Missouri Supreme Court Renders Definitive Pronouncement: CERCLA Response Costs Are Covered "Damages" under 1973 Form CGL

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MISSOURI SUPREME COURT RENDERS DEFINITIVE PRONOUNCEMENT: CERCLA RESPONSE COSTS ARE COVERED "DAMAGES" UNDER 1973 FORM CGL

Farmland Industries, Inc. v. Republic Ins. Co., 941 S.W. 2d 505 (Missouri Supreme Court-Mar. 25, 1997)

Prior to the 1986 revisions to the standard Commercial General Liability (CGL) policy, the policy form contained no specific language addressing the issue of environmental response costs imposed on an insured by federal or state governments, an issue of increasing importance after passage of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, better known as CERCLA or Superfund. State courts have divided on the issue, with a slight majority favoring the view that such liability is covered under the pre-1986 CGL (the 1973 Form) which stated that the CGL provided coverage for sums for which the insured was liable "as damages."

Representative of the division and influential on the respective sides of the debate are Continental Ins. Cos. v. Northeastern Pharm. & Chem. Co., Inc., 842 F. 2d 977 (8th Cir. 1988) (en banc) (NEPACCO) (finding environmental response costs are not CGL "damages" since payments are made to effect equitable relief of remediation of property) and Industrial Petrochemical Corp. …