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Aetna Insurance Co. v. Aaron12/4/1996
exclusions reduce the pool of insureds and cause an increase in insurance costs and a reduction in insurance availability). Although we understand the concern that the prevailing interpretation of the owned property exclusion may lead to increased adverse selection or moral hazard, we reiterate that there is not even a hint in this case that Aaron's actions constituted either adverse selection or moral hazard.
Conversely, the denial of coverage might encourage an insured to permit a condition on his land to deteriorate to a point that it would result in damage to others, for which liability coverage probably would be available. Anticipatory remedial measures would probably prevent damage or loss to the property of others, and reduce the likelihood of a significant claim for damages against both the insured and his or her insurer.
A number of courts have adopted the rationale that an "ounce of prevention is worth a pound of cure." For example, in Allstate Ins. Co. v. Quinn Constr. Co., 713 F. Supp. 35 (D.Mass. 1989), the court determined that the policy applied to work performed on the insured's property in order to prevent costly prospective harm to the property of third parties. It reasoned that if the cost of clean-up were not recoverable,
the insured would have the incentive simply to allow the pollution to continue. Under that scenario, the insurance company would ultimately have to spend much more to clean up the resulting actual damage to the property of third parties. For these reasons, the court concluded that the clean-up was as a matter of law within the coverage of the liability policy, which it construed to
Id. at 40 (citing Bankers Trust Co. v. Hartford Acc. & Indem. Co., 518 F. Supp. 371, 373-74 (S.D.N.Y. 1981)).
The court also recognized the purpose of a comprehensive general liability policy as consistent with coverage for pollution clean-up expenses incurred to prevent injury to property of others. "In some cases, the property owner will have no first-party insurance; he should not forfeit coverage by promptly cleaning up contamination rather than waiting for it to cause serious environmental damage." Quinn, 713 F. Supp. at 41. Reasoning that the cost of prevention is "far more economical than post-incident cure. . .", id., the court stated that it "serves no legitimate purpose to assert that. . . pollution must be allowed to spread over boundary lines before can be said to have caused the damage to other people's property which liability insurance is intended to indemnify." Id.
Similarly, in Broadwell Realty Serv., Inc. v. Fidelity & Cas. Co., 218 N.J. Super. 516, 528 A.2d 76 (1987), the court concluded that an insured's expenses in implementing preventive measures in response to a state agency's directive constituted damages that were not barred by the owned property exclusion. The court said:
It would be folly to argue, under such circumstances, that the insured would be required to delay taking preventive measures, thereby permitting the accumulation of mountainous claims at the expense of the insurance carrier. Stated another way, the policy does not require the parties to calmly await further catastrophe. Abatement measures designed to prevent the continued destruction of adjacent property are plainly compensable under the policy.
Id. at 526, 528 A.2d at 76.
Nevertheless, in Schlosser, 325 Md. at 308, the Court rejected liability coverage on the basis of an argument that, if the insured failed to institute precautionary measures, the threat of imminent harm would have materialized, that harm would have been covered under the policy, and it probably would have been
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