage for traditional environmental claims Insurers have some success applying the exclusion even to claims not commonly thought of as “pollution” claims, including – carbon monoxide poisoning from bad furnace – car crashes when driver blinded by blowing smoke – Indian curry smell from restaurant bothers neighbors – bat guano in cottage

But Pollution Coverage Still Exists – If Policyholders Are Willing to Pay Insurers now sell Environmental Impairment Liability Insurance or Environmental Claims Liability Insurance Provides coverage where policyholder sued for Superfund cleanup or contamination of property of others or injury to others – relatively low policy limits – relatively high premium prices – some significant restrictions e.g., pollution discharge must be abrupt and must be reported in timely fashion