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Powerline Oil Powers Through Umbrella Insurance Policies To Provide Pollution Coverage

The case has been winding through our appellate system for some time.  In 2002, our Court of Appeal told us that umbrella policies were broader than comprehensive general liability policies, and in particular provided coverage for pollution claims that were not the result of a lawsuit and didn't necessarily include a damages claim.

In the subset of the legal industry that deals with pollution insurance coverage, that was big news, especially in light of the decision in Foster-Gardner, the case where our Supreme Court had earlier said a "lawsuit" was required to trigger coverage under a CGL policy - and appeared to make the same determination in Powerline I, an earlier proceeding in the same case dealing with CGL policies (not umbrella policies).  With its decision, however, the Court of Appeal created a dichotomy that left us scratching our collective heads:  was a lawsuit required or wasn't it?

Now, we have our answer, and this time the insured wins. 

The Supreme Court ruled in Powerline Oil not only is a lawsuit unnecessary, but it also gave the insured the bonus round answer that damages were likewise unnecessary, a two-for-one win.  In a unanimous ruling, Justice Baxter wrote, " the express wording of the central insuring agreement .... goes well beyond mere coverage for court-ordered money 'damages,' and is broad enough to include coverage for the liability of environmental cleanup and response costs ordered by an administrative agency."

Since 1983, pollution coverage in California has been limited by the absolute pollution exclusion in CGL policies and there's been a cloud over coverage provided by umbrella policies.  Umbrella policies generally are excess over CGL policies, and frequently provide more coverage than CGL policies.  Now, we know for sure they do, and insureds are rejoicing across California.

 

Posted by J. Craig Williams on Monday, October 31, 2005


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