Insurance may cover cleanups
A recent Wisconsin Supreme Court Decision
raises the possibility that cleanup claims may be covered by a
drycleaner’s insurance policy.
The decision, issued July 11 in the case
of Johnson Controls, Inc. v.
Employers Insurance of Wausau,
overturned a 1994 decision in City of Edgerton v. General Casualty Co.
In Edgerton, the Supreme Court held that environmental
remediation costs incurred by an insured to clean up a
contaminated site were not “damages” that were
recoverable under comprehensive or commercial general liability
(CGL) insurance policies.
The Edgerton decision also stated that
receipt of a Responsible Party letter from a government agency
ordering a party to respond to environmental contamination did
not trigger an insurance company’s “duty to
defend” the insured under these policies.
In Johnson
Controls, the Supreme Court
reversed its position and ruled that an insured’s costs
of restoring and remediating damaged property, whether those
costs were incurred by a third party (including the government)
or the insured, constitute damages that are recoverable from
the insurer under a commercial general liability policy.
The Court also decided that receipt of a
Responsible Party letter from either the U.S. Environmental
Protection Agency or its state equivalent, the Wisconsin
Department of Natural Resources, “triggers” the
insurer’s duty to defend its insured. Under Edgerton, an
actual lawsuit had to be filed to trigger this duty.
According to Donald P. Gallo of the law
firm of Reinhart Boerner Van Deuren s.c., Johnson Controls
could prove to be of tremendous importance to those insured
drycleaners who have incurred costs in responding to releases
of contamination which occurred under historical CGL insurance
policies, generally those policies issued between 1963 and
1985.
Gallo said that cleaners who have received
a Responsible Party letter or incurred environmental cleanup
costs which fit this situation, should consider immediately
notifying their historical and current CGL carriers.
“In evaluating whether to notify
your insurance carrier, you should carefully review your policy
language, the potential defenses that the carriers could raise
based on other policy language and the facts of your
case,” Gallo said.
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