Weyerhaeuser Co. v. Commercial Union Ins.
15 P.3d 115 (2001)
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Rule of Law:
Under an 'occurrence'-based comprehensive general liability policy, an insurer is obligated to indemnify the insured for liabilities imposed by law (such as under CERCLA) for property damage that occurred during the policy period, even if the insured's own conduct creating the liability occurred after the policy period expired.
Facts:
- Weyerhaeuser Company was deemed a responsible party for cleaning up hazardous waste at approximately 130 sites nationwide under federal (CERCLA) and state (MTCA) environmental laws, which impose strict, joint, and several liability.
- Commercial Union Insurance Company (CU) issued a supplemental (excess) liability insurance policy to Weyerhaeuser, effective from January 1, 1970, to January 31, 1973.
- The policy indemnified Weyerhaeuser for 'all sums which the Assured shall be obligated to pay by reason of the liability... imposed upon the Assured by law... for damages... on account of... Property Damage... caused by or arising out of each occurrence.'
- The underlying policy defined an 'occurrence' as 'an event or continuous or repeated exposure to conditions, which unexpectedly causes injury during the policy period.'
- The Mid State and Pasco landfills became operational and property damage from pollution began occurring at these sites during CU's policy period (1970-1973).
- Weyerhaeuser did not ship any waste to the Mid State or Pasco landfills until after the expiration of the CU supplemental policy in 1973.
- Due to its later disposal of waste at the sites, Weyerhaeuser was held jointly and severally liable under environmental statutes for the entire cleanup of the sites, including the pollution that occurred during CU's policy period.
- Prior to trial, Weyerhaeuser settled with 33 other insurance companies it had sued for coverage, leaving CU as the sole non-settling defendant.
Procedural Posture:
- Weyerhaeuser filed a declaratory judgment action in a Washington state trial court against 34 insurance companies, including Commercial Union (CU), seeking coverage for property damage at 42 polluted sites.
- All defendant insurance companies except CU settled with Weyerhaeuser prior to trial.
- The trial court denied CU's motion for partial summary judgment to dismiss claims related to the Mid State site, where Weyerhaeuser did not ship waste until after the policy period.
- After multi-phase trials, juries returned verdicts finding coverage for the Mid State and Pasco landfill sites, among others.
- The trial court denied CU's post-trial motion to set off settlement funds Weyerhaeuser received from other insurance carriers against the jury verdicts.
- The trial court entered a final monetary judgment against CU.
- CU appealed and Weyerhaeuser cross-appealed to the Washington Court of Appeals, which certified the case for direct review by the Washington Supreme Court.
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Issue:
Does a comprehensive general liability policy that covers sums an insured is obligated to pay by law for property damage occurring during the policy period cover retroactive, statutorily-imposed liability for damage caused by third parties at a site before the insured had any connection to it?
Opinions:
Majority - Sanders, J.
Yes, the policy covers the liability. An insurer that agrees to pay for 'all sums which the insured shall become obligated to pay as damages by reason of the liability imposed upon the insured by law' must provide coverage where property damage occurred during the policy period and a statute later imposes liability on the insured for that damage. The policy defines a triggering 'occurrence' as an event causing injury during the policy period, which is not limited to actions taken by the insured itself. Because property damage occurred at the Mid State and Pasco sites during the policy period and environmental laws later obligated Weyerhaeuser to pay for that damage, the plain language of the contract requires coverage. The nature of liability under CERCLA and MTCA is strict, joint, several, and retroactive, and Weyerhaeuser purchased comprehensive coverage to insure against such legally imposed obligations. The court also held that CU, as the non-settling insurer, bore the burden of proving Weyerhaeuser had been fully compensated by other settlements to claim an offset, a burden which CU failed to meet.
Dissenting - Madsen, J.
No, the policy does not cover the liability. Coverage exists only where the property damage giving rise to the liability arises out of the 'business operations of the insured' during the policy period. Since Weyerhaeuser's shipments of waste—its business operations related to the sites—did not occur until after the policy period expired, no injury to property arose out of its business operations during that period. A reasonable construction of the policy requires that the complete factual predicate for liability, including the insured's own involvement, must exist during the policy period. It is unreasonable to require insurers to cover liabilities based on facts and actions by the insured that did not occur until after the policy expired.
Dissenting - Talmadge, J.
No, the majority misunderstands the nature of excess liability insurance and incorrectly interprets the policy's aggregate limits. The commercial context in which Weyerhaeuser purchased layers of insurance indicates that the parties intended for the Commercial Union policy to have a $1.5 million aggregate annual limit for property damage. Interpreting the policy to provide unlimited property damage coverage is commercially unreasonable, as evidenced by Weyerhaeuser's purchase of additional layers of coverage above the Commercial Union policy. The language describing the aggregate limits in the Commercial Union policy is identical to the language describing the underlying Fireman's Fund policy's limits, which the parties agree contained an annual aggregate limit.
Analysis:
This decision significantly solidifies the 'injury-in-fact' trigger for insurance coverage in environmental contamination cases under Washington law. It establishes that an 'occurrence' policy is triggered by the property damage itself during the policy period, irrespective of when the insured's liability-creating conduct took place. This precedent greatly benefits policyholders facing retroactive, joint and several liability under statutes like CERCLA, as it allows them to access coverage from policies in effect when contamination occurred, even if their own involvement with a site was years later. The ruling places the risk of unforeseen, retroactively imposed statutory liability on the insurer, reinforcing the broad protective scope of 'all sums' language in comprehensive general liability policies.
