Todd Tholke v. Sailing Vessel Energy Team AC45 Litigation Successfully Resolved, Energy Team Thanks Tholke

Posted by in Announcement, Maritime Law on March 11, 2013

ELG is pleased to announce that it has confidentially resolved all claims arising out of Todd Tholke v. Sailing Vessel Energy Team AC45, Civ. No. 12-05162, Northern District of California.  The case involved local sailor Todd Tholke’s salvage and rescue of the Energy Team AC45, a 45-foot twin-hulled America’s Cup World Series racing catamaran.  Unbeknownst to Energy Team, the AC45 broke free from its mooring off the San Francisco shoreline in the early morning of September 30, 2012, and sailed itself across San Francisco Bay where it grounded itself on the rocks of Treasure Island.  ELG’s client Todd Tholke first spotted it.  Mr. Tholke alerted the U.S. Coast Guard, and upon learning the Coast Guard would not respond because no lives were at risk, and at the Coast Guard dispatcher’s approval, successfully salvaged the derelict catamaran, pulling it from its precarious position on the rocks, preventing further damage to its fragile hull, and delivering it safely into the hands of America’s Cup officials.  The racing yacht, after some quick repairs, was thereafter able to participate in the ensuing America’s Cup World Series regatta.

In November 2012, the court validated Mr. Tholke’s salvage claim by denying Energy Team’s Motion to Vacate the Arrest Warrant and ordering Energy Team SARL to post a bond with the court to regain possession of its racing yacht while continuing to dispute Mr. Tholke’s salvage award.

This February, the parties reached an agreement resolving the matter.  On February 8, 2013, the parties issued the following joint Press Release, wherein Energy Team SARL publicly thanked Todd Tholke for his successful salvage services:

The owners of the America’s Cup World Series team, Energy Team SARL, and San Francisco sailor Todd Tholke, jointly announce they have confidentially resolved all claims and counter-claims in the matter of Todd Tholke v. The Sailing Vessel Energy Team AC45, Civ. No. 12-05162, Northern District of California. Energy Team thanks Todd Tholke for salvaging its vessel.

Mr. Tholke is pleased with the settlement terms, including Energy Team’s acknowledgment of the valuable salvage services he provided to their highly valuable racing yacht.  Mr. Tholke stated, “I was happy to resolve the matter well short of trial.  I never intended to create negative publicity around the America’s Cup, or engage in a lengthy litigation battle, but I felt it was appropriate to seek a just award under well-established salvage law so that others would be encouraged to take the same risks I took in acting promptly to save a fragile racing yacht in substantial peril, where the Coast Guard was not going to do so.  This settlement validates my salvage efforts, vindicates my claim, and allows me to get on with my life.”

Federal Court’s Dismissal of Buyer’s Fraud Action in Allegedly Contaminated Gas Station Sale Highlights the Need for Land Purchasers to Conduct Independent Environmental Assessments

Posted by in Environmental Litigation, Land Use & Development, Remediation on October 1, 2012

A Washington federal district court denied purchaser Pyramid Gold, Inc.’s claim that it was misled as to the level of contamination present at the gas station it purchased from BP West Coast Products, LLC.   Pyramid Gold agreed to the sale after receiving an environmental baseline assessment conducted by BP West Coast that revealed contamination below reporting and remediation action levels imposed by Washington state law.  However, when Pyramid Gold entered into negotiations to sell the property five years later, its potential buyer discovered contamination exceeding levels requiring cleanup under Washington state law.   Ultimately the potential sale failed, and Pyramid Gold and its owner, Hatem M. Shalabi, filed suit against BP West Coast and other BP entities alleging fraud and negligent misrepresentation in the land sale transaction.  The defendants filed a motion to dismiss all defendants except BP West Coast (“non-party defendants”) as non-parties to the sales agreement, and seeking summary judgment in favor of BP West Coast on the elements of fraud and negligent misrepresentation.

The court granted the non-party defendants’ motion to dismiss based upon plaintiffs’ failure to plead any factual basis for their inclusion.  The court also granted BP West Coast’s motion for summary judgment on the fraud and negligent misrepresentation claims, finding that plaintiffs failed to prove at least one element common to both: “reliance on the truth of the representation of an existing fact.”  In fraud and negligent misrepresentation claims, reliance on a representation is only justified when reasonable under the circumstances, and requires that the plaintiff have exercised due care and diligence on his own part in ascertaining relevant facts at his disposal.  Here, the court found that reasonable minds could not differ that plaintiffs were not justified in their reliance on any alleged statement by BP West Coast that there was little or no contamination on the property.  The court considered that BP West Coast’s baseline environmental assessment report was conducted by a third party consultant and clearly stated that some contamination on the property existed.  Pyramid Gold received the report, but nevertheless agreed under the terms of the sales agreement that it was buying the property “solely in reliance on its own investigation” and acknowledged that BP West Coast was selling the property “as is.”  In fact, Pyramid Gold never conducted its own environmental assessment.  In the course of the transaction, Pyramid Gold further acknowledged that BP West Coast was making no representation or warranty as to the accuracy of the third party consultant’s environmental assessment.  While Pyramid Gold argued that it was ignorant as to the contents of the agreement on this issue, the court gave no weight to that argument.  It is well-settled under Washington law that a party who is afforded the opportunity to read a plain and unambiguous written instrument cannot claim to be ignorant of its contents.  Accordingly, the court granted BP West Coast’s motion for summary judgment, entering judgment for the defendant.

The Pyramid Gold case highlights the need for land purchasers to be well-informed of the environmental terms in land sale transactions and to conduct independent environmental assessments of subject properties out of an abundance of caution, even in the face of a seemingly reliable environmental assessment conducted by the seller or third-party consultants retained by the seller.

Shalabi and Pyramid Gold  v. Atlantic Richfield Co., et al., case no. 2:11-cv-00505-BHS (9/20/12 W.D. Wash.)

by Clare Bienvenu & John D. Edgcomb

Federal Court Dismisses CERCLA Suit based on Lack of Necessary Response Costs

Posted by in CERCLA, Environmental Litigation on September 25, 2012

By Clare Bienvenu & John D. Edgcomb

In Stratford Holding, LLC v. Fog Cap Retail Investors, et al., Stratford Holding LLC (“Stratford”) sued its lessees, Fog Cap Retail Investors LLC (“Fog Cap”) and Foot Locker Retail Inc. (“Foot Locker”), under CERCLA §§ 107 and 113, seeking cost recovery for costs incurred in assessing alleged PCE contamination in the soil and groundwater of its property.  Allegations of PCE contamination arose when Stratford, upon conducting a visual inspection, discovered poor housekeeping practices at a commercial dry cleaning business on the property.  Since the commercial dry cleaning business subleased the property from Fog Cap and Foot Locker, Stratford made demand upon them as its direct lessees to investigate the potential contamination further.  Fog Cap commissioned an environmental investigation in response, finding no PCE contamination.  However, Stratford thereafter conducted another assessment that revealed PCE concentrations of 1200 ppb in the soil and 56 ppb in the groundwater.  When Fog Cap and Foot Locker declined to reimburse Stratford for the costs of the assessment and refused to agree to restore the premises to its pre-lease condition, Stratford filed suit in federal court for cost recovery under CERCLA §§ 107 and 113, among other claims.  Fog Cap and Foot Locker moved to dismiss the CERCLA claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim under which relief can be granted.

In order to establish a prima facie case for cost recovery under CERCLA, a plaintiff must show that: (1) the site is a CERCLA “facility”; (2) there was a release or threatened release of a hazardous substance; (3) the plaintiff incurred response costs consistent with the National Contingency Plan (NCP); and (4) the defendant is a potentially responsible party.  The only point of contention in the motion to dismiss was whether the costs incurred by Stratford were “necessary” and incurred in a manner consistent with the NCP under CERCLA §107(a)(4)(B).  According to well-established CERCLA jurisprudence, there must be an actual and real threat to human health or the environment in order for response costs to be “necessary.”   Using a rationale that is somewhat novel in CERCLA litigation, the court agreed with Fog Cap and Foot Locker that the response costs were not “necessary” and dismissed Stratford’s claim.

First, the court reasoned that the determination by the state environmental agency, the Georgia Environmental Protection Division (GEPD), not to list the site on its Hazardous Site Inventory was a major indicator that Stratford’s investigation response costs were unnecessary.  GEPD issued its decision not to list the site in a Release Notification, noting that it had conducted its own assessment and found no release exceeding a reportable quantity.  GEPD neither compelled further investigation or remediation of the site nor issued a statement that no further investigation or remediation was required.  Nevertheless, given that the agency is required to list a site on the Hazardous Site Inventory if the contamination poses a threat to human health or the environment, the court concluded that GEPD’s decision not to list the site was the equivalent of a government determination that the PCE contamination posed no threat to human health or the environment.  Further, the court considered that Stratford proffered no additional facts to show that its response was necessary to prevent a real threat to human health or the environment.

CERCLA caselaw clearly establishes that agency enforcement action is not a prerequisite to private party cost recovery.  Therefore, the absence of such agency action is not conclusive on the issue of whether any response costs incurred were “necessary.”  Here, however, the court was faced with a slightly different scenario – an agency, presented with some evidence of contamination, chose not to take any action to compel remediation.   The court cited its own decision, Southfund Partners III v. Sears, Roebuck & Co., 57 F.Supp.2d 1369 (N.D. Ga. 1999), in support of its conclusion.  In Southfund, a plaintiff similarly sought recovery of response costs for remedial efforts to remove contamination following a determination by the George Department of Natural Resources that the contaminant release was under the reportable quantity.  The court granted the defendant summary judgment in that matter, reasoning that upon considering that the state agency did not require remedial efforts to be undertaken, “no reasonable juror could find the response costs to be necessary.”  Southfund, 57 F.Suppp.2d at 1378.

The federal district court for the Northern District of Georgia clearly follows the rationale that where an investigation reveals contamination, but a government agency determines the release to be under the reportable quantity and declines to require remediation, the recovery of response costs will not be allowed – except, perhaps, if the plaintiff offers convincing additional evidence showing that its response was necessary to prevent a real threat to human health or the environment.  However, not all courts are willing to dismiss a CERCLA claim under such facts.  The Ninth Circuit Court of Appeals has specifically reserved rendering an opinion on whether “response costs not required by state and local agencies may [] be necessary.”  NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986).  The federal district court for the Northern District of California denied summary judgment on the issue of the necessity of response costs in connection with perchlorate levels in water supply wells that were below drinking water criteria.  While the facts did not indicate the details of government agency determinations in connection with the response, the court was unwilling to grant summary judgment on the basis of contamination below applicable regulatory criteria, stating that “whether or not perchlorate contamination in the subbasin posed a threat to human health appears to be a dispute of material fact, and this issue is not resolvable on summary judgment.”  Santa Clara Valley Water Dist. v. Olin Corp., 655 F. Supp. 2d 1066, 1072 (N.D. Cal. 2009).

Lastly, the Stratford Holdings court considered Stratford’s argument that because the NCP requires a Remedial Investigation and Feasibility Study (RI/FS) before determining whether a site is a threat to human health or the environment, it was still in the process of proving a threat to human health and the environment, and thus the claim should not be dismissed.  The court opined that even if an RI/FS later revealed a threat, Stratford’s claim for cost recovery at this point in time was premature.  In making this statement, the court may have been signaling that should Stratford complete its RI/FS and find a demonstrable threat to human health and or the environment, it could refile its claim for investigation costs at that time.

Based on these grounds, the court dismissed Stratford’s federal claims.  After declining to exercise supplemental jurisdiction over Stratford’s remaining state law claims, the court terminated the action.

Stratford Holding LLC v. Fog Cap Retail Investors LLC et al., case no. 1:11-cv-03463 (9/17/12 N.D. Ga.)

Edgcomb Law Group Moves & Changes Business Form

Posted by in Announcement on September 22, 2012

Edgcomb Law Group is pleased to announce its move to the prestigious McKesson Plaza at One Post Street, Suite 2100, San Francisco, CA.  The majestic skyscraper is home to the McKesson Corporation’s headquarters and is located in San Francisco’s financial district.  The structure itself was designed by noted architect Welton Becket, whose other noted commissions include the historical Capitol Records Building and UCLA’s Pauley Pavilion.

The move is set for the end of September 2012 and Edgcomb Law Group will be at its new address on October 1, 2012.  All email, phone and fax numbers will be the same.

In addition, Edgcomb Law Group announces its change of business form from sole proprietorship to corporation.  Effective October 1, 2012, Edgcomb Law Group will operate as Edgcomb Law Group, P.C.,  a California professional corporation.

California Bill Limiting Deposition Time Set to Take Effect January 1, 2013

Posted by in Environmental Litigation on September 21, 2012

By Clare Bienvenu & John Edgcomb, Esq.

This week Governor Jerry Brown signed A.B. 1875 into law, adding Section 2025.290 to the California Code of Civil Procedure.  The law, which will take effect on January 1, 2013, requires that many depositions be limited to seven hours in total.  While the seven hour limit is the default under the new rule, several exceptions apply. A court may authorize additional time if “needed to fairly examine the deponent or if the deponent, another person, or any other circumstance impedes or delays the examination,” and parties may stipulate that the default limit does not apply to specific depositions or to the entire proceeding.  The seven hour limit does not apply to complex litigation, expert witnesses, employment cases, or parties added after the deposition has concluded.  Despite the exemption for depositions in complex litigation, a 14 hour limit will be applied to complex litigation depositions where a witness has a fatal medical condition, evidenced by a medical affidavit attesting there is a substantial doubt the witness will survive for another six months.

The new law is similar to deposition limitations under the Federal Rules of Civil Procedure and that of several other states.  Fundamentally, the new law shifts the burden from counsel for the deponent, who formerly had to seek a protective order from the court to avoid an excessively long deposition, to the counsel of the party taking the deposition, who will soon have to secure the agreement of the other parties or obtain an order from the court to obtain more than seven hours of deposition time in specific circumstances.

Federal District Court Allows Chevron to Proceed with a CERCLA § 107 Cost Recovery Action to Attempt to Hold Non-Settling “Smaller Responsible Parties” Jointly and Severally Liable for All Response Costs

Posted by in CERCLA, Cost Recovery, Environmental Litigation, Remediation on September 11, 2012

By Clare Bienvenu & John D. Edgcomb

The United States District Court for the Eastern District of California denied defendants’ motion to dismiss in Chevron’s CERCLA § 107 cost recovery action against them in connection with the EPC Eastside Disposal Facility site outside of Bakersfield, CA.  In June 2005, Chevron, as one of several parties deemed responsible by the California Department of Toxic Substances Control (“DTSC”) for the presence of hazardous substances at the site, entered into a Consent Order with DTSC, under which it agreed to spearhead the cleanup activities at the site.  Chevron has settled with hundreds of companies and individuals in return for contribution to the substantial cleanup costs associated with the site’s remediation. However, several “smaller responsible parties,” as they characterize themselves in the motion, have declined to settle with Chevron, and, as a result, Chevron filed suit, seeking to hold them jointly and severally liable for all response costs under CERCLA § 107.

A CERCLA § 107 cost recovery action is reserved for potentially responsible parties (PRPs) that voluntarily incur response costs and allows the plaintiff PRP to hold a defendant PRP jointly and severally liable for all response costs, unless the defendant can show there is a reasonable basis for apportionment.  In contrast, a CERCLA § 113 contribution action is appropriate where a PRP has been sued under CERCLA §§ 106 or 107, or enters into a settlement to resolve its CERCLA liability to the United States or a state.  A CERCLA § 113 contribution action enables the plaintiff PRP to hold other defendant PRPs liable only for their equitable share of response costs. In this case, the “smaller responsible parties” argued in their motion to dismiss that Chevron was not entitled to bring its § 107 cost recovery claim against them because Chevron did not voluntarily incur response costs, based on its status as a party to the Consent Order with DTSC.  Instead, they argued, Chevron was limited to a CERCLA § 113 contribution action.

The court found that since Chevron has not been sued under CERCLA §§ 106 or 107 and has not entered into a “settlement” to resolve its CERCLA liability, a § 113 contribution claim was inappropriate. Further, the court found that the Consent Order the Chevron entered into with DTSC is neither “a satisfaction or release from liability” nor a mechanism barring Chevron from acting voluntarily in the response.  Accordingly, Chevron was entitled to bring a § 107 cost recovery action against the defendants.  The court also rejected defendants’ allegation that Chevron’s assertion of the § 107  cost recovery claim was overreaching in that it threatened the defendants with joint and several liability due to their inability to reach a settlement agreement. The court pointed out that CERCLA provides protection against inequitable results, because where PRPs, such as the defendants, are sued in a § 107 cost recovery action and held jointly and severally liable, those PRPs are entitled to seek contribution from the plaintiff and others under § 113 to attempt to recover their excess costs.

California Supreme Court Invalidates the Last Vestiges of the Common Law Release Rule – Plaintiffs May Recover the Unsatisfied Portion of All Awarded Damages from Nonsettling Joint Tortfeasors, Even in the Absence of a Good Faith Settlement

Posted by in Environmental Litigation, Insurance & Liability on September 6, 2012

By Clare Bienvenu & John Edgcomb

Until the California Supreme Court’s recent ruling in Leung v. Verdugo Hills Hospital, S192768, the common law release rule was technically still good law in California.  Yet, the rule has long lain dormant due to jurisprudence and legislation that significantly narrowed its scope of applicability. Nevertheless, the particular set of facts that arose in Leung triggered the application of the common law release rule and, in turn, prompted the California Supreme Court to authoritatively end this rule’s application.

In short, the common law release rule provides that a plaintiff’s settlement with one joint tortfeasor automatically releases all other joint tortfeasors from liability as well. The rule arose out of the traditional common law rationale that there can only be one compensation for a single injury and that, in the instance of joint wrongdoers, each wrongdoer is responsible for the entire damage. As a result, compensation of plaintiff by any one of several jointly responsible tortfeasors in return for a release satisfies plaintiff’s entire claim, thereby releasing the other joint tortfeasors as well.

California courts first narrowed the scope of the common law release rule by holding that using the terminology “covenant not to sue,” rather than  “release,” in a settlement with one of several joint tortfeasors would preserve the plaintiff’s right to recover additional compensation from the remaining nonsettling joint tortfeasors. The California Legislature further narrowed the scope of the rule’s application by enacting section 877 of the Code of Civil Procedure, providing that where a court determines that a settlement has been entered into in “good faith,” the settlement does not automatically discharge other joint tortfeasors from liability, but merely reduces the claims against the remaining joint tortfeasors by the settlement amount. Thus, compliance with section 877 protects a plaintiff’s interest in recovering the full amount of damages by making the common law release rule inapplicable and preventing the release of nonsettling joint tortfeasors. Compliance with section 877 also protects the settling tortfeasor from all liability for contribution to the non-settling tortfeasors for payment of the remaining damages awarded at trial.

Despite these constraints on the application of the common law release rule, until Leung, the rule still applied in the narrow circumstance where a settlement was not determined to be in good faith under section 877. This is the circumstance under which Leung made its way to the California Supreme Court. In Leung, the plaintiff, a newborn baby boy, suffered irreversible brain damage six days after his birth, and the plaintiff, through his guardian ad litem, sued both the pediatrician and the hospital for negligence.  The plaintiff settled with the pediatrician prior to trial for $1 million, but the trial court denied the pediatrician’s application for a determination of a good faith settlement under section 877, stating that the settlement was grossly disproportionate to the pediatrician’s expected share of liability under a reasonable person standard. However, the plaintiff and the pediatrician proceeded with the settlement anyway.  At trial, the jury found the pediatrician 55% at fault, the hospital 40% at fault, and the plaintiff’s parents 5% at fault and awarded the plaintiff approximately $15 million in damages.  The trial court found the hospital jointly and severally liable for 95% of the damages, minus the $1 million already paid to the plaintiff in settlement. The hospital appealed, claiming that since the settlement had not been found to be in good faith under section 877, the settlement released it from liability as well under the common law release rule. The Court of Appeals reluctantly agreed with the hospital, on the basis that the California Supreme Court had never affirmatively abandoned the common law release rule in full.

The California Supreme Court granted the plaintiff’s petition for review and held, in this landmark decision, that the common law release rule is no longer to be followed in California. The Court’s decision focused on the harsh results that application of the rule can cause. For instance, in the case at hand, application of the rule meant the plaintiff would recover only 1/15th of his total awarded damages. The Court found the abolition of the rule to be in keeping with the legislative intent behind section 877’s enactment, which was to ameliorate the harshness and inequity of the common law release rule.

Abandoning the rule necessitated that the Court decide how to apportion liability among joint tortfeasors when the apportionment standard under Code of Civil Procedure section 877 does not apply because a trial court has determined that a tortfeasor’s settlement has not been made in good faith. The Court adopted the “setoff-with contribution” approach for this apportionment scenario. Under the “setoff-with contribution” approach, the money paid to the plaintiff in settlement is credited against the damages assessed against the nonsettling tortfeasors, the nonsettling tortfeasors pay that remaining amount to the plaintiff, and the nonsettling tortfeasors are then entitled to seek contribution from the settling tortfeasor for any damages in excess of their equitable share.  The Court found this approach to be appropriate because it does not change the respective positions of the parties and is fully consistent with the concepts of comparative fault and joint and several liability.

The California Supreme Court’s abandonment of the common law release rule and adoption of the “setoff-with-contribution” approach makes conditioning the effectiveness of any proposed pre-trial settlement on the obtaining of a good faith determination from the presiding court of critical importance for settling defendants. Where a proposed settlement is not determined to have been made in good faith by the trial court, but the settling defendant nonetheless proceeds with its settlement, that defendant bears the risk of a contribution action brought by joint tortfeasors who are assessed excess damages at trial.  The abandonment of the common law release rule perhaps does the least for nonsettling joint tortfeasors, who have no control over another defendant’s settlement. If a defendant and plaintiff decide to settle without the court’s good faith determination, the nonsettling tortfeasor is not released from liability, but must instead pay upfront all awarded damages that were not covered by the settlement and only then may file a contribution action against the settling defendant for its remaining share, exposed to the risk that the settling defendant may lack the financial ability to reimburse the nonsettling tortfeasor in this later contribution action.  On the other hand, plaintiffs fare well in the abandonment of the rule. Regardless of whether a settlement is in good faith or not, plaintiffs are able to recover the full amount of awarded damages, minus what they have already received in settlement, from nonsettling joint tortfeasors.

State of California v. Continental Insurance: California Supreme Court Ruling Paves the Way for “Stacking” Multiple Insurance Policy Limits in Response to Certain Environmental Cleanup Claims

Posted by in Environmental Litigation, Insurance & Liability, Remediation on August 30, 2012

by Clare Bienvenu & John D. Edgcomb

On August 9, 2012, in State of California v. Continental Insurance, S170506, the California Supreme Court applied the “all sums-with-stacking” rule to allow the State of California to “stack” the policy limits of several successive insurance policies to recover for continuous environmental property damage incurred over a twelve year period. This ruling, which was based on the plain language of the commercial general liability (CGL) policies involved, allows the State of California to recover the aggregate amount of the individual policy limits up to the entire amount of the property damage, instead of limiting the State’s recovery to the pro rata allocation scheme proposed by the insurers.

The case arose out of the court-mandated cleanup of the Stringfellow Acid Pits waste site in Riverside County, a waste disposal site designed and operated by the State from 1956 to 1972. Several different factors in the location and design of the site caused continuous groundwater contamination from 1964 through 1976, which the State estimates will cost as much as $700 million to clean up. The State sued each of the insurers that issued a CGL policy covering the site during the twelve-year period of groundwater contamination for indemnity.

This case involves, and the ruling directly affects, a particular kind of property damage referred to as a “long-tail” injury.  A “long-tail” injury is continuous and progressive property damage that is not attributable to one identifiable cause but, rather, to a continuing series of events. For that reason, identifying which insurance policy is responsible for covering a “long-tail” loss is difficult, if not impossible.  Such “long-tail” claims regularly arise in the context of environmental damage, products liability, and toxic tort actions. Thus, the Supreme Court’s decision will have significant ramifications in the litigation of such claims when based on insurance policies that contain similar language to the CGL policies at issue here.

The language of all of the CGL policies in Continental Insurance required the insurers to pay “all sums which the insured shall become obligated to pay . . . for damages . . . because of injury to or destruction of property” and limited the insurers’ liability to a specified dollar amount of the “ultimate net loss [of] each occurrence.” The court analyzed its prior decisions in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, and Aerojet-General Corp. v. Transport indemnity Co. (1997) 17 Cal.4th 38, and found them to stand for the principle that where a policy contains such “all sums” language, and there is a continuous loss, any portion of which occurs during the policy period, an insurer’s indemnity obligations extend beyond the expiration of the policy period up until the point where the continuous loss terminates. The court pointed out that the plain language of the CGL policies in the case at hand did not restrict the insurer’s liability to sums expended or damage incurred solely “during the policy period,” and, thus, the Montrose and Aerojet principle applied. Therefore, since all of the CGL policies covered the risk of environmental damage to the Stringfellow site at some point during the continuous groundwater contamination, each insurer’s indemnity obligations were triggered as to the entirety of the damage, up to each policy’s limits.

After finding that the “all sums” language of the policies allowed each of the policies to cover up to the amount of the entire property damage, the court went on to find that the language of the CGL policies at issue did not limit “stacking” of the coverages. “Stacking” means that where several policies are triggered by one occurrence, each policy can satisfy the claim up to the full limits of that policy, and these policy limits can be “stacked” across several policy periods to cover the entire continuous loss. The court found the “all-sums-with-stacking” rule to be in keeping with its previous decisions in Montrose and Aerojet, as well as permitted by the insurance policy language involved – specifically, the insurance policies did not prohibit “stacking.” This, in effect, allowed the State to “stack” insurance coverage from the different policy periods during which the damage occurred creating coverage limits equal to the sum of all of the limits of the purchased insurance policies. The court opined that the “all-sums-with-stacking” rule is particularly appropriate to the “uniquely progressive nature of long-tail injuries that cause progressive damage throughout multiple policy periods.” Cont’l.  Ins. at 15.

The Supreme Court’s decision has definitive implications for the litigation of future “long-tail” claims, including environmental cleanup claims, arising under past insurance policies that contain the “all sums” language and that do not prohibit “stacking”: principally, the “all-sums-with-stacking” rule will apply to permit the insured to recover the full extent of each policy that was in force when some part of the continuous property damage occurred and to “stack” those policy limits up to the amount of the entire property damage.  The decision likely will affect future California insurance policies by encouraging insurers to incorporate policy language defeating the “all-sums-with-stacking” rule.  Future insureds should be watchful for policy language prohibiting stacking, limiting indemnity, and specifying pro rata coverage allocation rules.

ELG wins Summary Judgment for CNA in Asarco’s $33M CERCLA Contribution Claim Suit

Posted by in CERCLA, Environmental Legislation and Regulation, Environmental Litigation on June 29, 2012

On June 6, 2012, U.S. District Judge William Alsup granted summary judgment to ELG client CNA Holdings, LLC (“CNA”) in a CERCLA § 113(f) contribution suit brought against it by Asarco LLC.  COURT ORDER   Asarco filed the suit in 2011 against CNA, and several other defendants, to recoup a substantial portion of $33 million in anticipated cleanup costs it paid to DTSC in settlement of a bankruptcy claim filed by DTSC regarding a Superfund site in northern California known as the Selby Slag Site.  The Selby Slag Site was formerly the location of a smelter operated by ASARCO on the shore of San Francisco Bay for over 50 years.  In 1989, ASARCO had entered into a prior settlement regarding the allocation of past and future Selby Slag Site response costs with the State Lands Commission and Wickland Oil Company.