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Aetna Insurance Co. v. Aaron12/4/1996
e fact that the insured cooperates and assumes the obligation to conduct a clean-up, rather than forcing the EPA to incur the expenses of a clean-up and then bring a coercive suit, does not change the bottom line that a legal obligation exists.
Id. at 1143.
Therefore, unless the claim is barred by some other Policy provision, the damages in issue here potentially fall within the scope of the Policy. Given that the duty to defend is broader than the duty to indemnify, we are satisfied that the duty to defend here was unequivocally triggered when Aaron was sued by the Council for damages flowing from an alleged defect in Aaron's property that caused property damage to another. See Edgerton, 172 Wis. 2d 518, 493 N.W.2d 768 (1992); see also Anderson Dev. Co., 49 F.3d 1128 (holding that letter from EPA to insured was sufficient to trigger duty to defend).
III.
We turn next to the effect of the owned property exclusion, which ordinarily bars an insured's recovery for any costs incurred to repair the insured's own property. As we observed earlier, many courts have considered the applicability of such a provision in the context of environmental cases.
In Intel Corp. v. Hartford Acc. & Indem. Co., 952 F.2d 1551 (9th Cir. 1991), the Ninth Circuit applied California law to construe an owned property exclusion, and determined that costs incurred to comply with a consent decree or an injunction mandating environmental cleanup, or to reimburse a government agency for cleanup expenses, constituted damages under the applicable insurance policy. Id. at 1563-65. The court concluded that the policy applied to expenses incurred "to mitigate any future damage that might occur . . . whether or not on [the insured's] own property." Id. at 1565. As the location of the source of the hazard was not dispositive, the court emphasized that the exclusion did "not bar coverage of the cost of preventing future harm to ground water or adjacent property that might arise from contamination that has already taken place, whether such contamination has occurred on [the insured's] or others' property." Id. Relying on AIU Ins. Co., 51 Cal. 3d 807, 799 P.2d 1253, 274 Cal. Rptr. 820, the court reasoned that "where an insured is covered for damage to a third-party's property, that insured would reasonably expect coverage for efforts to mitigate that damage, even when the source of the hazard is on the insured's own property." 952 F.2d at 1565-66.
The case of Gerrish Corp. v. Universal Underwriters Ins. Co., 947 F.2d 1023 (2nd Cir. 1991), is to the same effect. There, the Second Circuit concluded that a liability policy covers a pollution claim, because environmental response costs are damages within the meaning of the policy. The court also determined that the owned property exclusion did not bar coverage, in view of damage that had occurred to property that was not owned, controlled, or possessed by the insured. The court reasoned that the insurer's liability for damage to property of another may extend to the insured's own property, "for the purpose of abating seepage to neighboring property. The cost of repairing [the insured's] property is inextricably linked" to the third-party claims. Id. at 1031. Therefore, the court held that the owned property exclusion did not foreclose recovery for remedial work on the insured's premises. Id.
Nevertheless, as a predicate to coverage under a liability policy for remediation expenses incurred in connection with the insured's own property, we conclude that the insured's property must first have caused damage to property owned or controlled by a third party. We are also satisfied that the insured must be legally or contractua
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