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Aetna Insurance Co. v. Aaron12/4/1996
lly obligated to remediate the hazard, so that the repairs are, in that sense, involuntary. In Signo Trading Int'l, Inc., 130 N.J. 51, 612 A.2d 932, for example, the New Jersey Supreme Court determined that a comprehensive general liability policy that contained an owned property exclusion barred coverage for abatement costs in connection with threatened harm to third-party property, in the absence of prior physical injury to property of a third-party. Id. at 62, 612 A.2d at 938. The court recognized, however, that "the cost of measures intended to prevent imminent or immediate future damage" to third-party property is not foreclosed for coverage by the owned-property exclusion, if the third-party property has previously been damaged. Id. at 64, 612 A.2d at 939. See also Edgerton, 172 Wis. 2d at 546, 493 N.W.2d at 779 ("We adopt the reasoning of those courts which have held that costs incurred to prevent future pollution damage of a kind which has already occurred constitute 'damages' within the meaning of the standard-form CGL Policy.") (Emphasis added).
In finding the owned property exclusion inapplicable, courts have also considered the involuntary nature of the remediation measures, in the sense that they were mandated by a state or federal agency or a court order. See, e.g., Claussen v. Aetna Cas. & Sur. Co., 754 F. Supp. 1576 (S.D.Ga. 1990). In Claussen, the Environmental Protection Agency required the insured to remove hazardous materials from its property. The insurer refused to defend or indemnify its insured, because its policy did not cover damages to the insured's own property. The court rejected Aetna's argument, in part because the toxic dumping damaged not only the insured's property, but also surrounding land and water. The court also determined that coverage applied because the insured was required by the EPA to remediate the site in order to prevent damage to the property of a third party. Id. at 1579.
The reasoning of the court in Patz v. St. Paul Fire & Marine Ins. Co., 15 F.3d 699 (7th Cir. 1994) (Posner, J.) also persuades us that, for coverage to apply, the insured must have some duty to remediate, so that, the repairs may be characterized as involuntary. In Patz, the insureds sought to recover from their insurers for substantial clean-up costs that were incurred when a state environmental agency ordered them to mitigate toxic contamination on their own property. Because neither the groundwater nor soil contamination had spread beyond the owners' premises, the insurer asserted, inter alia, that coverage was barred on the basis of the owned property exclusion.
Rejecting the insurer's contention that the owned property exclusion precluded coverage, the Seventh Circuit reasoned that the plaintiffs were not attempting to recover for damage to their property. To the contrary, they were seeking to recover for the cost of liability that had been imposed upon them by a state agency. In this regard, the court found it significant that the insureds involuntarily incurred the clean-up costs for which they sought reimbursement. Id. at 705.
Moreover, in that court's view, ownership of either the contaminated property or the groundwater was irrelevant. The court also deemed it irrelevant as to "how soon the groundwater contamination would have spread to groundwater beneath neighbors' property if the clean up had not been ordered, whether but for the clean up the contamination. . .would have leached to soil beneath the neighbors' property, or in short how much of a risk to other people's property the contamination created." Id. at 705. The court said:
[The insureds] are not attempting to obtain an insurance award for a reduction in the va
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