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Aetna Insurance Co. v. Aaron12/4/1996
lue of, or other damage to, their land. How could they? It is a policy of liability insurance, not casualty insurance, on which they have sued. They seek to recover the cost of complying with a government order to clean up a nuisance. The fact that the clean up occurred on their land is irrelevant. For all we know, the damage to the land was much less than the cost of cleaning it up.
Id.
We find support in two Maryland cases for our view that third-party property must suffer actual harm caused by the insured's property, and that the repairs are not covered unless the insured has a duty to remediate. See Bausch & Lomb, Inc. v. Utica Mut. Ins. Co., 330 Md. 758, 625 A.2d 1021 (1993) and W. M. Schlosser Co., Inc. v. Insurance Co. of North America, 325 Md. 301, 600 A.2d 836 (1992).
In Bausch & Lomb, the insurer sought a declaratory judgment to determine its obligations to defend and indemnify Bausch & Lomb for expenses incurred in connection with the groundwater contamination of Bausch & Lomb's own property. The policy provided:
The company [Utica] will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of . . . property damage to which this insurance applies caused by an occurrence. . . .
Bausch & Lomb, 330 Md. at 764 (emphasis added).
Neither the State nor any adjoining landowner had sued Bausch & Lomb, notwithstanding that the contamination of the insured's property allegedly polluted a neighboring site. Because the policy as a whole covered only injury to a third party's property, and not injury suffered by the insured, the Court determined that the "question of insurance coverage turns. . .on whether a third party has sustained injury to, or destruction of, its own property with respect to the [insured's] pollution." Id. at 783.
The Court concluded that the State lacked the requisite property interest in the contaminated groundwater to "qualify as a third party whose property was damaged by the pollutants emanating from the [Bausch & Lomb] site." Id. In the absence of third-party property damage, it held that the insurer was not contractually obligated to reimburse its insured for the costs of alleviating damages to its own property. The Court reasoned that the "hallmark of the comprehensive general liability policy is that it insures against injury done to a third party's property, in contradistinction to an 'all risks' policy also covering losses sustained by the policy-holder." Bausch & Lomb, 330 Md. at 783. Therefore, the insured was not required "to pay B & L's abatement expenses incurred at the State's behest." Id. at 788.
It is noteworthy that the Court expressly declined to determine whether, if there had been third-party damage, the insurer "would have been required to pay the costs of indirect steps taken on B & L's own . . . site, such as removal of the contaminated sludge, to prevent continuing harm to its neighbor." Id. at 789. This, of course, is the question that we must resolve.
In W.M. Schlosser Co. v. Insurance Co. of North America, 325 Md. 301, 600 A.2d 836 (1992), a subcontractor excavating a construction site was forced to backfill the excavated site to prevent the complete collapse of the earth surrounding the site and damage to a third party's property. The emergency backfilling was necessitated, in part, by the imminent approach of a hurricane. Subsequently, the general contractor, as the holder of a certificate of insurance, filed a claim with the subcontractor's insurer for the costs of the backfilling, which the insurer denied. The language of the insurance policy provide
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