# Petition for Writ of Certiorari — Armco Inc. v. Maryland Casualty Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1111%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1988 - **Citation:** 484 U.S. 1008 ## Text { e Supreme Court, U.S. i Vir =D ey 740° (0 3 oe NOV 2 1987 No. 87- Te JOSEPH F. SPANIOL, JR. IN THE Supreme Court of the United States OCTOBER TERM, 1987 ARMCO INC., Petitioner, a V _— THE MARYLAND CASUALTY COMPANY, Respondent. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT *BENJAMIN ROSENBERG CRAIG E. SMITH W. WARREN HAMEL VENABLE, BAETJER AND HOWARD 1800 Mercantile Bank & Trust Building Two Hopkins Plaza Baltimore, Maryland 21201 (301) 244-7400 | Attorneys for Petitioner *Counsel of Record LIST OF SUBSIDIARIES OF ARMCO INC. Acerex Acerco S.A. Aceros Comerciales Peru S.A. Aceros Del Oriente S.A. (Acedor) Aceros Del Sur S.A. (Adesur) AH (UK) INC. AIGI Leasing, Inc. Armco AB Armco ApS Armco Argentina S.A. Armco Canada Ltd. Armco Caribbean Corporation Armco Chile S.A. Sociedad Anonima Armco Colombiana S.A. Armco Colombo Armco Dinslaken GmbH Armco D.O. Armco Equipetrol S.A. Armco Finance (UK) Ltd. Armco Financia! Holdings Corporation Armco Financial Services Corperation Armco Financial Services Europe Limited Armco Financia! Services, Inc. Armco Financial Services International, Inc. Armco Financial Services International, Ltd. Armco Flexal B.V. Armco GmbH Armco Grinding Systems Armco Industrial S.A. Armco Industries (Nigeria) Ltd. Armco Instapanel S.A. Armco Insurance Group Inc. Armco International Inc. Armco International Insurance Company of Bermuda Armco Investment Management, Inc. Armco Limited Armco Management Corporation Armco Marsteel Alloy Corporation Armco Merchandising Limited Armco Merchandising S.A. Armco Moly-Cop S.p.A. Armco National Re Incorporated Armco National Supply (Australia), Pty. Ltd. Armco Overseas Corporation Armco Overseas Manufacturing Corporation Armco Pacific Financial Corporation Armco Pacific Financial Services Limited Armco Pacific Investments, Inc. Armco Pacific Limited Armcopaxi S.A. Armco Peruana S.A. Armco Realty Corporation Armco Resources Pty. Ltd. Armco S.A. (Spain) Armco S.A. (Spain) Spanish Armco SARL Armco SDT Limited Armco Services S.A.M. Armco Shipping Limited Armco (South Africa) (Proprietary) Limited Armco Steel Corporation Armco Steel Processing Company Armco Syndicate Ltd. Armco Trust Limited Armco Underwriters Agency, Inc. Armco Uruguaya S.A. Armco Venezolana S.A. Armco Wire Company Artex Constructors, Inc. Atlantic National Insurance Company, Ltd. Australian Steel & Mining Corporation Pty. Ltd. Autometrios Co. P.T. Bakrie—Armco Bellefonte Underwriters Insurance Company Black River Lime Company B.N.L.M.S. Limited British National Insurance Company of Bermuda Ltd. Bundy Venezolana C.A. C.A. Armco Venezolana C.A. Tubos Armco Colombo Fonderie S.P.A. Compass Insurance Company Continental Western Industries, Inc. Control International, Inc. The Cumberland Group, Inc. D.I.F.S.LC.A. ENCORP INC. (assets to be sold, corporate entity shall remain for next 5 yrs.) Everest International, Inc. Falconbridge Dominicana C.porA. First Taconite Company Charles Fulton (Asia) Holdings Ltd. Charles Fulton (Australia) Pty. Ltd. Charles Fulton (Malaysia) Sendirian Berhad Charles Fulton (Singapore) Holdings Ltd. Charles Fulton (Singapore) 1982 Ltd. Hangar Facilities, Inc. Industrias National Supply C.A. Inmobilliara Hierro y Accro, S.A. Insurance Management Corporation Inversiones Armco C.A. Metaltubos C.A. MINARMCOS.A. National Supply Company, Inc. The National Supply Company of Mexico, S.A. National Supply France S.A.R.L. National Supply Stores Pte. Lid. NN Administration, Inc. NN Risk Management Services, Inc. North Atlantic Management Company Limited Northern Automatic Electric Foundry, Inc. Northern Land Company Northwestern National Casualty Company Northwestern National Insurance Company Obras Civiles e Industrias C.A. Pacific Automobile Insurance Pacific National Insurance Company Productos Metalicos Armco S.A. Prolansa (Productora de Alambres y Derivados S.A.) Reserve Mining Company Strata Energy, Inc. Talbico, Inc. Torcad Limited United Lubricants Corporation Universal Reinsurance Corporation Virginia Horn Taconite Company Westchester Nominees Ltd. Winning Post Investment Ltd. QUESTION PRESENTED Whether the decision of the Court of Appeals for the Fourth Circuit defeats the policy of Congress to create a uniform, national framework for the clean up of toxic wastes, under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §9601, et. seg., by finding a wholly artificial distinction between actions by the Government under CERCLA Sec- tions 107(aX4\A) and (B) on the one hand and Section 107(aX4XC) on the other, to support its holding that an insurer is not liable to defend or indemnify its insured under a policy containing standard comprehensive general liability (‘“CGL”’) provisions in an action for clean-up costs under CERCLA Sections 107(a\4)A) and (B). THE PARTIES Defendant, petitioner herein, is Armco Inc., formerly known as Armco Steel Corporation (‘“‘Armco’’). Armco is incorporated under the law of Ohio and has its principal place of business in the State of Ohio. Armco engages in various businesses including the manufacture and sale of steel. Plaintiff, respondent herein, The Maryland Casualty Com- pany (“Maryland Casualty’’) is incorporated under the law of Maryland. Maryland Casualty is in the business of provid- ing and underwriting insurance. In the present case, Mary- land Casualty issued a CGL policy to Armco which was in effect from June 1, 1966 until June 1, 1983. TABLE OF CONTENTS Page Cetin PROIGOOR oo Se i Wee CE abcd ie swe ek eee eee i po rere ri ee eh ei il See OE BN io ka oe Dee eee ill CE TO ones 635s eae ee ree vi POI nbn ea ee See vl Statutory Provisions Involved .... 61... 6scesdares- vi Same ir SIN COANE ck a oe cs Nizds ce besa eee 1 Menno Hor Liat Wt 5k. ok vo cca eaters 5 I. Il. Il. IV. The decision of the Fourth Circuit frustrates the congressional policy embodied in CERCLA. ..... 5 The decision of the Fourth Circuit creates an artificial distinction between CERCLA Sections 107(a)4)(A) and (B) on one hand and Section 107(aN4NC) om the OGMOR. o.oo es kee 7 The decision of the Fourth Circuit ignores the host of decisions by other courts holding that response costs for environmental contamination are damages for purposes of a CGL policy. ...... 12 CERCLA response costs are a form of restitution at law, and are the measure of ‘“‘damages’”’ as defined by CGL policy language. .............. 16 APPENDIX Memorandum and Order of the District Court filed SeptembenS, 1986 .... ccc ccccncnccunces A-1 Opinion of the Court of Appeals filed July 6, 1987 A-11 Order of the Court of Appeals denying Petition for Rehearing filed August 4, 1987 ............ A-25 STATUTORY PROVISIONS INVOLVED Comprehensive Environmental Response, Compensation and Liability Act (““CERCLA’’) 42 USA). SGG8 ones eee A-26 GOT on knckcaxedeeeer eee A-28 il TABLE OF AUTHORITIES Cases Page Aaronson Associates, Inc. v. Pennsylvania National Mutual Casualty Insurance Co., 14 D. & C. 3d (Pa. Comm. Pl., Daughin Cty. 1977), aff'd mem., 272 Pa. Super. 606, 422 A.2d 689 (1979) ................. 14 Abell v. Anderson, 148 F.2d 372 (6th Cir. 1945) ...... 16 Aetna Casualty & Surety Co. v. Hanna, 224 F.2d SE Is che Seca ncneessesencsecves 10, 15 Askew v. American Waterways Operators, Inc., 411 US. 325, 36 L. Ed. 2d. 280 (1973) ............ 14 Bankers Trust Co. v. Hartford Accident & Indemnity Co., 518 F. Supp. 371 (S.D.N.Y. 1981), vacated by settlement, 621 F.Supp. 685 (S.D.N.Y. 1981) ....... 14 Cass v. Anderson, 154 Minn. 162, 191 N.W. 407 (1923) 17 Chemical Application Co. v. Home Indemnity Co., 425 Of Se dS bs | 14 Clearfield Trust Co. v. United States, 318 U.S. 363 rae a6 4k aaa wwe sdules 7 Consolidated Rail Corp. v. Certain Underwriters of Lloyds, No. 84-2069 (D. Pa. June 3, 1986) ........ 13 Continental Insurance Companies v. Northeastern Pharmaceutical & Chemical Co., Inc., (““NEPACCO IT’’) 811 F.2d 1180 (9th Cir. 1987), pet. for reh’g. granted, 815 F.2d 51 (8th Cir. 1987) .............. 12 Cotnam v. Wisdom, 83 Ark. 601, 104 S.W. 164 (1907) . 17 Desrochers v. New York Casualty Co., 99 N.H. 129, SN Ge ee 15 Haines v. St. Paul Fire & Marine Insurance Co., 428 P. eee. Ga ce. Wed. ISTT) 2... ce eee ees 15,16, 17 Independent PetroChemical Corp. v. Aetna Casualty & Surety Co., 654 F. Supp. 1834 (D.D.C. 1986) ....... 14 il TABLE OF AUTHORITIES—/(Continued) Cases Page Kutsher’s County Club Corp. v. Lincoln Insurance Co., 119 Misc. 2d 889, 465 N.Y.S. 2d 136 (1983) ........ 14 Lansco, Inc. v. Department of Environmental Protection, 138 N.J. Super. 275, 350 A.2d 520 (Ch. Div. 1975), affd., 145 N.J. Super. 433, 368 A.2d 363 (App. Div. 1976), certif. denied, 73 N.J. 57, 372 A.2d RENNES. 8a bu Rae ede SES ae aS ek eas ke 14 Lantry v. Wallace, 182 U.S. 536 (1901) ............. 16 Lehigh Electric & Engineering Co. v. Selected Risks Insurance Co., 30 D. & C. 3d. 120 (Pa. Comm. PI., LS SD oka oed ne dncsahiiveseab ha is 14 Maryland Casualty Co. v. Armco Inc., 822 F.2d 1348 BEE 5 %.0 04.5 4s knee asad dae eee eee 4,11 N.L. Industries, Inc. v. Kaplan, 792 F.2d 896 (9th Cir. WE ip cceedca chic boss ulvarebeeetneeheaee ns 14 Ohio Drill & Tool Co. v. Johnson, 498 F.2d 186 (6th Cee MG es oie caret ean ber aice a eee 17 Port of Portland v. Water Quality Insurance Syndicate, 796 F.2d 1188 (9th Cir. 1986) .......... 13 Riehl v. Travelers Insurance Co., 22 Env’t. Rep. Cas. (BNA) 1544 (W.D. Pa. August 7, 1984), rev’d on other grounds, 772 F.2d 19 (8rd Cir. 1985) ......... 15 Township of Gloucester v. Maryland Casualty Co., No. 83-4616 (SSB) (D.N.J. August 19, 1987) .......... 13 United States v. Conservation Chemical Co., 653 F. Supp. 152 (W.D. Mo. 1986) ................ 3, 10 United States Aviex Company v. Travelers Insurance Company, 135 Mich. App. 579, 336 N.W. 2d 838 PE hs casa ae a kL Ree EE ae Ok 4,11 Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887 Ee EE Ss coco os Sa ce och a eee e sa 14 TABLE OF AUTHORITIES—(Continued) Cases Page Wyandotte Transportation Co. v. United States, 389 Si SE a a hea Aa eR eee Ores dee 18 Statutes and Regulations Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 es sec kcdenenk sacsetdsantcnss 1 CERCLA §106, 42 U.S.C. §9606 .................. 7,9 §107(aX3), 42 U.S.C. §9607(aX3) .......... 2 §107(aX4\A), 42 U.S.C. eS 2, 3, 5, 6,7, 10 §107(aX4\B), 42 U.S.C. SS is o's wa 4k ako ae Oe 3, 5, 6, 7, 10 §107(aK4yC), 42 U.S.C. re 3, 4, 5, 7, 9, 11 §107(f), 42 U.S.C. §9607(f) ............. 8, 9, 12 Resource Conservation and Recovery Act (““RCRA’’) SRG Ge a EE bo bb c5eb eu choeas 1 C7008, 4B UBL. GORI nc ccccccascssvese 1 51 Fed. Reg. No. 142 at 27,681 (August 1, 1986) ..... 9 Other Authorities Black’s Law Dictionary (5th ed. 1979) .............. 16 D. Dobbs, Handbook on the Law of Remedies (1975).. 17 Restatement of Restitution, Section 2 (Tent. Draft Woes S,, Se os case eaa ska eae bear eee 17 Sang, Beverly S., The Quasi-Contractual Nature of Cost Recovery Actions Under CERCLA, 5 Virginia Journal of Natural Resources Law 85 (1985)....... 16 OPINIONS BELOW The opinions pertinent to this Petition are the September 8, 1986 Opinion of the United States District Court for the District of Maryland, 643 F. Supp. 430 (D. Md. 1986) (A-1 to A-10), and the July 6, 1987 Opinion of the United States Court of Appeals for the Fourth Circuit, 822 F.2d 1348 (4th Cir. 1987) (A-11 to A-24). JURISDICTION The judgment of the Court of Appeals for the Fourth Circuit was entered on July 6, 1987. A Petition for a Rehearing with Suggestion for Rehearing En Banc was filed on July 20, 1987 and denied on August 4, 1987. This Court’s jurisdiction is invoked pursuant to Sup. Ct. R. 20(4) and 28 U.S.C. §§1254(1) and 2101(C). STATUTORY PROVISIONS INVOLVED This case involves the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA’’) §§106 and 107(a), 42 U.S.C. §§9606, 9607(a) and the Resource Conservation and Recovery Act (““RCRA’’) 42 U.S.C. §§6903, 6973. The text of the relevant provisions of CERCLA is set forth at pages A-26 et seg. of the Appendix. vi STATEMENT OF THE CASE On August 10, 1982, the United States Government, on behalf of the Environmental Protection Agency (““EPA’”’), brought suit against Conservation Chemical Company (“CCC’’) and six co-defendants, including Armco, in the United States District Court for the Western District of Missouri, alleging seepage of hazardous waste from a stor- age facility operated by CCC in Kansas City, Missouri (the “CCC Litigation’). The suit was brought for injunctive relief and reimbursement for the costs of investigating the nature and scope of the pollution emanating from the site and costs incurred in cleaning up the contaminated area, pursuant to Sections 1004 and 7003 of the Resource Conser- vation and Recovery Act (““RCRA’’), 42 U.S.C. §6903 and §6973, and Sections 101, 104, 106, and 107(a) of the Com- prehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§9601-9607(a). The Government’s complaint generally alleged that CCC’s improper maintenance techniques—unlined or improperly lined impoundments, deteriorating waste basins, treatment basins which were allowed to overflow, improperly installed storage tanks, improperly sealed and deteriorated drums and unattended spillage of liquid wastes—had resulted in the seepage of hazardous and toxic chemicals into the soil and groundwater surrounding the site. The Complaint asserted that chemicals migrated from the site as leachate into the Missouri and Blue Rivers, creating a threat to per- sons living in communities down river who used the rivers for crop irrigation, livestock and wild life watering, boating, industrial water supply, and drinking water. The Complaint alleged that Armco “‘generated or caused to be transported solid or hazardous wastes, hazardous sub- stances and/or pollutants or contaminants to the CCC- Kansas City site . . .”” and thus had “‘caused or contributed to and [is] causing or contributing to the release or threat- ened release of hazardous substances from the CCC-Kansas City site which presents or may present an imminent and substantial endangerment to the public health or welfare of the environment.’’ Armco was alleged to be a “person who . . . arranged with a transporter for the transport for dis- posal or treatment of hazardous substances . . . at “any facility owned or operated by another party’’ under 42 U.S.C. §9607(aX3) and was therefore strictly liable for “‘all costs of removal or remedial action incurred by the United States Government or a state’’ under 42 U.S.C. §9607(aX4)A). On April 4, 1983, Armco requested coverage under its Maryland Casualty policy for the costs of its defense and for indemnity in the CCC Litigation under the following provi- sions of its policy: (i) [Tjo pay on behalf of the insured all sums the insured, shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by an occurrence; [and] (ii) [Tjo defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking dam- ages on account thereof, even if such suit is groundless, false, or fraudulent. . . . On April 20, 1983, Maryland Casualty advised Armco that it would not provide coverage or a defense, asserting that the Government’s complaint in the CCC Litigation did not state a claim for “damages’’ but was instead a claim for equitable relief.’ On April 2, 1985, Maryland Casualty instituted an action for declaratory judgment pursuant to 28 U.S.C. §§2201 and 2202 against Armco in the United States District Court for the District of Maryland. Jurisdiction was based on diversity of citizenship under 28 U.S.C. §1332. ' Maryland Casualty also alleged that the Government’s CCC com- piaint did not contain an allegation of a specific ‘“‘occurrence’’; that the complaint lacked an allegation of “bodily injury” or “injury to or destruc- tion of property”’ as defined in the policy; and that the pollution exclusion endorsement in the policy precluded coverage. None of these arguments is at issue in the instant petition. Meanwhile, in the CCC Litigation, CCC and Hjersted (the site operator defendants) requested their insurers, including Maryland Casualty, to defend and indemnify them for the claims asserted by the United States. That request was also refused. The original generator defendants (‘‘OGDs’’) including Armco, filed a third-party complaint against CCC’s insurers, including Maryland Casualty, asserting that the third-party plaintiffs were intended or creditor benefi- ciaries of the site operator defendants’ insurance policies and that the insurers were obligated to indemnify the OGDs against all damages, costs and fees that they had incurred or would incur. The CGL policy issued by Maryland Casualty to the CCC operator defendants contains language nearly identical to the Maryland Casualty policy at issue in this case. A Special Master appointed in the CCC Litigation made recommendations that Maryland Casualty and other insur- ers were obligated to indemnify and defend Armco and other OGDs. Those recommendations were adopted by the district court. United States v. Conservation Chemical Co., 653 F. Supp. 152 (W.D. Mo. 1986). The court found that the deposit of hazardous substances into the CCC site caused injury to the site itself, and that the release and migration of the contaminants damaged and continues to damage sur- rounding groundwater, surface water and soil. After noting that a great majority of courts have held that response or clean-up costs constitute property damage for the purpose of insurance coverage, the court held that actiofis seeking recovery for clean-up costs under Sections 107(a)4) (A) and (B) of CERCLA are equivalent to actions seeking recovery for damages to natural resources under Section 107(aX4\C). Id. at 194. The measure of damages caused by or arising out of the environmental harm for purposes of CCC’s CGL poli- cies was the cost of clean-up and response. Jd. at 193. The Special Master and the court explictly rejected the insurers’ argument that a claim for response costs under CERCLA was a claim for purely equitable relief and thus did not fall within the definition of ‘‘damages’’, concluding that “‘actions seeking recovery of cleanup costs . . . are equivalent to actions seeking recovery of damages to natural resources.”’ 653 F. Supp. at 193. In reaching this conclusion, the CCC — court applied reasoning similar to that of the court in United States Aviex Company v. Travelers Insurance Company, 135 Mich. App. 579, 336 N.W. 2d 838 (1983) (recognizing that the State could have chosen to incur the costs of cleaning up the site itself and then have sued plaintiffs to recover the costs, which would have clearly been a claim for damages under a comprehensive general liability policy, instead of suing to force the responsible party to incur the response cost directly, and terming the choice of one rather than the other ‘‘merely fortuitous’’). Jd. at 194. In this case, the Maryland district court rejected the approach of the Aviex court and the Missouri district court in the CCC Litigation, even though Maryland Casualty con- ceded that, had the Government sued under 42 U.S.C. §9607(a)(4\(C) for ‘“damages for injury to, destruction of, or loss of natural resources,’’ such a suit would have been covered as a claim for damages under Armco’s CGL policy. The district court held that Maryland Casualty was not obli- gated to defend or indemnify Armco because the Govern- ment’s suit was for equitable relief and not damages. The formalistic and substantively obsolete division between law ‘and equity was found sufficient by the district court to warrant its self-described ‘‘arbitrary” holding that the Gov- ernment’s claims were not covered by Armco’s CGL policy. 643 F. Supp. at 435. On appeal, the Fourth Circuit affirmed the district court’s decision, although the panel rejected the district court’s ratio decidendi that a distinction between legal and equita- ble forms of action governed in these circumstances. Instead, the court of appeals focused on the nature of “‘dam- ages’’ as that term is used in insurance policies, and adopted a very restrictive construction which excludes response costs from the definition. Maryland Casualty Co. v. Armco Inc., 822 F.2d 1348, 1352 (4th Cir. 1987). In the Fourth Circuit’s analysis, response costs are restitutionary relief, and bear no particular relationship to the loss of value to property occasioned by environmental contamination. As a result, the panel concurred in the district court’s rejection of the ‘“‘mere fortuity’”’ reasoning of Aviex, supra, and the Mis- souri district court. In fact, despite a finding by the Missouri district court that damage had occurred to the site and surrounding property, the Fourth Circuit found that the Government’s clean-up efforts were entirely and exclusively prophylactic. The Fourth Circuit held that since response costs are restitutional, they are not damages within the. meaning of the CGL policy. REASON FOR GRANTING WRIT This petition presents an issue of substantial national sig- nificance involving the frustration of the Congressional pol- icy embodied in an important federal environmental statute, by the denial of liability insurance coverage for claims made by the government against private parties under CERCLA. The decision of the Court of Appeals for the Fourth Circuit is contrary to the purposes of CERCLA and creates an artificial distinction between recovery by the Government under CERCLA Sections 107(a)4)A) and (B) and Section 107(ay4\C), by holding that Maryland Casualty is under no obligation under the CGL policy to defend or indemnify Armco for response costs sought by the United States Gov- ernment under CERCLA. I. The decision of the Fourth Circuit frustrates the con- gressional policy embodied in CERCLA. Denial of insurance coverage for response costs claimed in CERCLA actions will have a profoundly negative impact upon the operation of the statute. Requiring generators and site operators to forego insurance coverage for CERCLA claims will inevitably hamper prompt and efficient efforts to clean up hazardous waste sites. Congress passed CERCLA in 1980 in response to the growing awareness of the dangers presented by the numer- ous hazardous waste disposal sites throughout the country. m H. R. Rep. No. 1016, 96th Cong., Part I at 17-18 (1980), reprinted in 1980 U.S. Code Cong. & Admin. News at 6120. Many of these waste sites were created over a period of decades, and contained toxic wastes produced by tens or even hundreds of disparate industrial concerns. Tracing lia- bility, and in particular, proving negligence or scienter on the part of all of the owner/operators and the “original generator defendants” (““OGDs’’) would have required more years of complex and costly litigation, even as many of the toxic sites present immediate public health hazards. Thus, two overriding concerns of Congress in drafting CERCLA were (a) attaching liability, and thus the risk of liability, without fault, and (b) assuring a speedy remedial response. See H. R. Rep. No. 1016, 96th Cong., at 17 (1980) reprinted in 1980 U.S. Code Cong. & Admin. News at 6120 (‘‘This legislation would establish a Federal cause of action in strict liability to enable the administration to pursue rapid recov- ery of the costs incurred . . . to pursue appropriate environ- mental response actions with response to inactive hazardous waste sites.’’). By construing response costs as falling outside the scope of the term “‘damages’’ for liability insurance purposes, the decision below creates an obvious practical obstacle to the prompt clean up of identified hazardous waste sites. Site operators and generators of hazardous waste will be forced to bear the entire cost of remediation. Denying insureds the benefit_of_insurance coverage for which they bargained, based upon the erroneous characterization of CERCLA Sec- tions 107(aX4\A) and (B) as equitable restitution, will dis- courage operators and OGDs from quickly and efficiently carrying out remedial responsibilities under CERCLA. What is worse, the piece-meal application of state law, with response costs considered as ‘‘damages’”’ in one state but not another, will create a patch-work quilt of varying liability and rights under CERCLA, fragmenting what is plainly intended to be a national, uniform environmental clean-up statute.” II. The decision of the Fourth Circuit creates an artificial distinction between CERCLA Sections 107(a)(4)(A) and (B) on one hand and Section 107(a)(4)(C) on the other. Congress provided the federal government with a variety of tools to cope with environmental contamination from haz- ardous waste sites, including traditional equitable relief, 42 U.S.C. §9606, and civil penalties, 42 U.S.C. §§9606(b) and 9608. In addition, Congress enacted a series of cumulative, monetary compensation provisions. 42 U.S.C. §9607(aX4\A)-(C). The compensation sections of CERCLA establish a federal cause of action to recover a money judg- ment: [Any person who disposed of hazardous substances at any facility owned or operated by another party or entity containing such hazardous substances and] from which there is a release, or a threatened release which causes the occurrence of a response cost, of a hazardous substance, shall be liable for— (A) All cost of removal or remedial action incurred by the United States Government or a State not inconsis- tent with the National Contingency Plan; (B) Any other necessary cost of response incurred hy any other person consistent with the National Contin- gency Plan; and “It may be appropriate to address the issue directly as a matter of federal common law. The Supreme Court has held that certain matters penumbral to a federal statutory program are more appropriately subject to a uniform, national standard fashioned by the federal courts. See Clearfield Trust Co. v. United States, 318 U.S. 363 (1948). This is particu- larly so where application of a state law rule of decision will frustrate the statutory purpose and leave a national federal program fragmented and subject to uncertainty. 318 U.S. at 367. In the instant case, the Fourth Circuit’s decision frustrates federal policy embodied in CERCLA, and a national, uniform rule is most appropriate to assure the enforcement of CERCLA. (C) Damages for injury to, destruction of, or loss of natural resources, including the reasonable cost of assessing such injury, destruction, or loss resulting from such a release. Under each of the subsections, the person or facility charged with responsibility for hazardous waste is subject to liability for damage to the environment in the form of a money judgment. A defendant cannot be compelled under any subsection of CERCLA §107(a) to take any action except to pay a money judgment in a sum certain as deter- mined by a court. That the sums recovered under all three subsections are to be used for a common purpose, i.e., com- pensation for restoration and repair of the land and its resources, is additional evidence of congressional intent to create cumulative bases for monetary relief under Section 107(a). A separate section of CERCLA further explicates the rule of Subsection (C). CERCLA §107(f), 42 U.S.C. §9607(f), states that: In the case of an injury to, destruction of, or loss of natural resources under subparagraph (C) of subsection (a) of this Section, liability shall be to the United States Government and to any State for natural resources within the State or belonging to, managed by, controlled by, or appertaining to such State. ... The President, or the authorized representative of any State, shall act on behalf of the public as trustee of such natural resources to recover for such damages. Sums recovered shall be available for use to restore, rehabilitate, or acquire the equivalent of such natural resources by the appropriate agencies of the Federal Government or the State Govern- ment, but the measure of such damages shall not be limited by the sums which can be used to restore or replace such resources. (Emphasis provided). The statutory scheme as interpreted by the Department of the Interior, the executive department charged with carry- ing out the provisions of CERCLA, explicitly recognizes Congress’ intent to make recovery under subsection (C) overlap and supplement damages recovered under subsec- tions (A) and (B): [Njatural resource damages are for injuries residual to those injuries that may be ameliorated in the response action [under subsections (A) and (B)]. . . . This concept of natural resource damages as a residual should pre- vent the development of two separate actions to amelio- rate the same situation. See 51 Fed. Reg. No. 148, 27,681 (August 1, 1986) (adopting the Department of the Interior’s proposed rules for assess- ment of damage to natural resource). The statute itself states that the measure of damages under subsection (C) “shall not be limited by the sums which can be used to restore or replace such resources.” 42 U.S.C. §9607(f). Taken as a whole, the provisions of CERCLA creating multiple causes of action for damages stand in contrast to the equitable, injunctive relief available under Section 106 of CERCLA, 42 U.S.C. §9606. Section 106 empowers the Gov- ernment to seek to compel responsible parties to implement a comprehensive remedial program to remediate environ- mental damage, as well as to prevent future harm. Under the compensation provisions of Section 107 (a), the Govern- ment is authorized to seek reimbursement of costs and expense in response to environmental contamination. These reimbursement costs may include costs incurred by the Gov- ernment prior to the filing of a complaint, which are typi- cally investigatory in nature, costs which the Government has incurred to remedy the damage and abate the contami- nation, and costs the Government may incur when responsi- ble parties fail to implement appropriate remedial measures. Finally, in the event remedial measures fail to abate envi- ronmental damage, the Government may also sue for ‘‘dam- ages for injury to or destruction of, or loss of natural resources’. 42 U.S.C. §107(aX4\C). The goal of CERCLA’s liability provisions is the expeditious and cost efficient abatement of environmental damage or contamination. 10 In this case, the Fourth Circuit reached a decision which is in direct conflict with the statutory scheme of CERCLA. Maryland Casualty brought this declaratory judgment action against Armco in order to avoid its obligation to defend and indemnify Armco in the underlying Missouri CERCLA action brought by the United States Government against Armco and a variety of other OGDs. United States v. Conservation Chemical Company, 653 F. Supp. 152 (W.D. Mo. 1986). In the CCC Litigation, the Government sued for injunctive and monetary relief, seeking to force the site operator and the OGDs to implement a remedial plan to abate the envi- ronmental contamination in and around the Kansas City site, and to reimburse the Federal Government for response costs incurred by the Government in responding to environ- mental contamination of the Missouri site> Armco sought, and was denied, indemnity and the cost of defense of the CCC Litigation from Maryland Casualty under the terms of its comprehensive general liability policy. The Court of Appeals for the Fourth Circuit, in deciding that Maryland Casualty is under no obligation to defend or indemnify Armco for the response costs sought in the CCC Litigation, has reached a conclusion that is at odds with the intent of Congress in creating the compensation provisions of CERCLA §107(a). The court of appeals found that the “best approach” to the language was to afford the term ‘“‘damages”’ the “legal, technical meaning described in [Aetna Casualty and Surety Company v. Hanna, 224 F.2d 499, 503 (5th Circuit 1955)].”’ The question, then, became whether the claim for response costs under CERCLA §107(aX4)(A) and (B) involved a claim for ‘‘damages’’ prop- erly defined, or whether it asserted a claim for equitable relief. The court concluded that the claims for response costs are not within the coverage of the CGL policy: The claim for the reimbursement element arises under CERCLA §107(a), and it is clear that the form of relief requested in CCC pursuant to CERCLA §107(a) is not 1] ‘“damages”’ in a legal sense, but rather is a form of equitable, remedial relief. Maryland Casualty Company v. Armco, Inc., 822 F.2d 1348, 1352 (4th Cir. 1987).° The court of appeals affirmed the district court’s rejection of the rationale of a leading case in the area of indemnifica- tion of an insured for response costs under an environmen- tal statute, United States Aviex Company v. Travelers Insurance Company, 125-Mich. App. 579, 336 N.W.2d 838 (1983). In Aviex, the Court held that the term ‘‘damages’”’ in a CGL policy included reimbursement of response costs under an environmental clean-up statute. The Aviex court reasoned that the state had the choice of suing the insured to recover damages for the injury done to the groundwater, including the cost of cleaning up the groundwater, or to seek an injunction requiring the insured to conduct the clean up itself. The Aviex court concluded that: It is merely fortuitous from the standpoint of either plaintiff or defendant that the state has chosen to have plaintiff remedy the contamination problem, rather than choosing to incur the costs of clean-up itself and then suing plaintiff to recover those costs. 125 Mich. App. at 590, 336 N.W.2d at 843. Both the district court and the court of appeals considered the form of the Government’s claims for relief more signifi- cant than the substance of those claims. The district court accepted the proposition that, had the government brought suit in the CCC Litigation under 42 U.S.C. §9607(aX4\C) for “damages for injury to, destruction of, or loss of natural * Curiously, the court of appeals abandoned its legal/equitable analysis in the very next paragraph. Responding to Armco’s “creative argument”’ that CERCLA response costs are, as a form of action, most closely related to an action in quasi-contract, and therefore legal rather than equitable, the court stated, ‘‘whether a particular cause of action has historically been considered a ‘legal’ or ‘equitable’ proceeding, with dif- fering procedural and substantive rights thereto appertaining, is irrele- vant.”’ 822 F.2d at 1352. 12 ’ resoures,”’ coverage would have been found. The court of appeals rejected the Aviex “mere fortuity’’ argument as being a dangerous step for courts to “begin to construe insurance policies to encompass costs of compliance with injunctive and reimbursement relief.’’ 822 F.2d at 1353. In holding that no coverage existed, both lower courts failed to acknowledge that Congress intended for all three subsections of CERCLA Section 107(a) to serve as cumula- tive measures of damages in an abatement action. Any mon- ies recovered in a suit under any of the three subsections of Section 107(ay4) must be used to “restore [and] rehabili- tate’, 42 U.S.C. §9607(f), the damaged property. Subsection (C) stands apart only to the extent that it serves as a catch- all remedy for injury to property due to environmental con- tamination that cannot be abated. The policy revealed in the legislative history, the interpretation of CERCLA by one of its implementing agencies, and a close reading of the statute for an appreciation of the structure of remedial tools avail- able to the government under CERCLA, mandate the con- clusion that subsections (A), (B) and (C) are cumulative and overlapping bases by which the government may recover damages as a remedy for contamination of the environment. III. The decision of the Fourth Circuit ignores the host of decisions by other courts holding that response costs for environmental contamination are damages for purposes of a CGL policy. The Fourth Circuit’s decision runs directly counter to the reasoning of a panel of the Eighth Circuit in Continental Insurance Companies v. Northeastern Pharmaceutical & Chemical Co., Inc., 811 F.2d 1180 (8th Cir. 1987), pet. for reh’g granted, 815 F.2d 51 (8th Cir. 1987) (“NEPACCO IT’). Although that decision has been suspended by the granting of a petition for rehearing, the persuasive force of the panel opinion stands in marked contrast to the Fourth Circuit’s analysis. The court reviewed the extensive list of cases pre- dominantly (although not entirely) holding that environmen- tal response costs are damages under the CGL policy. 811 13 F.2d at 1186-87. After concluding that environmental con- tamination causes property damage, and damage to the property interests of the state and federal governments acting as sovereign within their territories, 811 F.2d at 1187, the court addressed the issue of response costs, and in particular, the notion that subsections (A) and (B) are differ- ent in kind from subsection (C): It seems clear to us that, although subsection (C) directly provides for recovery for damage to natural resources, subsections (A) and (B) are also measures of the damages which governmental entities may recoup for hazardous waste damage to natural resources. 811 F.2d at 1188. This conclusion was supported by the case law and by a close reading of the language of the CGL policy, virtually a duplicate of the provision in Armco’s CGL policy. 811 F.2d at 1189. According to the panel, response costs fit within the CGL language without difficulty: This [CGL policy] language suggests that once there is property damage—here, environmental contamination— then the damages that flow from that property damage—here, clean-up costs—are recoverable. Id. (footnote omitted).4 Here, the Fourth Circuit ignored the large and growing number of cases holding that response costs sought under an environmental clean-up statute are damages for purposes of CGL insurance. See, e.g., Township of Gloucester v. Mary- land Casualty Company, et al., No. 83-4616 (SSB) (D.N.J. August 19, 1987); Port of Portland v. Water Quality Insur- ance Syndicate, 796 F.2d 1188 (9th Cir. 1986); Consolidated Rail Corp. v. Certain Underwriters of Lloyds, et ak., * Although technically no dispute of law between the Fourth Circuit and the Eighth Circuit exists at present because of the pending en banc decision, should the decision of the district court be affirmed by the Eighth Circuit, under reasoning similar to that of the majority in the panel decision, a very clear conflict will exist. Petitioner will, of course, immediately notify this Court of any action by the Eighth Circuit during the pendency of this Petition. 14 No. 84-2069 (D. Pa. June 3, 1986); Kutsher’s Country Club Corp. v. Lincoln Ins. Co., 119 Mise. 2d 889, 465 N.Y.S. 2d 136 (1983); Chemical Application Company v. Home Indem- nity Co., 425 F. Supp. 777 (D. Minn. 1977); Lansco, Ine. v. Department of Environmental Protection, 138 N.J. Super. 275, 350 A.2d 520 (Ch. Div. 1975), aff'd, 145 N.J. Super. 433, 368 A.2d 363 (App. Div. 1976), certif. denied, 73 N.J. 57, 372 A.2d 322 (1977); Independent PetroChemical Corp. v. Aetna Casualty & Surety Company, 654 F. Supp. 1334, 1359 (D.D.C. 1986). Courts have held that response costs constitute ‘‘dam- ages’ within the meaning of a CGL policy regardless of whether a state or the federal government cleaned up the affected area and then sued to recover the costs of clean up which were incurred, see, e.g., Kutsher’s, supra, or more commonly, when the insured incurred the clean-up costs itself pursuant to a state or federal enforcement order or under threat of an enforcement suit. See, e.g., Consolidated Rail Corp., supra; Bankers Trust Company v. Hartford Accident and Indemnity Co., 518 F. Supp. 371 (S.D.N.Y. 1981), vacated by settlement, 621 F. Supp. 685 (S.D.N.Y. 1981); Lehigh Electric and Engineering Company v. Selected Risks Insurance Company, 30 D. & C. 3d 120 (Pa. Comm. Pl., Luzerne Cty. 1982); Aaronson Associates, Inc. v. Penn- sylvania National Mutual Casualty Insurance Company, 14 D. & C. 3d-(Pa. Comm. Pl., Daughin Cty. 1977), aff'd mem., 272 Pa. Super. 606, 422 A.2d 689 (1979). Moreover, CERCLA Section 107(a) creates a private cause of action for damages, Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887, 890 (9th Cir. 1986) (‘‘Section 107(aX2\B) expressly creates a private cause of action for damages’’); N.L. Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986), with the measure of damages in subsec- tions (A) and (B) being the cost of clean up. Compare Askew v. American Waterways Operators, Inc., 411 U.S. 325, 36 L. Ed. 2d 280, 286 (1973) (in comparing Water Quality Improvement Act of 1970, 33 U.S.C. §§1161, et seq. (1972), and a similar Florida act, the court concluded that ‘‘the 15 Federal Act determines damages measured by the cost to the United States for cleaning up oil spills. . . .’’); Riehl v. Travelers Insurance Company, 22 Env’t Rep. Cas. (BNA) 1544, 1546 (W.D. Pa. August 7, 1984), rev’d on other grounds, 772 F.2d 19 (3rd Cir. 1985). The Fourth Circuit relied on only three cases in reaching its conclusion, 822 F.2d at 1352, citing Aetna Casualty & Surety Company v. Hanna, 224 F.2d 499 (5th Cir. 1955); Desrochers v. New York Casualty Company, 99 N.H. 129, 106 A.2d 196 (1954); Haines v. St. Paul Fire & Marine Insurance Company, 428 F. Supp. 435 (D. Md. 1977), none of which addresses the issue of whether environmental response costs are covered as damages under a CGL policy. In Desrochers, the insured-inadvertently closed a drainage culvert in the course of filling a marsh, which caused peri- odic flooding and damage to his neighbor’s property. The insurer declined to pay the costs incurred by the insured in complying with an injunction issued in an action by the neighbor. The trial court held in favor of the insured, finding that the costs of compliance with the injunction were in lieu of future monetary damages which would be incurred, had the condition not been corrected. On appeal, the Supreme Court of New Hampshire held only that because the insur- er’s contract had been cancelled, the insurer could not be held for any future damages caused by the flooding and the costs of complying with the injunction could not be termed “in lieu of’’ future damages. 99 N.H. at 133, 106 A.2d at 199. Likewise, Hanna involved the refusal of an insurer to defend or indemnify an insured sued in the Chancery Court in Florida, where the plaintiff sought an injunction to force the insured to remove landfill from the plaintiff's property that had washed there during a storm, and to build a retain- ing wall to prevent further damage to the property. Upon failing to comply with an injunction issued by the Court of Chancery, the insured was assessed penalties and damages, although later the suit was revived in the Court of Chancery 16 in an attempt to force compliance with the original injunc- tion. 224 F.2d at 502. Finally, in Haines the insured claimed coverage under a professional liability policy for defense and indemnity in a suit brought by the Securities and Exchange Commission against the insured to force disgorgement of illegal profits. 428 F. Supp. at 439. The nature of the action and the relief granted in Haines was equitable and injunctive, and the relief obviously did not fall under the term “‘damages’”’ in the professional liability policy. The court found that the SEC suit for restitution of ill-gotten profits was an action for “traditional equitable relief and cannot be considered damages within the policy coverage.”’ Jd. at 441. IV. CERCLA response costs are a form of restitution at law, and are the measure of ‘“‘damages’”’ as defined by CGL policy language. The Fourth Circuit rejected the structure of CERCLA as it stands, in favor of a purely formalistic analysis: Response costs are a form of restitution, restitution is not ‘““damages”’, and therefore, response costs are not covered by the lan- guage of the CGL policy. A closer look at the statute unmasks the labels attached by the Fourth Circuit. Accept- ing for the sake of argument that ‘‘damages’”’ are defined as “‘pecuniary compensation or indemnity, which may be recov- ered in the courts by anyone who suffers loss,’’ Black’s Law Dictionary 351 (5th Ed. 1979), and that such damages may only be had in a suit at law, CERCLA response costs none- theless more closely resemble legal damages than an injunc- tion, equitable restitution or any other form of equitable relief.° Response costs are the remedy available in a suit at law. Section 107 of CERCLA, 42 U.S.C. §9606, imposes an obli- gation which is wholly separate from the injunctive relief available under CERCLA Section 106, 42 U.S.C. §9607. The Supreme Court has held that an action to enforce a liability ° Seng, Beverly S., Quasi Contractual Nature of Cost Recovery Actions Under CERCLA, 5 Va. J. Nat. Res. Law 85 (1985). 17 created by a statute is an action at law. Lantry v. Wallace, 182 U.S. 536, 548 (1901) (“The present action is beyond question one at law. Its object is to enforce a liability cre- ated by statute. .. .’’); Abell v. Anderson, 148 F.2d 372, 374 (6th Cir. 1945). Restitution is available at law as well as in equity. Restatement (Second) of Restitution, tentative draft No. 1, at 1 (1983) (“Restitution at law is the progeny of the action of assumpsit—especially one of the so-called common counts of indebitatus assumpsit—which gave rise to the gen- eral theory of money recovery known as quasi-contract.’’); Restatement of Restitution, §4(f) (1937) (‘‘In situations in which a person is entitled to restitution, he is entitled in an appropriate case to . . . (f) a judgment at law or decree in equity for the payment of money. . . .”’). Equitable restitution is quite different in purpose and in measure from legal restitution. Equitable restitution most commonly takes the form of disgorgement: The defendant has been unjustly enriched and the remedy is to compel the defendant to give back the undeserved gain. See, e.g., Ohio Drill and Tool Company v. Johnson, 498 F.2d 186, 193 (6th Cir. 1974); Haines v. St. Paul Fire and Marine Insurance, supra; D. Dobbs, Remedies §41 at 224 (1975). The remedy is not, as is the case with CERCLA response costs, measured by the extent of the plaintiff's injury, but rather by the amount of the defendant’s unjust enrichment. By contrast, as noted in the Seng article, supra, restitution at law has been available for recovery of expenses incurred in provid- ing necessaries to the defendant,® recovery for the costs of performing the defendant’s duty,’ and provision of public necessaries, such as the cost of repair or removal of public * See, for example, the physician's recovery for rendering medical aid in an emergency. Restatement of Restitution §116 (1937); Cotnam v. Wisdom, 83 Ark. 601, 104 S. W. 164 (1907). ’ Restatement of Restitution §113 (1937); Cass v. Anderson, 154 Minn. 162, 191 N.W. 407 (1923). 18 nuisances.* Liability does not arise until the plaintiff per- forms the duty and incurs the out-of-pocket expense.® Plainly, response costs under CERCLA are more akin to legal restitution than to equitable restitution. * Wyandotte Transportation Company v. United States, 389 U.S. 191, 204 (1967), citing Restatement of Restitution §115 (1937). The measure of relief for an action at law to recover the costs of removing a public nuisance is not the defendant’s unjust enrichment, but the plaintiff’s out- of-pocket cost in performing the defendant’s duties. * Seng, supra, 5 Va. J. Nat. Res. Law at 98-99.(‘{T]he benefit to the defendant may be intangible, even ficticious, but it is presumed in the law. Consequently, the usual measure of recovery, the benefit or enrich- ment of the defendant, is replaced by the measure of the plaintiff’s outlay.’’). 19 CONCLUSION The Fourth Circuit’s decision frustrates the underlying policies of CERCLA by creating an artificial distinction between CERCLA subsections (A) and (B) on the one hand and subsection (C) on the other and fostering very real obstacles to prompt and efficient remedial efforts on the part of parties primarily liable under CERCLA. The reason- ing of the court of appeals runs counter to the overwhelm- ing majority of opinions which hold that response costs are damages within the meaning of the CGL policy. By allowing the opinion to stand, enforcement of an important national environmental statute will be hamstrung. For the foregoing reasons, Armco Inc. respectfully asks that this court grant its Petition for Certiorari and set the case for briefing and oral argument. Respectfully submitted, Benjamin Rosenberg Craig E. Smith W. Warren Hamel Venable, Baetjer and Howard 1800 Mercantile Bank & Trust Bldg. 2 Hopkins Plaza Baltimore, Maryland 21201 (301) 244-7400 Attorneys for Petitioner Armco Ince. APPENDIX IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND THE MARYLAND CASUALTY * COMPANY . V. * CIVIL NO. Y-85-1396 ARMCO, INC. ' Filed: September 1986 Jonathan D. Smith, Esquire, Baltimore, Maryland, Stephen J. Immelt, Esquire, Baltimore, Maryland, Thomas W. Bren- ner, Esquire, Washington, D.C., Jeffrey F. Liss, Esquire, Washington, D.C., and Laura Foggan, Esquire, Washington, D.C., counsel for the plaintiff. Mark R. Engel, Esquire, Baltimore, Maryland, Benjamin Rosenberg, Esquire, Baltimore, Maryland, and Robert J. ’ Proutt, Esquire, Baltimore, Maryland, counsel for the defendant. YOUNG, United States District Judge MEMORANDUM The Maryland Casualty Company seeks a declaratory judgment that it does not have a duty to defend a Compre- hensive Environmental Response, Compensation and Liabil- ity Act (““CERCLA’’) suit brought against its insured, Armco, Inc., and a host of other defendants in the Western District of Missouri. United States v. Conservation Chemical Co., No. 82-0983-CV-W-5. Maryland Casualty issued gen- eral business insurance policies to Armco from 1966 to 1983. The parties do not dispute the terms of those insurance policies or the underlying facts in the Conservation Chemi- A-1 A-2 cal Co. (““CCC’’) litigation, and have filed cross motions for summary judgment. No hearing is necessary. Local Rule 6. The Environmental Protection Agency’s complaint in the CCC case alleges that a toxic waste site in Kansas City, owned and maintained by the Chemical Conservation Com- pany, is leaking hazardous substances into the water tables of the Missouri and Blue Rivers. The complaint names Armco as one of several defendants who generated hazard- ous waste present at the site. The parties in this case have represented to the Court that Armco hired Conservation Chemical to dispose of its wastes, and that Conservation Chemical improperly stored Armco’s wastes at the site over a period of years. Armco thus appears to be a “‘person who . . . arranged with a transporter for transport for disposal or treatment, of hazardous substances . . . at any facility owned or operated by another party’’ under 42 U.S.C. § 9607(aX3). The EPA complaint alleges that, as such, Armco is strictly liable for ‘‘all costs of removal or remedial action incurred by the United States Government or a “‘state’’ under 42 U.S.C. § 9607(a)4)(A). The contracts between Maryland Casualty and Armco do not specify whether the parties intended the contracts to be interpreted according to the law of a particular jurisdiction. In a diversity case such as this, the Court must look to the choice of law rules of Maryland, the forum state. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941). Maryland follows the rule of locus contractus, applying the law of ‘“‘the place where the last act is performed which makes an agree- ment a binding contract.’’ Grain Dealers Mutual Insurance Co. v. Van Buskirk, 241 Md. 58, 65-66 (1965); Sun Insur- ance Office, Ltd. v. Mallick, 160 Md. 71, 81 (1931); Haines v. St. Paul Fire & Marine Insurance Co., 428 F. Supp. 485 (D. Md. 1977); Riviera Beach Volunteer Fire Co., Inc. v. Fidelity & Casualty Co. of New York, 388 F. Supp. 1114, 1119-20 (D. Md. 1975). Counsel for both parties have orally represented to the Court that the insurance contracts at issue were signed in A-3 Maryland, and agree that Maryland law applies. The Court finds no dispute of material fact on this issue, and will apply Maryland law. ‘‘Maryland has not adopted the rule, followed in many jurisdictions, that an insurance policy is to be most strongly construed against the insured. If the language of an insurance contract is ambiguous, however, construction is for the jury, and the ambiguity is to be resolved against the company who prepared the policy and in favor of the insured.”’ National Grange Mutual Insurance v. Pinkney, 284 Md. 694, 705 (1979) (citations omitted), quoting Govern- ment Employees Insurance v. DeJames, 256 Md. 717, 720 (1970). In its motions for summary judgment, Maryland Casualty argues that it is not obligated to defend Armco in the CCC litigation because the EPA’s complaint does not assert claims for legal ‘‘damages’’ within the meaning of Maryland Casualty’s policies. Because the Court finds that Maryland Casualty is entitled to summary judgment on this issue, it is unnecessary to consider the other contentions of the parties. The insurance contracts limit Maryland Casualty’s duty to defend to a “‘suit against the insured . . . seeking damages,” and limit the duty to indemnify to “‘sums which the insured shall become legally obligated to pay as damages.”’ Policy No. 31R-0038550, Defense, Settlement, Supplementary Pay- ments, Subsection (a); Coverage C - Property Damage Lia- bility - Except Automobile. The word “‘damages”’ is not ambiguous in the insurance context. Black letter insurance law holds that claims for equitable relief are not claims for “damages” under liability insurance contracts. See, e.g., Haines v. St. Paul Fire & Marine Insurance Co., 428 F. Supp. 485 (D. Md. 1977) (Blair, J.); Aetna Casualty and Surety Co. v. Hanna, 224 F:2d 499 (5th Cir. 1955); Desro- chers v. New York Casualty Co., 106 A.2d 196 (N.H. 1954). The government’s CCC complaint sought injunctive relief against Armco, as well as reimbursement for “‘all costs of removal or remedial action incurred by the United States Government or a State not inconsistent with the national A-4 contingency plan,” under 42 U.S.C. § 9607(aX4\A). Judge Wright of the Western District of Missouri appointed a spe- cial master, Professor Robert H. Freilich of the University of Missouri at Kansas City, to help resolve the CCC litiga- tion. The special master recommended that a CCC defen- dant’s request for a jury trial be denied, on the grounds that the government’s suit for response costs were analogous to an equitable claim for restitution. See Special Master’s Rec- ommendation Regarding General Dynamics Corporation’s Demand for a Jury Trial (April 29, 1985). Judge Wright approved the special master’s recommendation by Order dated May 14, 1985. The Seventh Amendment does not provide a right to a jury trial ‘‘if viewed historically the issue would have been tried in the courts of equity ... .”’ 9 Wright & Miller, Federal Practice and Procedure, Civil § 2302, p. 15 (1971). Judge Wright’s Seventh Amendment analysis of the CER- CLA statutory scheme followed the unanimous decisions of other courts faced with the same issue. This Court has also denied a demand for a jury trial in a CERCLA case. See United States v. Dickerson, No. Y-85-3249, memo. op. at 12 (May 28, 1986); see also United States v. Mottolo, 605 F. Supp. 898, and cases cited at 913 (D. N.H. 1985). Recently, the special master recommended that the gov- ernment’s CCC complaint alleges claims for ‘‘damages’’ for purposes of comprehensive general liability insurance poli- cies. See Special Master’s Recommendation on Motions for Summary Judgment Regarding Insurance and Indemnifica- tion, memo. op. at 132 (June 27, 1986) (hereafter ‘Special Master’s Recommendations“). Maryland Casualty has repre- sented to the Court that Judge Wright entered an order adopting the special master’s recommendations on July 10, but said that he would vacate the order as to Maryland Casualty and two other insurers who had settled before entry of the order. Judge Wright apparently has deferred entry of that order to vacate pending further settlement negotiations between all parties still involved. See letter to A-5 the Court from counsel for Maryland Casualty, July 18, 1986, pp. 1-2. In this posture, the special master’s recommendations are not res judicata against Maryland Casualty. They are also unpersuasive as precedent. Professor Freilich, in some — detail, explained why actions to recover response costs alleged ‘‘property damage’”’ under the insurance contracts. Special Master’s Recommendations at pp. 63-81. This Court agrees with the special master’s common sense conclusion that toxic waste dumps that contaminate the environment cause “‘property damage;”’ it reached the same result in Mraz v. American Universal Insurance Co., 616 F. Supp. 1173, 1177 (D. Md. 1985), appeal filed, No. 85-2399 (4th Cir. November 26, 1985). The “‘property damage’’ issue is dis- tinct from the ‘damages’ issue, however. As Professor Freilich noted, the typical business liability policy reads: “The company will pay on behaif of the insured all sums which the insured shall become legally obligated to pay as damages because of . . . property damage. . . .”” Special Master’s Recommendations at p. 70. In the unambiguous wording of the policy, even if a lawsuit against the insured alleges ‘‘property damage,’’ it must also make claims for ‘“‘damages’’ before the insurer becomes obligated to defend or indemnify. This Court was not presented with the “‘damages”’ issue in the Mraz litigation. See Pretrial Order filed June 26, 1985, section 2(c), pp. 8-10. Maryland Casualty squarely pre- sented Special Master Freilich with the “‘damages”’ issue in the CCC litigation, and he acknowledged that it was differ- ent than the ‘‘property damage”’ issue noting: To the extent that Maryland [Casualty]’s argument once again raises the question of whether “‘cleanup costs’ con- stitute ‘‘property damage’’ for purposes of liability insur- ance coverage, the Special Master rejects Maryland’s argument. [The special master had already rejected that argument at pp. 63-81 of his memorandum.| To the extent that Maryland’s argument interprets “‘damages”’ as com- A-6 pensation for injury or loss and excludes the cost of com- plying with equitable or injunctive orders, the Special Master believes the argument interprets “damages’’ too narrowly. The Special Master interprets “‘damages’”’ to be sums which the insured is obligated to pay by reason of liability imposed by law, and adopts the reasoning of the Court in United States Aviex Co. v. Travelers Ins. Co., 125 Mich. App. 579, 336 N.W.2d 838 (1983). Special Master’s Recommendations at 132. To adopt the reasoning of the Aviex decision is to adopt no reasoning at all. In that case, the insured operated a chemi- cal plant in Niles, Michigan that had been destroyed by fire. Chemicals from the plant mixed with water used to put out the fire and percolated into the ground, contaminating the groundwater. The State of Michigan ordered the insured to clean up the contamination. The insured paid a consulting firm to analyze the damage, but dragged its feet when the consultants estimated that clean-up operations would cost over a million dollars. The State of Michigan threatened the insured with legal action. Under Michigan’s statutory scheme, the State could have sought an order for abatement of water pollution, a criminal complaint, injunctive relief, or damages for injuries done to the national resources of the state. 336 N.W.2d 841, 843. Before the State pursued any of these remedies, the insured sued its insurer for a declara- tory judgment. The trial court held that the insurer was obligated to defend any claim or action and to pay for any dam- ages to the extent of the policy’s monetary limits deter- mined by a tribunal of competent jurisdiction, which damages will include the costs of plaintiff imposed by such tribunal or resulting from a determination by such tribu- nal for correcting the chemical contamination of the per- colating or ground water underneath plaintiff's premises caused by the fire. . . . The obligation of the defendant includes reimbursement of plaintiff for the costs and SS A-7 expenses of any study and testing incurred by the plaintiff to date. 336 N.W.2d at 841. On appeal, the insurer argued that ‘“‘damages” did not include costs incurred in complying with equitable or injunc- tive orders. The Court of Appeals of Michigan affirmed. The Aviex court recognized that ‘“‘Defendant’s argument is per- suasive and supported by decisions from several other juris- dictions,’ and cited Aetna Casualty Co. v. Hanna, supra; Desrochers v. New York Casualty Co., supra; and Ladd Con- struction Co. v. Insurance Company of North America, 391 N.E.2d 568 (Ill. App. 1979). 336 N.W.2d 842-43. The Aviex court declined to follow this ‘‘persuasive’’ prec- edent, however, holding: In our opinion, this reasoning interprets ‘‘damages’’ too narrowly. . . . [T]he Attorney General is empowered to file a suit ‘“‘to recover the full value of the injuries done to the natural resources of the state. . . .” [sic] This language clearly indicates the state’s interest in its natural resources. Defendant agrees that the contamination of subterranean and percolating water as a result of the fire is “physical injury to tangible property”’ within the terms of the insurance policy [the equivalent of the “property damage” issue]. If the state were to sue in court to recover in traditional ‘‘damages,”’ [sic] including the state’s costs incurred in cleaning up the contamination, for the injury to the groundwater, defendant’s obligation to defend against the lawsuit and to pay damages would be clear. It is merely fortuitous from the standpoint of either plaintiff or defendant that the state has chosen to have plaintiff remedy the contamination problem, rather than choosing to incur the costs of clean-up itself and then suing plaintiff to recover those costs. 336 N.W.2d 843. It was no coincidence that the Aviex court did not cite a single authority in support of its “‘mere fortuity’’ argument, because that argument violates one of the major tenets of ee A-8 black letter insurance law. An insurer has an obligation to assess its duty to defend and indemnify against the allega- tions in the complaint alone. See generally, Brohawn v. Transamerica Insurance Co., 276 Md. 396 (1975); Board of County Commissioners of the County of Larimer v. Guaran- tee Insurance Co., 90 F.R.D. 405, 407-408 (D. Colo. 1981); Ladd Construction Co., supra, 391 N.E.2d at 572-73: | Should we indulge in speculation as to whether a court by exercising its inherent power might award damages when none were sought and then conclude that such inher- ent power exists and insurance company [sic] must defend an action, then we would by speculation be altering the responsibilities between parties as set forth in an insur- ance contract. Moreover, a giant if not final step would have been taken in support of a proposition that an insur- ance company would be under an obligation to defend all suits, regardless of policy provisions or allegations con- tained in a complaint. Such a result could well create havoc as to both the insurers and the insureds. Traditionally, courts have found no insurance coverage for the costs of complying with an injunction even in cases where the suits could have been brought for damages. See Aetna Casualty and Surety Co. v. Hanna, supra, 224 F.2d 503; Ladd Construction Co. v. Insurance Co. of North Amer- wea, supra, 391 N.E.2d at 572-73; Garden Sanctuary, Ine. v. Insurance Co. of North America, 292 So.2d 75, 76-77 (Fla. App. 1974). Maryland Casualty concedés that the govern- ment could have brought its CCC suit under 42 U.S.C. § 9607(aX4XC) for “damages for injury to, destruction of, or loss of natural resources,”’ and that such a suit would have alleged claims for ‘“‘damages’’ under the insurance con- tracts. But, the government chose not to bring suit under the “damages” provisions of CERCLA, apparently prefer- ring the equitable remedy of restitution. Maryland Casualty is obligated to defend or indemnify real lawsuits, not hypo- thetical ones. A-9 Professor Freilich and the Aviex court tried to get around this result by saying that damages to the environment are measured by the costs of clean-up. See Special Master’s Recommendations at 80, 132; Aviex, supra, 336 N.W.2d 843. Armco adds a wrinkle to that argument by suggesting that in claims for clean-up, money is the ‘“‘essence”’ of the gov- ernment’s claims, unlike in other equitable suits, which pre- sumably focus on injunctive relief. The difficulty with these arguments is that they apply with equal force to the Sev- enth Amendment analysis of CERCLA clean-up suits; clean- up costs cannot be the equivalent of damages, or “essentially’’ monetary, for purposes of interpreting an insurance contract, and also be equitable for Seventh Amendment purposes. The Special Master’s suggestion that ‘‘damages’’ are “sums which the insured is obligated to pay by reason of liability imposed by law’”’ appeals to common sense. That is why people buy insurance, after all, and why should out- dated distinctions between law and equity get in the way? It is true that no practical difference exists between sums which the insured must pay the court under some equitable remedy as opposed to sums payable for damages. But there is also no practical difference between sums which the insured must pay the court and sums which the insured must pay to comply with an injunctive order. Obviously, an insurer cannot be required to pay the costs of its insured in complying with every new government regulation. Insurance contracts must draw the line somewhere, and under law clearly established by 1955, these contracts drew the line at the historic division between law and equity. Every court that has considered the question has held that CERCLA response cost suits fall on the equity side of the line. Arbitrary as it may appear, Maryland Casualty is enti- tled to the benefit of its bargain. /s/ United States District Judge A-10 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND THE MARYLAND CASUALTY * COMPANY , v. * CIVIL NO. Y-85-1396 ARMCO, INC. 7 ORDER In accordance with the attached Memorandum, it is this day of September, 1986, by the United States District Court for the District of Maryland, ORDERED: 1. That the motion of Maryland Casualty for summary judgment BE, and the same IS, hereby GRANTED; 2. That the motion of Armco, Inc. for summary judgment BE, and the same IS, hereby DENIED; 3. That the cross-motion for summary judgment by Mary- land Casualty BE, and the same IS, DENIED AS MOOT; 4. That the Pretrial Order in Mraz v. American Universal Insurance Co., Y-84-4426, and counsel for Maryland Casu- alty’s letter to the Court dated July 18, 1986, be made part of the record in this case; 5. That judgment BE, and the same IS, ENTERED in favor of Maryland Casualty; and 6. That a copy of this Memorandum and Order be mailed to counsel. /s/ United States District Judge A-11 UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 86-3125 The Maryland Casualty Company, Plaintiff— Appellee, versus Armco, Inc., Defendant— Appellant, Lumbermens Mutual Casualty Company; AT&T Technologies, Inc.; State of Missouri; Insurance Environmental Litigation Association; Keith Rayment Amici Curiae. Appeal from the United States District Court for the Dis- trict of Maryland, at Baltimore. Joseph H. Young, District Judge. (CA-85-1396) Argued: March 2, 1987 Decided: July 6, 1987 Before WIDENER, SPROUSE, and CHAPMAN, Circuit Judges. A-12 Benjamin Rosenberg (Craig E. Smith; James R. Moxley, II]; Mare R. Engel; W. Warren Hamel; Venable, Baetjer & Howard on brief) for Appellant; Thomas William Brunner (Steven C. Kahn; Jeffrey F. Liss; Laura A. Foggan; John W. Cavilia; Piper & Marbury on brief) for Appellee; (Robert N. Sayler; John E. Heintz; William F. Greaney; Frederick G. Harold; Covington & Burling on brief) for Amicus Curiae AT&T Technologies, Inc., The Boeing Company, Carter Day Industries, Inc., Chemical Manufacturers Associations, Ex- Cell-O Corporations, International Business Machines Cor- poration, Key Pharmaceuticals, Inc., SCM Corporation, Stauffer Chemical Company and 3M Company; (Richard L. Blatt; Richard S. Borland; Ellen J. Kerschner; Robert W. Hammesfahr; Peterson, Ross, Schloerb & Seidel; Patrick M. Sweeney; Beverly L. Crump; Douglas M. Palais; McSweeney, Burtch & Crump on brief) for Amicus Curiae Keth Rayment; (William L. Webster, Attorney General; Shelley A. Woods, Assistant Attorney General on brief) for Amicus Curiae State of Missouri; (Timothy C. Russell; Thomas S. Schaufelberger; Drinker, Biddle & Beath on brief) for Amicus Curiae Lumbermens Mutual Casualty Company; (Roger E. Warin; Virginia L. White-Mahaffey; Helen D. Irvin; Michael J. Markoff; Steptoe & Johnson on brief) for Amicus Curiae Insurance Environmental Litiga- tion Association. A-13 CHAPMAN, Circuit Judge: The appellee, The Maryland Casualty Company, sought a declaratory judgment concerning its liability to its insured, Armco, Inc., arising out of a suit brought against Armco by the United States. The underlying suit is a claim against Armco for reimbursement and injunctive relief because of an alleged endangerment to the environment at a hazardous waste site in Missouri. The question presented is whether the claim brought against Armco in Missouri constitutes a claim for ‘“damages’”’ as defined in the insurance agreement between Armco and Maryland Casualty. We hold that the claim seeking compliance with regulatory directives of a federal agency, which compliance takes the form of obedi- ence to injunctions and reimbursement of remedial costs, does not constitute a claim for ‘“‘damages’’ under the insur- ance policy. We affirm the decision of the district court that Maryland Casualty is not obligated to indemnify nor defend Armco in the Missouri litigation I At issue is a general comprehensive liability policy first negotiated between Maryland Casualty and Armco in 1966. Modified periodically, it remained in effect until June 1, 1983. Totaling one hundred and fifty-eight pages, the policy is “manuscript” in several instances: that is, some provi- sions are negotiated and specifically written for this insured. In pertinent part, the policy obligates Maryland Casualty: [T]o pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by an occurrence; [and] [To] defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking dam- ages on account thereof, even if such suit is groundless, false, or fraudulent. . . . In the Missouri litigation, United States v. Conservation Chemical Company, 82-0983-CV-W-5 (W.D. Mo. Sept. 2, A-14 ~ 1986) (‘“CCC’’), the United States brought suit against both the owners of the waste storage facility and the “original waste generator’ defendants, which latter group included Armco. The complaint alleged that improper maintenance techniques utilized in storing the hazardous waste resulted in the seepage of toxic chemicals into the soil and ground- water surrounding the site and surface flows off the site and e-.to adjoining property. The complaint also alleged that the chemicals have migrated from the site as leachate into the Missouri and Blue Rivers and thus pose a threat to persons living in communities downriver who use the rivers for crop irrigation, livestock and wildlife watering, boating, indus- trial water supply and as a source of drinking water. The suit was brought pursuant to the Resource Con- servation and Recovery Act of 1976, as amended, 42 U.S.C. §§ 6901-91, and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, Pub. L. No. 96-510, 94 Stat. 2767 (1980) (““CERCLA’’). Among its CERCLA claims the government sued under § 106 and under § 107, 42 U.S.C. § 9607(a)4)(A) seeking to compel the responsible parties to implement a comprehensive remedial action program and seeking reimbursement for all of its investigatory and other response costs and enforcement activities related to the site and for the costs incurred or to be incurred in cleaning up the affected area. CERCLA § 107, 42 U.S.C. § 9607 reads in pertinent part: (4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities or sites selected by such person, from which there is a release, or a threatened release which causes the incur- rence of response costs, of a hazardous substance, shall be liable for— (A) all costs of removal or remedial action incurred by the United States Government or a State not incon- sistent with the national contingency plan; A-15 (B) any other necessary costs of response incurred by any other person consistent with the national contin- gency plan; and (C) damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction, or loss resulting from such a release.! In January 1986, the original waste generator defen- dants in the CCC litigation, including Armco, filed an amended third-party complaint against the site operator defendants’ primary and excess insurers, including Mary- land Casualty, alleging that the third-party plaintiffs were intended and/or creditor beneficiaries of the site operator defendants’ insurance policies. The complaint asserted that the insurers were obligated to indemnify the original waste generator defendants against all damages, costs and fees which they had incurred or would incur. The insurance pol- icy between Maryland Casualty and the CCC operator defen- dants contained nearly identical language to the Maryland Casualty—Armco policy at issue in this case. The special master appointed in CCC found that Mary- land Casualty was under an obligation to indemnify and defend Armco in the CCC litigation. Specifically, the master determined that environmental harm constitutes “‘property damage”’ as defined in the insurance policy, and that envi- ronmental response costs constitute ‘damages’ as con- tained in the policy. The district judge in CCC signed an order which adopted, in substantial part, the-recommenda- tions of the special master. Immediately thereafter, Mary- land Casualty and two other insurers informed the judge that they wished to complete a settlement with the original generator defendants, including Armco. The district judge stated that he would set aside his order nunc pro tunc as to any settling insurers. The settlement was reached, and the order was vacated. ' Section 9607 was slightly amended by Pub. L. 99-499, effective Octo- ber 17, 1986, but this amendment has no bearing on this litigation. A-16 The district court in the present litigation found that the action taken by the Missouri district court did not render the present controversy res judicata, and did not give rise to collateral estoppel. Addressing the case on the merits, the court held that Armco was not entitled to defense costs and indemnity from Maryland Casualty in the CCC litigation. Maryland Casualty Company v. Armco, Inc., 643 F.Supp. 430 (D.Md. 1986). The court stated that ‘“‘[bjlack letter insur- ance law holds that claims for equitable relief are not claims for ‘damages’ under liability insurance contracts.” Jd. at 432. The district court then inquired into whether CCC involved a claim for equitable relief. The court considered whether the nature of that claim was a “‘legal’’ or ‘‘equita- ble”’ claim as historically defined, and analogized to judicial interpretations of the Seventh Amendment right to a jury trial. Because ‘“‘[e]very court that has considered the ques- tion has held that CERCLA response cost suits fall on the equity side of the line,” id. at 485, the CCC claim was not a legal claim, and therefore was not a suit for damages against which Maryland Casualty must defend and indem- nify. II Maryland Casualty’s obligations under the terms of the insurance agreement arise only where the insured has become “‘legally obligated to pay as damages because of injury to or destruction of property. .. .” It is black-letter law that the terms of an insurance policy are to be con- strued according to the meaning a reasonably prudent lay- man would infer. Pacific Indemnity Company v. Interstate Fire & Casualty Company, 302 Md. 3838, 488 A.2d 486, 488 (1985). Under this standard, Armco and its amici AT&T, et al., argue that the term “damages” connotes virtually any claim for monetary relief. Judicial decisions, although not rejecting the rule of con- struction that terms of an insurance contract are to be given their ordinary meaning, have nevertheless limited the A-17 breadth of the definition of ““damages’”’ somewhat more nar- rowly than the appellant suggests. “‘Damages,”’ as distin- guished from claims for injunctive or restitutionary relief, includes “only payments to third persons when those per- sons have a legal claim for damages. . . . Aetna Casualty and Surety Company v. Hanna, 224 F.2d 499, 503 (5th Cir. 1955). See also, Desrochers v. New York Casualty Company, 99 N.H. 129, 106 A.2d 196 (1954). Thus ‘‘damages”’ is to be construed in consonance with its ‘“‘accepted technical mean- ing in law.” Hanna, 224 F.2d at 503. Maryland law, whieh governs the construction of this agreement, has similarly adopted the somewhat narrow, technical definition of dam- ages. See, e.g., Haines v. St. Paul Fire and Marine Insur- ~ ance Company, 428 F.Supp. 435 (D. Md. 1977) (holding that a claim for restitution of ill-gotten profits was an action for “traditional equitable relief and cannot be considered dam- ages within the policy coverage’’). The best approach in construing the term ‘‘damages”’ as contained in this insurance contract is to afford it the legal, technical meaning described in Hanna. The contract obli- gates Maryland Casualty to pay where its insured become obligated ‘‘to pay as damages... .’”’ If the term “‘damages”’ is given the broad, boundless connotations sought by the appellant, then the term ‘‘damages’”’ in the contract between Maryland Casualty and Armco would become mere surplus- age, because any obligation to pay would be covered. The limitation implied by employment of the phrase ‘‘to pay as damages”’ would be obliterated. We thus proceed to examine whether the claim for relief in the CCC litigation involves a claim for ‘“‘damages’’ properly defined, or whether it asserts claims for equitable relief. In the CCC litigation, the government sought both injunctive relief and restitution in the form of reimburse- ment of costs, including engineering and clean-up costs, in connection with the allegedly hazardous waste contamina- tion in Missouri. The claim for the reimbursement element A-18 arises under CERCLA § 107(a), and it is clear that the form of relief requested in CCC pursuant to CERCLA § 107(a) is not “‘damages”’ in the legal sense, but rather is a form of equitable, remedial relief. Because we adopt the construc- tion of the term “damages” as employed by the court in Hanna and the other cases cited, we find the claims raised in CCC are not within the coverage of the insurance con- tract. The general comprehensive liability policy between the parties covers “damages,” but not the expenditures which result from complying with the directives of regula- tory agencies. Armco and its amici proffer the creative argument that an action for restitution which arises from the fulfillment of one’s legal obligation by another is an action in quasi- contract, and therefore is an action at law, and not in equity. This argument, however, misperceives the focus of the inquiry. In defining ‘‘damages,’’ and distinguishing ‘“dam- ages’ from equitable remedies, we focus not on the nature of the underlying action, but rather on the form of relief sought. In other words, whether a particular cause of action has historically been considered a “‘legal’’ or ‘“‘equitable’”’ proceeding, with the differing procedural and substantive rights thereto appertaining, is irrelevant. The insurance contract, which controls the obligations between the parties and therefore centers the focus of this court, is written in terms of the relief sought, and not in terms of the form of the cause of action. The contract describes “‘damages’’ to be paid, and not liabilities arising out of “‘legal,”’ rather than “equitable” proceedings. The appellant relies upon two decisions that have held that a claim for apparent equitable relief for reimbursement of environmental cleanup expenses is a claim for ‘“‘damages”’ as used in the standard general comprehensive liability pol- icy. We find these decisions unpersuasive. In United States Aviex Company v. Travelers Insurance Company, 125 Mich. App. 579, 336 N.W.2d 838 (1983), the court held that the A-19 term ‘‘damages’’ included monies recovered to reimburse the government for costs incurred in investigating and cor- recting chemical contamination of percolating waters. In rejecting the argument that the term “‘damages’”’ should be limited to compensation for injury or loss, as distinguished from costs incurred in complying with equitable or injunc- tive orders, the court noted that other jurisdictions had recognized this distinction, citing Hanna among other deci- sions. Rejecting the definition employed in other jurisdic- tions as being too narrow, the court in Aviex reasoned that the ‘“‘merely fortuitous” event that the state has chosen to clean the contamination itself and then sue for reimburse- ment, rather than suing straightforwardly for damages, should not excuse the insurer from liability on its policy. According to the Aviex court the measure of damages to natural resources is measured simply as the costs of restora- tion, and whether a plaintiff sues for the damages or the costs should not determine the coverage under the insur- ance policy. We think this reasoning is faulty for two reasons. First, it is not necessarily correct that the measure of relief is unrelated to whether the government sues for reimburse- ment or for damages. Damages is a form of substitutional redress which seeks to replace the loss in value with a sum of money. Restitution, conversely, is designed to reimburse a party for restoring the status quo. It might very well cost far more to restore a contaminated marsh than it would to pay damages for its loss. See, e.g., Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962), cert. denied, 375 U.S. 906 (1963) (where the cost of restoring strip-mined land was more than quadruple its potential value in the restored condition). Second, even assuming that the costs to the defendant are the same regardless of whether the government sues for restitution or for damages, thus in some sense rendering the decision by the government regarding whether to sue for A-20 damages or restitution a ‘‘mere fortuity,’’ it is a great step, and a dangerous one, for courts to begin to construe insur- ance policies to encompass costs of compliance with injunc- tive and reimbursement relief. Insurance policies, probably for reasons of certainty and economy, traditionally reimburse only damages arising from actual, tangible injury. Insurers are very reluctant to cover what are essentially prophylactic measures, such as safety precautions, for the obvious reason that such expenditures are subject to the discretion of the insured, and are not connected with any harm to specific third parties. Insurers require certainty as to the extent of their liability and this certainty is set forth in the insurance policy, which in the instant case was a negotiated manuscript policy. The less obvious, but perhaps more telling reason that insurers are reluctant to cover avoidance costs is that insureds are far more likely to over-utilize safety measures where another party is paying the bill. Should policies be-construed to cover some forms of harm-avoidance measures, courts would be faced with the very difficult problem of separating needed prophylactic measures from unnecessary or ineffi- cient ones. From an insurer’s perspective, investigative and reme- dial action taken by the government respecting potential environmental hazards constitutes a prophylactic measure. In the CCC litigation which underlies this case, the govern- ment, choosing not to wait and learn whether the environ- mental spill in Missouri created a hazard which would cause harm to the wildlife and humans in the Missouri River and Blue River region, has intervened immediately upon learn- ing of the toxic contamination. The case thus presents no instance of harm to human or animal life, but merely the prevention of such harm. Even if some such harm had occurred, the fundamental nature of the government’s inter- vention is the same: the government seeks to prevent or mitigate the occurrences or reoccurrences of hazardous con- A-21 tamination. This action is fundamentally prophylactic, and is not of the sort that Maryland Casualty contracted to cover. Armco also relies upon the recent decision in United States v. Northeastern Pharmaceutical and Chemical Com- pany, No. 84-1837 (8th Cir. Dec. 31, 1987) (NEPACCO). In a 2-1 decision, the court held that damage to the environment constitutes “‘property damage’”’ as contained in that insur- ance policy.* The court, however, in an apparently advisory spirit, continued beyond its holding to address the issue of whether the term “damages” as used in the standard gen- eral comprehensive liability policy includes claims for reim- bursement and other equitable relief. The court held that “damages” does include claims for equitable relief, reason- ing that the measure of damages is the same regardless of whether the suit seeks damages or reimbursement. Thus this decision rests on the same logic we find faulty in Avier. Maryland Casualty has contracted with Armco to reim- burse only where Armco is obligated to pay damages which result from injury, which in the insurance context means damages in the legal sense. In the absence of clear contract language or specific Congressional authorization in CER- CLA, we decline to extend the obligations of insurance car- riers beyond the well-illumined area of tangible injury and into the murky and boundless realm of injury prevention. We hold that the costs to Armco of complying with the directives of a regulatory agency are not covered within the terms of the insurance policy. Ili Armco has argued that the duty to defend is broader than Maryland Casualty’s obligation to reimburse Armco for damages and that the district court erred in construing the * This holding is in disagreement with this court’s holding in Mraz v. Canadian Universal Insurance Company, No. 85-2399, slip opinion (4th Cir. Nov. 4, 1986). The parties in this case do not raise the same issue as that presented in Mraz, and we therefore decline to base our decision on its holding. A-22 terms in pari materia, with the effect of holding that Mary- land Casualty had no duty to defend Armco in the CCC litigation. Under Maryland law, the insurer has a duty to defend where there is a “‘possibility’”’ that it may be liable. Continental Casualty Company v. Board of Education of Charles County, 302 Md. 516, 489 A.2d 536 (1985). The insurance contract provides that Maryland Casualty will defend any suit against Armco which alleges ‘‘such injury, . . . even if such suit is groundless, false, or fraudulent . .. .’’ Thus, the duty to defend arises only where there is an allegation of “‘such injury,’’ which phrase refers to the liability of the insurance company to pay on behalf of Armco the sums which Armco will become legally obligated “to pay as damages because of injury to or destruction of property ....’’ It is clear that the duty to defend and the duty to reimburse are to be interpreted conterminously, and because we hold that the claim in the CCC litigation does not allege a claim for damages as defined in the policy, then a mere “‘possibility”’ of liability on behalf of Maryland Casu- alty does not arise. IV The appellant has offered two other theories. First, the appellant argues that response costs are ‘‘mitigation”’ costs which, because their incursion saves the insurer money for which it would otherwise be liable, are “‘damages’’ under the terms of the policy. The appellant cites two cases which it Says supports the recoverability of mitigation expenses. See Consolidated Rail Corporation v. Certain Underwriters at Lloyds, No. 84-2069, slip opinion (E.D.Pa. June 3, 1986); Bankers Trust Company v. Hartford Accident and Indem- nity Company, 518 F.Supp. 371 (S.D.N.Y.), vacated due to settlement, 621 F.Supp. 685 (S.D.N.Y. 1981). In these cases, however, the court determined that the insurance contract specifically obligated the insurer to reimburse expenses undertaken to mitigate the amount of damages. The appel- lant has presented no argument that the Maryland Casualty A-23 policy by its terms implies the coverage of such damages. The appellant does argue, as a matter of judicial policy, that the insurer ought to be liable where the insured takes steps to mitigate the damages which would be chargeable to the insurer. Such an interpretation would suffer from the same difficulties attendant in construing Maryland Casualty liable for Armco’s (or the government’s) employment of prophy- lactic measures: the insurer would be uncertain of the extent of its liability in the absence of a requirement for an injury, the insured would have the tendency to over-utilize the ‘“‘free’’ resource, and the judicial system would be faced with the impossible task of attempting to define the limita- tions on the necessity for the costs incurred in preventing future harm. We find this argument unpersuasive. Second, the appellant argues that the action of the dis- trict court in Missouri, which assigned a special master to address the same issue but later vacated nune pro tune its order that adopted the master’s recommendations, should have collateral estoppel or preferably res judicata effect in this case. The appellant argues that a defendant should not be able to manipulate the judicial system by entering into last-minute settlements in order to avoid the collateral estoppel effects of unfavorable judgments. See, Note, Collat- eral Estoppel of Nonparties, 87 Harv. L. Rev. 1485, 1503 (1974). Regarding the rule that the judgment in the prior suit must be “‘final’’ before collateral estoppel can obtain, the appellant cites Chemetron Corporation v. Business Funds, Inc., 682 F.2d 1149, 1191 (5th Cir. 1982), vacated on other grounds, 460 U.S. 1007 (1983) (stating that the finality requirement “‘does not require a judgment ‘which ends the litigation . . . and leaves nothing for the court to do but execute the judgment,’ Catlin v. U.S., 324 U.S. 229, 233... . (1945), but includes many dispositions which, though not final in that sense, have nevertheless been fully litigated”’). A-24 We decline to hold that the recommendations of a spe- cial master, which have been vacated, rise to the level of a “final judgment”’ in order to estop the present litigation. In light of the significance of the issue presented and the large sums of money involved, and the fact that the manuscript policy was not before the Missouri court, the preclusion against the putative defendant of re-litigation on the grounds of estoppel arising out of withdrawn judgment is singularly inappropriate. See Note, Avoiding Issue Preclu- ston by Settlement Conditioned upon the Vacatur of Entered Judgments, 96 Yale L. J. 860 (1987). Collateral estoppel is an equitable doctrine, and we affirm the district court’s decision on the equities not to employ it. Thus the decision of the district court is AFFIRMED. rer I a le Dn et OR a SD, SW SS Ga SS ae —_——— A-25 FILED August 4, 1987 U.S. Court of Appeals Fourth Circuit UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 86-3125 The Maryland Casualty Company Appellee, versus Armco, Inc., Appellant. On Petition for Rehearing with Suggestion for Rehearing In Banc. ORDER The appellant’s petition for rehearing and suggestion for rehearing in bane were submitted to this Court. As no member of the Court requested a poll on the suggestion for hearing in banc, and As the panel considered the petition for rehearing and is of the opinion that it should be denied, IT IS ORDERED that the petition for rehearing and suggestion for rehearing in banc are denied. Entered at the direction of Judge Chapman, with the concurrence of Judge Widener and Judge Sprouse. - For the Court, /s/ CLERK iui a nace A-26 Comprehensive Environmental Response, Compensation and Liability Act (““CERCLA’’) 42 U.S.C. §9606. Abatement Actions (a) Maintenance, jurisdiction, etc. In addition to any other action taken by a State or local government, when the President determines that there may be an imminent and substantial endangerment to the public health or welfare or the environment because of an actual or threatened release of a hazardous substance from a facility, he may require the Attorney General of the United States to secure such relief as may be neces- sary to abate such danger or threat, and the district court of the United States in the district in which the threat occurs shall have jurisdiction to grant such relief as the public interest and the equities of the case may require. The President may also, after notice to the affected State, | ) : take other action under this section including, but not limited to, issuing such orders as may be necessary to protect public health and welfare and the environment. (b) Fines; reimbursement (1) Any person who, without sufficient cause, willfully violates, or fails or refuses to comply with, any order of the President under subsection (a) of this section may, in an action brought in the appropriate United States district court to enforce such order, be fined not more than $25,000 for each day in which such violation occurs or such failure to comply continues. (2(A) Any person who receiv.s and complies with the terms of any order issued under subsection (a) of this section may, within 60 days after completion of the required action, petition the President for reimbursement 7 from the Fund for the reasonable costs of such action, plus interest. Any interest payable under this paragraph shall accrue on the amounts expended from the date of expendi- ture at the same rate as specified for interest on invest- ments of the Hazardous Substance Superfund established under subchapter A of chapter 98 of Title 26. A-27 (B) If the President refuses to grant all or part of a petition made under this paragraph, the petitioner may within 30 days of receipt of such refusal file an action against the President in the appropriate United States district court seeking reimbursement from the Fund. (C) Except as provided in subparagraph (D), to obtain reimbursement, the petitioner shall establish by a prepon- derance of the evidence that it is not liable for response costs under section 9607(a) of this title and that costs for which it seeks reimbursement are reasonable in light of | the action required by the relevant order. (D) A petitioner who is liable for response costs under section 9607(a) of this title may also recover its reasonable costs of response to the exvent that it can demonstrate, on the administrative record, that the President’s decision in selecting the response action ordered was arbitrary and capricious or was otherwise not in accordance with law. Reimbursement awarded under this subparagraph shall include all reasonable response costs incurred by the peti- tioner pursuant to the portions of the order found to be arbitrary and capricious or otherwise not in accordance with law. oO EE (E) Reimbursement awarded by a court under subpar- agraph (C) or (D) may include appropriate costs, fees, and other expenses in accordance with subsections (a) and (d) of section 2412 of Title 28. (c) Guidelines for using imminent hazard, enforce- ment, and emergency response authorities; promul- gation by Administrator of EPA, scope, etc. Within one hundred and eighty days after December 11, 1980, the Administrator of the Environmental Protection Agency shall, after consultation with the Attorney General, establish and publish guidelines for using the imminent haz- ard, enforcement, and emergency response authorities of this section and other existing statutes administered by the Administrator of the Environmental Protection Agency to OE —_ EO A-28 effectuate the responsibilities and powers created by this chapter. Such guidelines shall to the extent practicable be consistent with the national hazardous substance response plan, and shall include, at a minimum, the assignment of responsibility for coordinating response actions with the issuance of administrative orders, enforcement of standards and permits, the gathering of information, and other immi- nent hazard and emergency powers authorized by (1) sec- tions 1321(c\2), 13818, 1319, and 1364(a) of Title 33, (2) sections 6927, 6928, 6934, and 69738 of this title, (3) sections 300j-4 and 300i of this title, (4) sections 7413, 7414, and 7603 of this title, and (5) section 2606 of Title 15 42 U.S.C. § 9607. Liability (a) Covered persons; scope; recoverable costs and damages; interest rate; ‘‘comparable maturity”’ date Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section— | (1) the owner and operator of a vessel or a facility (2) any person who at the time of disposal of any hazard- ous substance owned or operated any facility at which such hazardous substances were disposed of, (3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances, and (4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facili- ties, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a haz- ardous substance, shall be liable for— A-29 (A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan; (B) any other necessary costs of response incurred by any other person consistent with the national contingency plan; (C) damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction, or loss resulting from such a release; and ¥ (D) the costs of any health assessment or health effects study carried out under section 9604(i) of this title. The amounts recoverable in an action under this section shall include interest on the amounts recoverable under sub- paragraphs (A) through (D). Such interest shall accrue from the later of (i) the date payment of a specified amount is demanded in writing, or (ii) the date of the expenditure concerned. The rate of interest on the outstanding unpaid balance of the amounts recoverable under this section shall be the same rate as is specified for interest on investments of the Hazardous Substance Superfund established under subchapter A of chapter 98 of Title 26. For purposes of applying such amendments to interest under this subsection, the term “comparable maturity’”’ shall be determined with reference to the date on which interest accruing under this subsection commences. (b) Defenses There shall be no liability under subsection (a) of this section for a person otherwise liable who can establish by a preponderance of the evidence that the release or threat of release of a hazardous substance and the damages resulting therefrom were caused solely by— (1) an act of God; (2) an act of war; A-30 (3) an act or omission of a third party other than an employee or agent of the defendant, or than one whose act or cmission occurs in connection with a contractual relationship, existing directly or indirectly, with the defen- dant (except where the sole contractual arrangement arises from a published tariff and acceptance for carriage by a common carrier by rail), if the defendant establishes by a preponderance of the evidence that (a) he exercised due care with respect to the hazardous substance con- cerned, taking into consideration the characteristics of such hazardous substance, in light of all relevant facts and circumstances, and (b) he took precautions against fore- seeable acts or omissions of any such third party and the consequences that could forceably result from such acts or omissions; or (4) any combination of the foregoing paragraphs. (c) Determination of amounts (1) Except as provided in paragraph (2) of this subsec- tion, the liability under this section of an owner or opera- tor or other responsible person for each release of a hazardous substance or incident involving release of a haz- ardous substance shall not exceed— (A) for any vessel, other than an incineration vessel, which carries any hazardous substance as cargo or resi- due, $300 per gross ton, or $5,000,000, whichever is greater; (B) for any other vessel, other than an incineration vessel, $300 per gross ton, or $500,000, whichever is greater; (C) for any motor vehicle, aircraft, pipeline (as defined in the Hazardous Liquid Pipeline Safety Act of 1979 [49 U.S.C.A. § 2001 et seq.]}), or rolling stock, $50,000,000 or such lesser amounts as the President shall establish by regulation, but in no event less than $5,000,000 (or, for releases of hazardous substances as defined in section 9601(14)(A) of this title into the navigable waters, A-31 $8,000,000). Such regulations shall take into account the size, type, location, storage, and handling capacity and other matters relating to the likelihood of release in each such class and to the economic impact of such limits on each such class; or (D) for any incineration vessel or any facility other than those specified in subparagraph (C) of this para- graph, the total of all costs of response plus $50,000,000 for any damages under this subchapter. (2) Notwithstanding the limitations in paragraph (1) of this subsection, the liability of an owner or operator or other responsible person under this section shall be the full and total costs of response and damages, if (A)i) the release or threat of release of a hazardous substance was the result of willful misconduct or willful negligence within the privity or knowledge of such person, or (ii) the primary cause of the release was a violation (within the privity or knowledge of such person) of applicable safety, construction, or operating standards or regulations; or (B) such person fails or refuses to provide all reasonable coop- eration and assistance requested by a responsible public official in connection with response activities under the nationa! contingency plan with respect to regulated carri> ers subject to the provisions of Title 49 or vessels subject to the provisions of Title 33 or 46, subparagraph (A\ii) of this paragraph shall be deemed to refer to Federal stan- dards or regulations. (3) If any person who is liable for a release or threat of release of a hazardous substance fails without sufficient cause to properly provide removal or remedial action upon order of the President pursuant to section 9604 or 9606 of this title, such person may be liable to the United States for punitive damages in an amount at least equal to, and not more than three times, the amount of any costs incurred by the Fund as a result of such failure to take proper action. The President is authorized to commence a civil action against any such person to recover the puni- A-32 tive damages, which shall be in addition to any costs recovered from such person pursuant to section 9612(c) of this title. Any moneys received by the United States pur- suant to this subsection shall be deposited in the Fund. (d) Rendering care or advise (1) In general Except as provided in paragraph (2), no person shall be liable under this subchapter for costs or damages as a result of actions taken or omitted in the course of render- ing care, assistance, or advice in accordance with the National Contingency Plan (‘‘NCP’’) or at the direction of an onscene coordinator appointed under such plan, with respect to an incident creating a danger to public health or welfare or the environment as a result of any releases of a hazardous substance or the threat thereof. This paragraph shall not preclude liability for costs or damages as the result of negligence on the part of such person. (2) State and local governments No State or local government shall be liable under this subchapter for costs or damages as a result of actions taken in response to an emergency created by the release or threatened release of a hazardous substance generated by or from a facility owned by another person. This para- graph shall not preclude liability for costs or damages as a result of gross negligence or intentional misconduct by the State or local government. For the purpose of the preced- ing sentence, reckless, willful, or wanton misconduct shall constitute gross negligence. (3) Savings provision This subsection shall not alter the liability of any per- son covered by the provisions of paragraph (1), (2), (3) or (4) of subsection (a) of this section with respect to the release or threatened release concerned. (e) Indemnification, hold harmless, etc.; agreements or conveyances; subrogation rights A-33 (1) No indemnification, hold harmless, or similar agree- ment or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section. ~ (2) Nothing in this subchapter, including the provisions of paragraph (1) of this subsection, shall bar a cause of action that an owner or operator or any other person subject to liability under this section, or a guarantor, has or would have, by reason of subrogation or otherwise against any person. (f) Actions involving natural resources; maintenance, scope, etc. (1) Natural resources liability; use of recovered funds; measure of damages; double recovery In the case of an injury to, destruction of, or loss of natural resources under subparagraph (C) of subsection (a) of this section liability shall be to the United States Gov- ernment and to any State for natural resources within the State or belonging to, managed, by, controlled by, or appertaining to such State: Provided, however, That no liability to the United States or State shall be imposed under subparagraph (C) of subsection (a) of this section, where the party sought to be charged has demonstrated that the damages to natural resources complained of were specifically identified as an irreversible and irretrievable commitment of natural resources in an environmental impact statement, or other comparable environment anal- ysis, and the decision to grant a permit or license autho- rizes such commitment of natural resources, and the facility or project was otherwise operating within the terms of its permit or license. The President, or the autho- rized representative of any State, shall act on behalf of the A-34 public as trustee of such natural resources to recover for such damages. Sums recovered by the United States Gov- ernment as trustee under this subsection shall be retained by the trustee, without further appropriation, for use only to restore, replace, or acquire the equivalent of such natu- ral resources. Sums recovered by a State as trustee under this subsection shall be available for use only to restore, replace, or acquire the equivalent of such natural resources by the State. The measure of damages in any action under subparagraph (C) of subsection (a) of this section shall not be limited by the sums which can be used to restore or replace such resources. There shall be no double recovery under this chapter for natural resource damages, including the costs of damage assessment or restoration, rehabilitation, or acquisition for the same release and natural resource. There shall be no recovery under the authority of subparagraph (C) of subsection (a) of this section where such damages and the release of a hazardous substance from which such damages resulted have occurred wholly before December 11, 1980. (2) Designation of Federal and State officials (A) Federal The President shall designate in the National Contin- gency Plan published under section 9605 of this chapter the Federal officiais who shall act on behalf of the public as trustees for natural resources under this chapter and section 1321 of Title 33. Such officials shall assess dam- ages for injury to, destruction of, or loss of natural resources for purposes of this chapter and such section 1321 of Title 33 for those resources under their trustee- ship and may, upon request of and reimbursement from a State and at the Federal officials’ discretion, assess dam- ages for those natural resources under the State’s trustee- ship. (B) State The Governor of each State shall designate State offi- cials who may act on behalf of the public as trustees for ee Ne ae ey ee a eS eed Nee ere btn 9 Srabvee at! A-35 natural resources under this chapter and section 1321 of Title 33 and shall notify the President of such designa- tions. Such State officials shall assess damages to natural resources for the purposes of this chapter and such section 1321 of Title 33 for those natural resources under their trusteeship. (C) Rebuttable presumption Any determination or assessment of damages to natu- ral resources for the purposes of this chapter and section 1321 of Title 33 made by a Federal or State trustee in accordance with the regulations promulgated under sec- tion 9651 of this title shall have the force and effect of a rebuttable presumption on behalf of the trustee in any administrative or judicial proceeding under this chapter or section 1321 of Title 33. (g) Federal agencies For provisions relating to Federal agencies, see section 9620 of this title. (h) Owner or operator of vessel The owner or operator of a vessel shall be liable in accor- dance with this section, under maritime tort law, and as provided under section 9614 of this title notwithstanding any provision of the Act of March 3, 1851 (46 U.S.C. 183ff) or the absence of any physical damage to the proprietary interest of the claimant. (i) Application of registered pesticide produce No person (including the United States or any State or Indian tribe) may recover under the authority of this section for any response costs or damages resulting from the appli- cation of a pesticide product registered under the Federal Insecticide, Fungicide, and Rodenticide Act [7 U.S.C.A. § 136 et seq.]. Nothing in this paragraph shall affect or modify in any way the obligations or liability of any person under any other provision of State or Federal law, including com- mon law, for damages, injury, or loss resulting from a A-36 release of any hazardous substance or for removal or reme- dial action or the costs of removal or remedial action of such hazardous substance. (j) Obligations or liability pursuant to federally permit- ted release Recovery by any person (including the United States or any State or Indian tribe) for response costs or damages resulting from a federally permitted release shall be pursu- ant to existing law in lieu of this section. Nothing in this paragraph shall affect or modify in any way the obligations or liability of any person under any other provision of State or Federal law, including common law, for damages, injury, or loss resulting from a release of any hazardous substance or for removal or remedial action or the costs of removal or remedial action of such hazardous substance. In addition, costs of response incurred by the Federal Government in connection with a discharge specified in section 9601(10\B) or (C) of this title shall be recoverable in an action brought under section 1319(b) of Title 33. (k) Transfer to, and assumption by, Post-Closure Lia- bility Fund of liability of owner or operator of haz- ardous waste disposal facility in receipt of permit under applicable solid waste disposal law; time, cri- teria applicable, procedures, etc.; monitoring costs; reports (1) The liability established by this section or any other law for the owner or operator of a hazardous waste dis- posal facility which has received a permit under subtitle C of the Solid Waste Disposal Act [42 U.S.C.A. § 6921 et seq.], shall be transferred to and assumed by the Post- closure Liability Fund, established by section 9641 of this title when— (A) such facility and the owner and operator thereof has complied with the requirements of subtitle C of the Solid Waste Disposal Act [42 U.S.C.A. § 6921 et seq.] ad regulations issued thereunder, which may affect the per- formance of such facility after closure; and - ees A-37 (B) such facility has been closed in accordance with such regulations and the conditions of such permit, and such facility and the surrounding area have been monitored as required by such regulations and permit conditions for a period not to exceed five years after closure to demon- strate that there is no substantial likelihood that any migration offsite or release from confinement of any haz- ardous substance or other risk to public health or welfare will occur. (2) Such transfer of liability shall be effective ninety days after the owner or operator of such facility notifies the Administrator of the Environmental Protection Agency (and the State where it has an authorized program under section 3006(b) of the Solid Waste Disposal Act [42 U.S.C.A. § 6926(b)]) that the conditions imposed by this subsection have been satisfied. If within such ninety-day period the Administrator of the Environmental Protection Agency or such State determines that any such facility has not com- plied with all the conditions imposed by this subsection or that insufficient information has been provided to demon- strate such compliance, the Administrator or such Stae shall so notify the owner and operator of such facility and the administrator of the Fund established by section 9641 of this title, and the owner and operator of such facility shall continue to be liable with respect to such facility under this section and other law until such time as the Administrator and such State determines that such facility has complied with all conditions imposed by this subsection. A determina- tion by the Administrator or such State that a facility has complied with all conditions imposed by this subsection or that insufficient information has been supplied to demon- strate compliance, shall be a final administrative action for purposes of judicial review. A request for additional infor- mation shall state in specific terms the data required. (3) In addition to the assumption of liability of owners and operators under paragraph (1) of this subsection, the Post- closure Liability Fund established by section 9641 of this title may be used to pay costs of monitoring and care and A-38 maintenance of a site incurred by other persons after the period of monitoring required by regulations under subtitle C of the Solid Waste Disposal Act [42 U.S.C.A. § 6921 et seq.] for hazardous waste disposal facilities meeting the con- ditions of paragraph (1) of this subsection. (4A) Not later than one year after December 11, 1980, the Secretary of the Treasury shall conduct a study and shall submit a repor thereon to the Congress on the feasibil- ity of establishing or qualifying an optional system of pri- vate insurance for postclosure financial responsibility for hazardous waste disposal facilities to which this subsection applies. Such study shall include a specification of adequate and realistic minimum standards to assure that any such privately placed insurance will carry out the purposes of this subsection in a reliable, enforceable, and practical manner. Such a study shall include an examination of the public and private incentives, programs, and actions necessary to make privately placed insurance a practical and effective option to the financing system for the Post-closure Liability Fund provided in subchapter II of this chapter. (B) Not later than eighteen months after December 11, 1980, and after a public hearing, the President shall by rule determine whether or not it is feasible to establish or qualify an optional system of private insurance for postclosure financial responsibility for hazardous waste disposal facili- ties to which this subsection applies. If the President deter- mines the establishment or qualification of such a system would be infeasible, he shall promptly publish an explana- tion of the reasons for such a determination. If the Presi- dent determines the establishn. +t or qualification of such a system woud be feasible, he shall promptly publish notice of such determination. Not later than six months after an affir- mative determination under the preceding sentence and after a public hearing, the President shall by rule promul- gate adequate and realistic minimum standards which must be met by any such privately placed insurance, taking into account the purposes of this chapter and this subsection. Such rules shall also specify reasonably expeditious proce- De ate ls n> Cae