Olin Corporation v. American Home Assurance Co.
(2nd Cir, December 19, 2012)
This environmental coverage dispute arises out of ground water contamination claims involving Olin’s Morgan Hill, California site, which had used the chemical potassium perchlorate in the manufacturing of signal flares beginning in 1956. Olin appealed from the district court granting summary judgment to the insurers on the ground that the attachment point for the excess insurance policies could not be reached by the alleged environmental damage at the site. Specifically at issue was whether the $30 million attachment point for the insurers’ excess policies for the years 1966-69 and 1969-72 could be triggered by the claim where the contamination was continuing, reaching its maximum extent in 1987.
Olin argued that Condition C of the policy required the insurer to indemnify Olin not only for damage occurring during the policy periods, but also for any damage in subsequent years as this damage was a “covered occurrence” that was “continuing at the time of termination” as contemplated in each policy. Olin further argued that, based on the policy language, the continuous absorption of perchlorate into the soil and groundwater from 1956 go 1987 was a single, multi-year occurrence. Also, the absorption was a continuous or repeated exposure to conditions resulting in property damage, and because both the absorption itself and the damaged caused by it took place during the original policy periods, it was a covered occurrence.
Conversely, while the insurer agreed that the perchlorate contamination at the site qualified as a single multi-year occurrence for purposes of determining limits of liability and retentions, the multi-year occurrence spanning the policy periods did not satisfy Condition C. The insurer further argued that the post-policy damage was “new” damage rather that “continuing damage.”
The court found that there was no basis for interpreting that “occurrence” in Condition C had a different meaning than “occurrence” elsewhere in the policies. The court further held that the damage “continuing at the time of termination” of the policy clearly contemplated property damage from the migration of chemicals in the expanding groundwater plume during the term of the policy and continuing after the policy terminated, noting that this holding is consistent with its prior decisions as to this site.
Consequently, the court held that Condition C obligated the insurer to indemnify Olin for property damage arising from covered occurrences that continued after the policy period and that the three decades of perchlorate exposure must be treated as a single, multi-year occurrence for the purposes of this policy. As such, the district court erred in concluding that neither policy would be reached because of the allocation method. Rather, the record established that $72.6 million in damage fell within the 1966-69 policy, while $62.7 million fell within the 1969-72 policy, which exceeded the policies’ $30.3 million attachment points.