By Barnaby J. Feder No wonder insurance companies and their
policyholders are waging a coast-to-coast conflict over who has to
pay to clean up hazardous waste sites. By some estimates, more than
$500 billion is at stake.
``I don't know a hotter area of litigation,'' said Robert
Saylor, a partner at Covington Burling in Washington who has argued
a number of major cases for policyholders. ``The volume of dollars
on the table is so staggeringly high that no one can figure out how
Because the interpretation of insurance contracts is based on
state law, neither side sees any prospect of a federal standard
``The Supreme Court is not going to touch this with a 10-foot
pole,'' said Eugene Anderson, a partner at the New York firm of
Anderson Kill Olick & Oshinsky, which represents many policyholders.
``They were asked to take similar cases relating to asbestos damage
several times and refused.''
Insurers argue that the typical property policy was never
intended to cover the kinds of damage resulting from long-term waste
disposal by businesses. Nor, they argue, do such policies cover the
cost of cleaning up damage to such public resources as groundwater.
If insurers have to foot most of the bill, bankruptcies would
become common and the ability of many survivors to sell or renew
policies would be crippled, according to a study presented last year
to the House Subcommittee on Policy Research and Insurance by
Tillinghast, a subsidiary of the consulting firm Towers Perrin.
But many companies and municipalities that will initially foot
the cleanup bills are in equally dire financial straits.
Most battles turn on one or more of five issues. The initial
problem in many cases has come to be known as the ``suit issue.''
The typical property insurance policy requires the insurance company
to defend a policyholder in any lawsuit involving property damage.
But does an action by a federal or state agency seeking a cleanup of
a hazardous waste site constitute a lawsuit?
Most courts have ruled that insurance companies have to defend
policyholders in administrative proceedings that are ``adversarial.''
But some courts have dissented. Last year, for example, the
Maine Supreme Court ruled that the owners of a small store were on
their own in opposing an order by the Maine Department of
Environmental Protection to clean up soil contaminated by leaking
underground gasoline tanks.
A second common battleground is the meaning of the comprehensive
``damages clause,'' which summarizes an insurer's general liability.
Insurers argue that such clauses do not cover any of the costs of
cleanups ordered by government agencies, at least where there is no
showing that the site is government-owned. …