Phase I/II Environmental Assessment Report Issued To Property Owner Held To Constitute A Claim For Environmental Losses Under A Claims-Made Policy
This environmental action involves a determination of coverage under a claims-made policy stemming from the investigation and clean-up of a site in Waterbury Connecticut. Specifically, Adelphia entered into a contract to sell its Waterbury property and engaged an environmental consultant to conduct an environmental audit of the site prior to the sale pursuant to the Connecticut Property Transfer Act. The Act prohibited transfer of an “establishment” without certifying that a parcel had been investigated for the potential discharge of hazardous waste and resultant remediation.
The firm conducted a Phase I/II Environmental Site Assessment that revealed soil contamination due to on-site releases of hazardous substances in five areas of concern. Adelphia submitted the report to the Connecticut Department of Environmental Conservation and forwarded an updated report on the Waterbury property to the insurer advising “of our notice … of two potential claims.” The insurer denied “any present or future obligation with respect to the matters disclosed in the [Adelphia letter].”
On review by the court, two issues were to be decided: 1) whether a “claim” was made against Adelphia during the policy period, and 2) whether Adelphia substantially reported the claim to the insurer during the policy period or extended reporting period.
As to the first issue, the policyholder argued that the Phase I/II report was written notice to Adelphia asserting its responsibility for the contamination. Conversely, the insurer argued that the report did not clearly state that Adelphia was responsible or liable for any loss or remediation. Instead, it simply suggested more investigation. The court noted that the report was not a model of clarity, but that liability was not “the sine qua non of a claim” and that its effect was best understood in the context of the Connecticut Property Transfer Act. Thus, the court concluded that, when read in the context of the obligations required under the Act and where there was documented contamination exceeding applicable clean-up criteria, the report served as written notice asserting Adelphia’s responsibility for the releases. Thus, it constituted a claim made against Adelphia.
On the second issue of whether the policyholder substantially complied with its reporting obligation, the court held that this evaluation “circled back” to the argument whether a claim had been made, which the court answered in the affirmative. Specifically, it noted that reporting requirements in the policy were clear, and that Adelphia informed the insurer that it had received an “assertion of responsibility” regarding the Waterbury site during the expanded reporting period. Thus, the policyholder substantially complied with the reporting obligation.