Appendix — Missouri v. Continental Insurance Cos.

87-19 53 | ~ Supveme Cour, U8

hfILRED

sVSGPH F. SPANIOL JR

In the Supreme Court of the United-Seaten___|

OCTOBER TERM, 1987

CONTINENTAL INSURANCE COMPANIES,

Plaintiff-Respondent,

VS.

NORTHEASTERN PHARMACEUTICAL AND

CHEMICAL COMPANY, INC., et al.,

Defendants,

and

STATE OF MISSOURI,

Intervenor-Petitioner.

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

EIGHTH CIRCUIT

WILLIAM A. WEBSTER

Attorney General

MICHAEL L. Boicourt*

Chief Counsel,

Special Litigation Division

SHELLEY A. Woops

Assistant Attorney General

P.O. Box 899

Jefferson City, Missouri 65101

Attorneys for Petitioner

*Counsel of Record

E. L. Menpenuatt, Inc., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030

TABLE OF CONTENTS

Opinion, United States Court of Appeals, Eighth Cir-

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Opinion, United States Court of Appeals, Eighth Cir-

CUE Ce AONE Oe, ONE? Bk ies ne A3l

Order, United States District Court, Western District

of Missouri, Southern Division (Filed June 25,

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Order, United States District Court, Western District

of Missouri, Southern Division (Filed June 26,

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Order Denying Rehearing, United States Court of a

peals, Eighth Circuit (Filed May 4, 1988) _............... A84

Complaint for Declaratory Judgment (Filed February

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Excerpts From Suggestions in Support of Plaintiff’s

Motion for Summary Judgment (Filed November

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Agenda and Minutes - Meeting of the General Liability

Governing Committee - October 28, 1969 —.................. All5

Commercial General Liability Coverage Form ............ A120

Excerpts From Reporters’ Transcript of Proceedings

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Excerpts From Reporters’ Transcript of Proceedings

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APPENDIX

(Filed February 26, 1988)

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 85-1940

Continental Insurance Companies,

Appellee,

V.

Northeastern Pharmaceutical & Chemical Company, Inc..

Milton Turkel, Edwin B. Michaels, and John W. Lee,

Appellees,

State of Missouri,

Intervenor-appellant.

Appeal from the United States District Court for the

Western District of Missouri

Submitted: May 12, 1987

Filed: February 26, 1988

Before LAY, HEANEY, ROSS,* McMILLIAN, FAGG,

BOWMAN, WOLLMAN, and MAGILL, Circuit Judges,

en banc.

McMILLIAN, Circuit Judge.

This is an appeal from an order entered in the Dis-

trict Court’ for the Western District of Missouri granting

*The Honorable Donald R. Ross, active Circuit Judge of

this court at the time this case was argued and submitted,

took senior status on June 13, 1987.

1. The Honorable Russell G. Clark, United States District

Judge for the Western District of Missouri.

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summary judgment in favor of Continental Insurance Cos.

(Continental) on count I of its complaint and on the

counterclaim filed by the state of Missouri and granting

Continental’s motion to dismiss without prejudice count

II of its complaint. Continental Insurance Cos. v. North-

eastern Pharmaceutical & Chemical Co., No. 84-5034-CV-

S-4, slip op. at 11, 16 (W.D. Mo. June 25, 1985) (herein-

after district court order). On appeal, a panel of this

court affirmed in part and reversed in part. Continental

Insurance Cos. v. Northeastern Pharmaceutical & Chem-

ical Co., 811 F.2d 1180 (8th Cir. 1987) (hereinafter panel

opinion).* Subsequently, the court granted the petitions

for rehearing en banc filed by Continental and the state.

815 F.2d 51 (1987).

For the reasons discussed below, we hold that the

term “damages” in the standard-form comprehensive gen-

eral liability (CGL) policy does not include cleanup costs

and accordingly affirm the order of the district court.

FACTUAL BACKGROUND

The following factual summary is taken in large part

from the panel opinion, 811 F.2d at 1182-84. A more

detailed statement of the factual background of the Denney

farm site can be found in the underlying liability deci-

sions, United States v. Northeastern Pharmaceutical &

Chemical Co., 579 F. Supp. 823 (W.D. Mo. 1984) (EPA),

aff'd in part, rev’d in part and remanded, 810 F.2d 726

(8th Cir. 1986), cert. denied, 108 S. Ct. 146 (1987).

2. The panel opinion was withdrawn and vacated by order

of the court when rehearing en banc was granted. The fol-

lowing discussion refers to and cites the panel opinion because

the analysis set forth in the panel opinion is necessary to an

understanding of the development of the issues.

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From 1970 to 1972 the Northeastern Pharmaceutical

& Chemical Co. (NEPACCO) manufactured hexachloro-

phene in a factory in Verona, Missouri. (NEPACCO ef-

fectively ceased doing business sometime in 1974.) The

manufacturing process produced a variety of hazardous

wastes, including the highly toxic chemical, dioxin. In

July 1971 NEPACCO disposed of about eighty-five 55-

gallon drums of hazardous wastes by burying them in

a trench on a farm near Verona (hereinafter the Denney

farm site). Many of the drums had deteriorated and

were in poor condition at the time of disposal; many broke

open when they were dumped into the trench. A strong

chemical odor persisted in the immediate area of the

Denney farm site for several months thereafter.

In 1971 or 1972 NEPACCO hired Independent Petro-

chemical Corp. (IPC) to dispose of more hazardous wastes

containing dioxin. IPC in turn hired Russell Bliss to

actually dispose of NEPACCO’s hazardous wastes. In

1971-1973 Bliss allegedly transported and sprayed the

hazardous wastes, mixed with waste oil, as a dust sup-

pressant on the grounds of the Bubbling Springs Stables

in Fenton, Missouri, and on the roads of Times Beach,

Missouri. In 1974 an individual named Minker bought

dirt contaminated with NEPACCO hazardous wastes from

the Bubbling Springs Stables to use as landfill on his

property located in nearby Imperial, Missouri (the

Minker/ Stout/ Romaine Creek site).

From 1970-1972 NEPACCO was insured under three

standard-form CGL insurance policies issued by Conti-

nental. The first policy was in effect from August 5,

1970, to August 5, 1971, the second policy from August 5,

1971, to August 5, 1972, and the third policy from Au-

gust 5, 1972, to November 17, 1972, when it was cancelled.

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Each policy was slightly different, but each provided

that Continental would

pay on behalf of the insured all sums which the

the insured shall become legally obligated to pay as

damages because of .. . property damage to which

this insurance applies caused by an occurrence, and

[Continental] shall have the right and duty to de-

fend any suit against the insured seeking damages

on account of such .. . property damage.

The policies defined “property damage” as

(1) Physical injury or destruction of tangible

property which occurs during the policy period, in-

cluding the loss of use thereof at anytime resulting

therefrom,

(2) Loss of use of tangible property which has

not been physically injured or destroyed provided

such loss of use is caused by an occurrence during

the policy period... .

The policies further provided that “[t]his insurance ap-

plies only to . . . property damage which occurs during

the policy period” and defined “occurrence” as “an acci-

dent, including continuous or repeated exposure to con-

ditions, injury or property damage neither expected nor

intended from the standpoint of the insured.” Only the

second and third policies contained the following pollu-

tion exclusion clause:

It is agreed that the insurance does not apply to...

property damage arising out of the discharge, dis-

persal, release or escape of smoke, vapors, soot, fumes,

acids, alkalis, toxic chemicals, liquids or gases, waste

materials or other irritants, contaminants or pollu-

A5

tants into or upon land, the atmosphere or any water-

course or body of water; but this exclusion does

not apply if such discharge, dispersal, release or es-

cape is sudden or accidental.

For general information about standard-form CGL insur-

ance policies, see American Home Products Corp. v.

Liberty Mutual Insurance Co., 565 F. Supp. 1485, 1500-03

(S.D.N.Y. 1983), aff'd as modified, 748 F.2d 760 (2d Cir.

1984), and Note, The Pollution Exclusion Clause Through

the Looking Glass, 74 Geo. L.J. 1237 (1986).

In 1980 the Environmental Protection Agency (EPA)

investigated the Denney farm site. The EPA took soil

and water samples and found “alarming[ly] high con-

“entrations of dioxin” and other toxic chemicals. EPA,

579 F. Supp. at 831. The EPA secured and then “cleaned

up” the Denney farm site. In August 1980 the federal

government filed a lawsuit (the EPA lawsuit) against

NEPACCO and others, seeking tement costs, pursuant

to § 7003(a) of the Resource ervation and Recovery

Act of 1976 (RCRA) (also known as the Solid Waste

Disposal Act), as amended, 42 USC. § 6973(a). In

August 1982 the federal government filed an amended

complaint adding claims for injunctive relief and reim-

bursement of its response costs pursuant to §§ 104, 106,

107 of the Comprehensive Environmental Response, Com-

pensation and Liability Act of 1980 (CERCLA) (com-

monly known as Superfund), 42 US.C. §§ 9604, 9606,

9607 (reauthorized and amended in part by the Super-

fund Amendments and Reauthorization Act of 1986, Pub.

L. No. 99-499, 100 Stat. 1613 (1986) (effective Oct. 17,

1986)).* We will use the descriptive term “cleanup costs”

3. The 1986 Superfund Amendments do not affect this

appeal.

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to refer to both “abatement costs” under RCRA and

“response costs” under CERCLA.

In January 1984 the district court held NEPACCO

and several other defendants, jointly and severally, strictly

liable for cleanup costs under CERCLA, but not RCRA.

EPA, 579 F. Supp. at 834-37, 839-52. On appeal, a panel

of this court affirmed in part, reversed in part and re-

manded the case to the district court for further pro-

ceedings. 810 F.2d at 749-50. The majority held that

the federal government could recover cleanup ‘costs under

both RCRA and CERCLA. Id. at 732-46. The dissent

did not agree that past non-negligent off-site generators

or transporters of hazardous waste could be held liable

for cleanup costs under the 1984 RCRA amendments or

that the corporate officer defendants could be held liable

for cleanup costs under RCRA as generators and trans-

porters. Id. at 750-51 (J.R. Gibson, J., dissenting in part).

The EPA lawsuit prompted the filing of several other,

related lawsuits, including the present case.

In March 1983 several former residents of the com-

munities of Times Beach and Imperial filed an action in

Missouri state court against NEPACCO and other defen-

dants, seeking damages for present and future personal!

injury and property damage allegedly caused by the trans-

portation and spreading of hazardous wastes and dirt,

contaminated by dioxin and other toxic chemicals produced

by NEPACCO, on the roads of Times Beach and at the

Minker/ Stout/ Romaine Creek site. The plaintiffs also

sought recovery of the costs of cleaning up the contamin-

ated sites and punitive damages but asserted no RCRA or

CERCLA claims. Capstick v. Independent Petrochemical

Corp., No. 832-00453 (Mo. Cir. Ct. filed Mar. 7, 1983)

(Capstick).

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In November 1983 the state filed a lawsuit in federal

district court against NEPACCO and other defendants,

seeking declaratory judgment and recovery of present and

future response costs, pursuant to CERCLA and the com-

mon law of public nuisance, in connection with the state’s

cleanup of the Minker/ Stout/ Romaine Creek site. Mis-

souri v. Independent Petrochemical Corp., No. 83-2670-C

(E.D. Mo. filed Nov. 23, 1983) (IPC).

Somewhat later, in February 1985 the federal govern-

ment filed a garnishment action in federal district court

against Continental, as NEPACCO’s liability insurer, to

collect the CERCLA cleanup costs the federal government

had been awarded in the EPA lawsuit. United States v.

Continental Insurance Cos., No. 85-3069-CV-S-4 (W.D. Mo.

filed Feb. 25, 1985) (garnishment action). Discovery was

consolidated in the garnishment action and in the IPC

lawsuit. On June 25, 1985, the same day judgment was

entered in the case on appeal, the district court also entered

judgment in favor of Continental in the garnishment ac-

tion. The district court later granted the federal govern-

ment’s motion for reconsideration and the case was held in

abeyance pending disposition of the EPA appeal.

In the meantime, in February 1984 Continental filed

this action seeking a declaratory judgment concerning its

liability to NEPACCO arising out of the underlying EPA

and Capstick lawsuits. Continental Insurance Cos. v.

NEPACCO, No. 84-5034-CV-S-4 (E.D. Mo. filed Feb. 9,

1984). Count I sought deciaratory judgment concerning

the federal government’s EPA lawsuit (cleanup costs for

the Denney farm site); count II sought declaratory judg-

ment concerning the Capstick lawsuit (cleanup costs and

damages for personal injury and property damage in Times

Beach and at the Minker/ Stout/ Romaine Creek site).

NEPACCO and the other defendants failed to enter an

A8

appearance or file an answer. As noted earlier, in 1974

NEPACCO had ceased operations; its corporate assets had

been liquidated and the proceeds distributed to its share-

holders. Thus, by 1984 NEPACCO had been “defunct”

for ten years. In November 1984 Continental moved for

summary judgment.

In December 1984 the state filed a motion for leave to

intervene in the present case in order to protect its in-

terests in its related IPC lawsuit. In January 1985 the

district court granted the state’s motion to intervene, and

the state filed an answer and a counterclaim alleging that

Continental, as NEPACCO’s liability insurer, was obli-

gated to indemnify NEPACCO for anv judgment against

NEPACCO in the IPC lawsuit. In March 1985 the state

filed suggestions in opposition to Continental’s motion for

summary judgment. Continental later filed a motion to

dismiss count II without prejudice; the state filed sug-

gestions in opposition.

DISTRICT COURT DECISION

In June 1985 the district court granted summary judg-

ment in favor of Continental on count I (no liability in-

surance coverage for Denney farm site cleanup costs sought

in the EPA lawsuit) and on the state’s counterclaim (no

liability insurance coverage for cleanup costs for the

Minker/ Stout/ Romaine Creek site sought in the IPC

lawsuit). First, the district court held that, under Mis-

souri law, the time of an “occurrence” is the time the loss

or damage is sustained, not the time the wrongful act is

committed. District court order at 8 (citations omitted).

The district court held that the claims for cleanup costs

were not claims for compensation for “property damage.”

Id. at 10. Although the wrongful acts occurred in 1971-

A9

1973, when the policies were in effect, cleanup costs were

not incurred until 1980 and 1982, many years after the

policies expired. The district court held that the federal

and state governments did not suffer any “loss” or “dam-

age” until the cleanup costs were actually incurred. Id.

Thus, because there was no “occurrence” of loss or prop-

erty damage during the policy periods, the district court

held there was no coverage. Id. at 11.

The district court also decided that summary judgment

was not appropriate on count II, with respect to the Cap-

stick lawsuit, because more information was necessary in

order to determine whether there was an “occurrence” of

bodily injury or property damage, or both, within the

policy periods and whether the pollution exclusion applied,

and granted Continental’s motion to dismiss without prej-

udice count II of its complaint. Id. at 11-17. The state

appealed.

PANEL DECISION

The panel decision reversed in part and affirmed in

part. The majority first held the policy definition of

“property damage” included contamination of the envi-

ronment by hazardous wastes, 811 F.2d at 1184-87, and

rejected Continental’s argument that any “injury” suf-

fered by the federal and state governments from envi-

ronmental pollution constituted only economic loss. Id.

at 1184-89. The majority held that, in addition to the

actual owners of the polluted land, water or air, the

federal and state governments also sustained “property

damage” “because of their ‘|quasi-sovereign] interest [in

natural resources] independent of and behind the titles

of its citizens in all the earth and air within [their]

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domain.’”’ Id. at 1187 & n.17, citing Georgia v. Tennessee

Copper Co., 206 U.S. 230, 237 (1907).

The majority also expressly rejected the argument

raised by amicus curiae American Insurance Association

(AIA) that even if environmental contamination had

caused “property damage,” cleanup costs under CERCLA

§ 107(a) (4)(A), 42 U.S.C. § 9607(a)(4)(A), were not

in themselves recoverable as “damages.” 811 F.2d at

1187-90. The majority reviewed the policy language and

the statutory language and concluded that “cleanup costs

under CERCLA are compensatory damages for ‘property

damage’ within the meaning of the CGL policies.” Id.

at 1189 & n.21; see also id. at 1187-88 & n.17 (citing cases).

Cf. EPA, 810 F.2d at 737-40 (abatement costs under

RCRA § 7003(a), 42 U.S.C. § 6973(a)).

The remaining issue was whether there had been an

“occurrence” of “property damage” during the period

when the policies were in effect. Although the wrongful

acts allegedly occurred during the early 1970’s, the federal

and state governments did not actually incur any cleanup

costs until the early 1980’s, many years after the third

and last policy had been cancelled. The majority dis-

agreed with the district court’s view that the federal and

state governments did not suffer any loss or damage until

cleanup costs were actually incurred. 811 F.2d at 1190-91

& n.28 (distinguishing Kirkham, Michael & Assocs. v.

Travelers Indemnity Co., 361 F. Supp. 189 (D.S.D. 1973),

aff'd, 493 F.2d 475 (8th Cir. 1974) (per curiam)). The

majority predicted that Missouri courts would follow the

majority view and adopt the “exposure” theory of cov-

erage, 811 F.2d at 1191-92 & n.29, and accordingly held

that “environmental damage occurs at the moment that

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hazardous wastes are improperly released into the envi-

ronment and that a liability policy in effect at the time

this damage is caused provides coverage for the subse-

quently incurred costs of cleaning up the wastes.” Id.

at 1189 (footnotes omitted).

Applying the “exposure” theory, the majority deter-

mined that “property damage” occurred at the Denney

farm site in July 1971, when the first CGL pSlicy was

in effect, when NEPACCO improperly disposed of the

hazardous wastes by dumping the barrels in the trench.

Id. at 1191. Accordingly, the majority reversed the grant

of summary judgment in favor of Continental on count I

and remanded for further proceedings to determine

whether Continental was liable to indemnify NEPACCO

for the award of cleanup costs in the EPA lawsuit. Id.

at 1192.

Because contaminated dirt from the Bubbling Springs

Stable was not used as landfill at the Minker/ Stout/

Romaine Creek site until 1974, two years after the third

CGL policy had been cancelled, the majority held that

Continental was under no duty to defend or indemnify

NEPACCO for liability arising out of the IPC lawsuit

and affirmed the grant of summary judgment in favor

of Continental on the state’s counterclaim. Id. Finally,

the majority agreed with the district court that factual

issues in the Capstick lawsuit precluded summary judg-

ment and affirmed the district court’s dismissal without

prejudice of count II. Id. at 1193.

The dissent disagreed with the panel majority only

on the issue of whether cleanup costs are “damages”

within the meaning of the CGL policies. Id. at 1193-95

(MeMillian, J., concurring in part and dissenting in part).

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REHEARING EN BANC

Both Continental and the state filed petitions for

rehearing en banc. Both petitions for rehearing en banc

were granted, and the parties, and several amici curiae,

including the federal government, several “hazardous

waste generators,” the AIA, and several other insurers,

filed supplemental briefs.

For reversal the state argues that (1) the district

court erroneously held “property damage’ did not occur

until the federal and state governments actually incurred

cleanup costs; (2) the plain meaning of the policy term

“damages” includes “equitable” monetary relief such as

cleanup costs or, alternatively, the policy term “damages”

is ambiguous and should be construed against the insurer

to include payment of cleanup costs; (3) cleanup costs

are merely a measurement of “damages” for “property

damage,” and the characterization of cleanup costs as

equitable for purposes of seventh amendment analysis

is inapplicable to questions involving insurance coverage;

and (4) finally, the public interest in mitigating envi-

ronmental pollution and cleaning up hazardous waste sites

strongly supports imposing liability for the cleanup costs

on the polluters and their insurers. The state also argues

that, although it is not necessary to reach the “trigger’’

of coverage issue on appeal, if the court reaches that

issue, Missouri courts would adopt the “injury-in-fact”

theory, not the “exposure” theory.

Continental argues that (1) the district court cor-

rectly held that “property damage” did not occur until

the federal and state governments actually incurred

cleanup costs; (2) cleanup costs are equitable costs, not

legal “damages,” and thus are not recoverable under the

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CGL policies; and (3) cleanup costs constitute economic

losses, not “property damage,” and thus are not recover-

able under the CGL policies. Continental agrees with

the state that it was not necessary to reach the “trigger”

of coverage issue, but argues that if the court reaches

that issue, there was no “occurrence” of property damage

within the policy periods because cleanup costs were not

incurred until sometime in 1980 at the earliest.

The amici curiae have advanced similar arguments.

The federal government filed an amicus brief in support

of the state, arguing that (1) for purposes of insurance

coverage, “property damage” occurs at the time of injury

or physical damage to the property itself, not at the time

cleanup costs are incurred, and (2) under Missouri law

cleanup costs are “damages’’ which NEPACCO is legally

obligated to pay because of “property damage.” Several

“hazardous waste generators” also filed an amicus brief

in support of the state, arguing that insurers are liable for

cleanup costs because such costs are “damages.” The AIA

and several London insurance underwriters filed amicus

briefs in support of Continental, arguing that, under the

CGL policies in question, (1) cleanup costs are not legal

“damages” and (2) cleanup costs constitute only economic

losses, not “property damage.”

The dispositive issue is whether the term “damages”

in the standard-form CGL policy includes cleanup costs.

We need not reach the other issues raised on appeal, such

as whether environment contamination caused by improper

disposal of hazardous wastes constitutes “property damage”

or whether Missouri would adopt the “exposure” theory

of coverage. However, we agree that environmental con-

tamination caused by improper disposal of hazardous

wastes can constitute “property damage.” See~ Port of

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Portland v. Water Quality Insurance Syndicate, 796 F.2d

1188, 1195-96 (9th Cir. 1986) (oil pollution of water con-

stitutes damage to tangible property); Maryland Casualty

Co. v. Armco, Inc., 643 F. Supp. 430, 433 (D. Md.) (holding

toxic waste dumps that contaminate the environment

cause “property damage”; also distinguishing ‘property

damage” from “damages”), aff'd, 822 F.2d 1348 (4th Cir.

1987), petition for cert. filed, 56 U.S.L.W. 3368 (U.S. Nov.

2, 1987) (No. 87-744); Lansco, Inc. v. Department-of_En-

vironmental Protection, 138 N.J. Super. 275, 350 A.2d 520,

524 (Ch. Div. 1975) (oil spill into water caused damage

to identifiable physical property), aff'd, 145 N.J. Super.

433, 368 A.2d 363 (App. Div. 1976), cert. denied, 73 N.J.

57, 372 A.2d 322 (1977); Kutsher’s Country Club Corp. v.

Lincoln Insurance Co., 119 Misc. 2d 889, 465 N.Y.S.2d

136, 139 (Sup. Ct. 1983) (oil spill into water constituted

property damage). But see Mraz v. Canadian Universal

Insurance Co., 804 F.2d 1325, 1328-29 (4th Cir. 1986)

(governmental claims for cleanup costs are not claims

for damages due to “property damage’), rev’g Mraz v.

American Universal Insurance Co., 616 F. Supp. 1173, 1177

(D. Md. 1985).

We also agree that Missouri would probably adopt the

“exposure” theory of coverage. See, e.g., Hawkeye-

Security Insurance Co. v. Iowa National Mutual Insurance

Co., 567 S.W.2d 719, 720 (Mo. Ct. App. 1978), citing Kirch-

ner v. Hartford Accident & Indemnity Co., 440 S.W.2d

751 (Mo. Ct. App. 1969); Kissel v. Aetna Casualty &

Surety Co., 380 S.W.2d 497, 509 (Mo. Ct. App. 1964). How-

ever, application of either the “exposure” or “injury-in-

fact” theory of coverage would make little difference be-

cause of the specific facts presented in the EPA and IPC

cases. Cf. Abex Corp. v. Maryland Casualty Co., 252 U.S.

App. D.C. 297, 790 F.2d 119, 125 (1986) (asbestos tort

=

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cases; following “injury-in-fact” theory adopted in Amer-

ican Home Products Corp. v. Liberty Mutual Insurance

Co., 748 F.2d 760, 765 (2d Cir. 1984) (coverage triggered

when injury actually occurs during policy period, whether

or not diagnosable during policy period)). Under the

specific facts presented, the crucial events—the improper

disposal of the hazardous wastes (wrongful act), the re-

lease of hazardous wastes into the environment (exposure),

the contamination of the environment (injury-in-fact)—all

happened virtually simultaneously. For example, in the

EPA case, the improper disposal of the hazardous wastes

immediately resulted in their release into the environment

in July 1971. Because by definition hazardous wastes are

extremely harmful, there was clearly both “exposure” and

“injury-in-fact” during the first policy period. In the

IPC case the contaminated dirt was not used as landfill

at the Minker/ Stout, Romaine Creek site until 1974, and

thus there was no exposure or injury-in-fact until after

the expiration of the third policy period. But cf. Eagle-

Picher Industries, Inc. v. Liberty Mutual Insurance Co.,

523 F. Supp. 110 (D. Mass. 1981), modified, 682 F.2d 12,

17 (1st Cir. 1982) (“manifestation” theory; coverage trig-

gered if asbestos-related disease became “reasonably

capable of medical diagnosis” during policy period), cert.

denied, 460 U.S. 1028 (1983).

As a threshold matter, the state argues that we should

not consider the “damages’”’ issue because it was raised by

the AIA on appeal and was not raised by a party until

Continental filed its supplemental brief for rehearing en

bane. Ordinarily, we consider only issues argued in the

briefs filed by the parties and not those argued in the

briefs filed by interested nonparties. See, e.g., Preserva-

tion Coalition, Inc. v. Pierce, 667 F.2d 851, 861-62 (9th Cir.

1982). Nonetheless, we can consider issues not raised in

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the briefs or in oral argument, particularly when substan-

tial public interests are involved. See, e.g., Consumers

Union v. FPC, 166 U.S. App. D.C. 276, 510 F.2d 656, 662

& nn.9-10 (1974) (per curiam on petition for rehearing).

The “damages” issue is properly before the court en

bane. It was expressly raised by the AIA in its initial

amicus brief, and the state responded to the AIA’s argu-

ment in its reply brief. The “damages” issue was con-

sidered and discussed at length by the panel majority,

811 F.2d at 1187-89, and the panel dissent, id. at 1193-95,

and in fact was the only point of significant disagreement

between the majority and dissenting opinions. Moreover,

the broad issue of the availability of liability insurance

coverage under standard-form CGL policies for the costs

of cleaning up hazardous waste sites is a question of sub-

stantial importance not only to liability insurers and their

insureds, but to the public as well.

This case involves the construction of standard-form

CGL insurance policies. “An insuring obligation is a

contract, and coverage exists only if assumed by the

terms of the policy.” Aetna Casualty & Surety Co. v.

Hanna, 224 F.2d 499, 503 (Sth Cir. 1955) (Hanna). The

district court correctly applied the law of Missouri, the

forum state. See Klaxon Co. v. Stentor Electric Manu-

facturing Co., 313 U.S. 487 (1941). Missouri has adopted

the most significant relationship test set forth in the Re-

statement (Second) Conflict of Laws § 188 (1971). See

American Institute of Marketing Systems, Inc. v. Brooks,

469 S.W.2d 932 (Mo. Ct. App. 1971) (contracts), and is

the state with the most significant contacts with the

parties and the CGL policies. See, e.g., Havenfield Corp.

v. H & R Block, Inc., 509 F.2d 1263, 1267-68 (8th Cir.),

cert. denied, 421 U.S. 999 (1975).

Al7

Under Missouri law

[t]he rules of construction applicable to insurance

contracts require that the language used be given

its plain meaning. If the language is unambiguous

the policy must be enforced according to such lan-

guage. If the language is ambiguous it will be con-

strued against the insurer. Language is ambiguous

if it is reasonably open to different constructions;

and language used will be viewed in light of “the

meaning that would ordinarily be understood by the

lay[person] who bought and paid for the policy.”

Robin v. Blue Cross Hospital Service, Inc., 637 S.W.2d

695, 698 (Mo. 1982) (banc) (citations omitted); see also

Pearce v. General American Life Insurance Co., 637 F.2d

536, 539 (8th Cir. 1980) (Missouri law); Bellamy v.

Pacific Mutual Life Insurance Co., 651 S.W.2d 490, 495-96

(Mo. 1983) (banc).

Case law on this issue is sharply divided. Compare

Maryland Casualty Co. v. Armco, Inc., 822 F.2d at 1352-55

(under Maryland law, holding “damages” does not cover

cleanup costs; citing cases), with New Castle County v.

Hartford Accident & Indemnity Co., No. 85-436, slip op.

at 13-17 (D. Del. Nov. 2, 1987) (under Delaware law,

holding “damages” covers cleanup costs; citing cases).

For the reasons discussed below, we hold that the term

“damages” is not ambiguous in the insurance context

and that the plain meaning of the term “damages” used

in the CGL policies refers to legal damages and does

not cover cleanup costs.

Viewed outside the insurance context, the term ‘‘dam-

ages” is ambiguous: it is reasonably open to different

constructions. Webster’s Third New International Dic-

Al8

tionary 571 (1971) defines “damages” as “the estimated

reparation in money for detriment or injury sustained:

compensation or satisfaction imposed by law for wrong

or injury caused by a violation of a legal right.” The

dictionary definition does not distinguish between legal

damages and equitable monetary relief. E.g., New Castle

County v. Hartford Accident & Indemnity Co., No. 85-436,

slip op. at 16. Thus, from the viewpoint of the lay in-

sured, the term “damages” could reasonably include all

monetary claims, whether such claims are described as

damages, expenses, costs, or losses.

In the insurance context, however, the term “dam-

ages” is not ambiguous, and the plain meaning of the

term “damages” as used in the insurance context refers

to legal damages and does not include equitable monetary

relief. See Maryland Casualty Co. v. Armco, Inc., 822

F.2d at 1352. The CGL policies require Continental to

“pay on behalf of the insured all sums which the insured

shall become legally obligated to pay as damages because

of .. . property damage to which this insurance applies

caused by an occurrence.” (Emphasis added.) “The obli-

gation of the insurer to pay is limited to ‘damages,’ a

word which has an accepied technical meaning in law.”

Hanna, 224 F.2d at 503. Although not defined in the

CGL policies, “{t]he 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.” Maryland

Casualty Co. v. Armco, Inc., 643 F. Supp. at 432, citing

Haines v. St. Paul Fire & Marine Insurance Co.. 428 F-.

Supp. 435, 439-41 (D. Md. 1977) (applying Maryland

law), Hanna, 224 F.2d at 503-04, and Descrochers v. New

York Casualty Co., 99 N.H. 129, 106 A2d 196. 198-99

Al9

(1954). But see, e.g., New Castle County v. Hartford

Accident & Indemnity Co., No. 85-436, slip op. at 13-17

(applying Delaware law; citing cases); United States

Aviex Co. v. Travelers Insurance Co., 125 Mich. App. 579,

336 N.W.2d 838, 843 (1983); Broadwell Realty Services,

Inc. v. Fidelity & Casualty Co., 218 N.J. Super. 516, 528

A.2d 76, 82-83 (App. Div. 1987) (citing cases).

This limited construction of the term “damages” is

consistent with the provision defining the insurer’s obli-

gation as a whole. Continental did not agree to pay “all

sums which the insured shall become legally obligated

to pay.” Continental agreed to pay “all sums which

the insured shall become legally obligated to pay as

damages.” The expansive reading of the term “damages”

urged by the state would render the term “all sums”

virtually meaningless. “If the term ‘damages’ is given

the broad, boundless connotations sought by the [insured],

then the term ‘damages’ in the contract . . . would be-

come mere surplusage, because any obligation to pay

would be covered. The limitation implied by employ-

ment of the phrase ‘to pay as damages’ would be oblit-

erated.” Maryland Casualty Co. v. Armco, Inc., 822 F.2d

at 1352.

Such a limited construction of the term “damages” is

also consistent with the distinction drawn in insurance

law between money damages and injunctive relief. “Tra-

ditionally, 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.”

Maryland Casualty Co. v. Armco, Inc., 643 F. Supp. at 434.

See also Hanna, 224 F.2d at 503-04; Garden Sanctuary, Inc.

v. Insurance Co. of North America, 292 So. 2d 75, 77-78

(Fla. Ct. App. 1974); Ladd Construction Co. v. Insurance

A20

Co. of North America, 73 Ill. App. 3d 43, 29 Ill. Dec. 305,

307-08, 391 N.E.2d 568, 570-73 (1979).

The limited construction of the term “damages” is also

consistent with the statutory scheme of CERCLA §107(a)

(4), 42 U.S.C. §9607(a) (4), which differentiates between

cleanup costs and damages. Under CERCLA cleanup costs

are not substantially equivalent to compensatory damages

for injury to or destruction of the environment. Some

cases have overlooked the difference between recovery of

cleanup costs under CERCLA § 107(a)(4)(A) (by govern-

ments), (B) (by “any other person’’), 42 U.S.C. § 9607(a)

(4)(A), (B), and recovery of damages for injury, de-

struction or loss of natural resources under CERCLA

§ 107(a) (4)(C), 42 U.S.C. § 9607(a)(4)(C). For example,

in United States Aviex Co. v. Travelers Insurance Co.,

336 N.W.2d at 843 (citations omitted), the court was

persuaded that the distinction between recovery of cleanup

costs and recovery of damages for damage to natural re-

sources was “merely fortuitous from the standpoint of

either [the insured} or [the insurer].” The court rea-

soned that whether the government chooses to cleanup

the pollution itself and then sue to recover its cleanup

costs, or sues to recover damages for the damage to natural

resources, “|t|he damage ‘o the natural resources is simply

measured in the cost to restore the [environment] to its

original state,” and rejected the argument that the term

“damages” should be limited to legal damages and should

not include equitable costs. Id.

Moreover, the distinction between recovery of cleanup

costs and recovery of damages is not “merely fortuitous”

to either the insured as a CERCLA and RCRA defendant

or to the insurer. The cost of cleaning up a hazardous

waste site often exceeds its original value. On the other

A21 -

hand, some natural resources are of exceptional value and

their destruction could greatly exceed the cost of cleaning

up any hazardous waste contamination. A _ significant

difference between the measurement of liability for

cleanup costs and for damage to natural resources could

determine whether the government sues for cleanup costs

or for damages. See Maryland Casualty Co. v. Armco,

Inc., 822 F.2d at 1353, citing Peevyhouse v. Garland Coal

& Mining Co., 382 P.2d 109 (Okla. 1962) (restoration of

strip-mined land cost four times its potential value),

cert. denied, 375 U.S. 906 (1963); cf. Jack L. Baker Cos.

». Pasley Manufacturing & Distributing Co., 413 S.W.2d

268, 273-74 (Mo. 1967) (under Missouri law, measure of

damages to real property is lesser of either difference in

value before and after injury or cost of restoring property

to original condition).

Whether the government seeks recovery of cleanup

costs, damages for destruction or loss of natural resources,

or both, may make little difference to the insured as a

CERCLA or RCRA defendant. As noted above, there may

be little difference between the dollar amount the insured

may have to pay as cleanup costs under CERCLA § 107(a)

(4)(A), 42 U.S.C. § 9607(a) (4) (A), and the dollar amount

the insured may have to pay as damages under CERCLA

£ 107(a)(4)(C), 42 U.S.C. § 9607(a)(4)(C). Nonethe-

less, the type of relief sought is critical to the insured and

the insurer, because under the CGL policies the insurer

is liable only for legal damages, not for equitable mone-

tary relief, such as cleanup costs. “The insurance con-

tract, which controls the obligations between the parties

and therefore centers the focus of this court, is written in

terms of the relief sought... .”’ Maryland Casualty Co.

v. Armco, Inc., 822 F.2d at 1352. Here, the federal and

state governments seek recovery of cleanup costs under

EO ee

A22

CERCLA § 107(a)(4)(A), 42 U.S.C. § 9607(a) (4) (A)

(costs of removal or remedial action), and RCRA § 7003

(a), 42 U.S.C. § 6973(a) (abatement costs). These law-

suits are essentially equitable actions for monetary relief

in the form of restitution or reimbursement of costs. See

Maryland Casualty Co. v. Armco, Inc., 822 F.2d at 1352-53:

cf. EPA, 810 F.2d at 749 (for purposes of determining

seventh amendment jury trial issue; cases cited). The

federal and state governments have not sought recovery

of “damages for injury to, destruction of, or loss of natural

resources,” pursuant to CERCLA § 107(a)(4)(C), 42

U.S.C. § 9607(a) (4)(C).

Accordingly, we hold that the federal and state govern-

ments’ claims for cleanup costs under CERCLA § 107(a)

(4) (A), 42 U.S.C. § 9607(a) (4) (A), and RCRA § 7003(a),

42 U.S.C. § 6973(a), are not claims for “damages” under

these CGL policies.

The issues in the Capstick litigation require additional

factfinding and analysis and are therefore unsuitable for

summary disposition. The private individuals in Capstick

seek, in part, recovery of damages for personal injury

and property damage due to the improper disposal of haz-

ardous wastes. Cf. CERCLA § 107(a)(4)(C) (damages

for damage to natural resources), 42 U.S.C. § 9607(a) (4)

(C). These claims are claims for “damages,” not cleanup

costs, and are covered within the terms of the CGL policies.

We express no opinion on the issue of the insurer’s lia-

bility for claims for damages under the CGL policies.

The order of the district court is affirmed.

A23

HEANEY, Circuit Judge, with whom LAY, Chief Judge,

and FAGG, Circuit Judge, join, concurring and dis-

senting.

The majority opinion appears to be consistent with

the panel opinion of this Court, Continental Ins. Co. v.

Northeastern Pharmaceutical and Chem. Co., 811 F.2d

1180, 1189 (8th Cir. 1987), in all respects, save one. The

panel held that under Missouri law the term “damages’”’

in the standard-form comprehensive general liability

(CGL) policy includes clean-up costs. Id. at 1189. The

majority now disregards established Missouri law and

holds to the contrary.

We all agree that the question whether clean-up

costs are “damages” within the meaning of a CGL policy

is an issue of Missouri law. We also agree that under

Missouri law:

The rulesNof construction applicable to insurance

contracts require that the language used be siven

its plain meaning. If the language is unambiguous

the policy must be enforced according to such lan-

guage. If the language is ambiguous it will be con-

strued against the insurer. Language is ambiguous

if it is reasonably open to different constructions;

and language used will be viewed in light of “the

meaning that would ordinarily be understood by the

layman who bought and paid for the policy.”

Robin v. Blue Cross Hosp. Serv., Inc., 637 S.W.2d 695,

698 (Mo. 1982) (en banc) (citations omitted) (quoting

Stafford v. Travelers Ins. Co., 530 S.W.2d 23, 25 (Mo.

Ct. App. 1975)).

A24

Indeed, as this Court has pointed out, Missouri courts:

do not necessarily accept the construction accorded

to policy terms by astute insurance specialists or

perspicacious counsel but rather are concerned with

the meaning which the ordinary insured of average

intelligence and common understanding reasonably

would give to the words or language under consid-

eration.

McMichael v. American Ins. Co., 351 F.2d 665, 669 (8th

Cir. 1965) (quoting Hammontree v. Central Mut. Ins. Co.

385 S.W.2d 661, 666-67 (Mo. Ct. App. 1965)).

The majority concedes on page 16:

[Fjrom the viewpoint of the lay insured, the term

“damages” could reasonably include all monetary

claims, whether such claims are described as dam-

ages, expenses, costs, or losses.

Majority opinion at 16.

This concession should be dispositive. The Missouri

court en banc has unequivocally held that the language

of an insurance policy must be viewed in the light of

the meaning that would ordinarily be understood by the

lay person who bought and paid for the policy. Robin,

637 S.W.2d at 698.

The CGL policy does not define “damages.” If the

insurer wished to use a technical legal meaning for that

term which differed from the accepted dictionary defini-

tion, it should have explicitly done so. Thus. to the

extent the word “damages” is open to different con-

structions, it must be accorded the meaning ordinarily

given it by the lay person who bought and paid for

the policy.

ieee etait a

A25

Not surprisingly, the majority cites no Missouri case

under which this Court may ignore the lay definition

of “damages” and substitute in its place a “technical in-

surance” definition. Instead, the majority rejects the

dictionary definition of “damages” on the ground that

in the insurance context the word has a technical meaning

which does not include the cost of restoring real property

to the pre-damage condition. While this may be justified

under the law of some states, it certainly is not under

Missouri law. The legal definition of “damages” under

Missouri law, assuming we were free to recognize that

definition, includes the cost of restoring real property

to its pre-damaged condition. Jack L. Baker Companies,

Inc. v. Pasley Mfg. and Distribut. Co., 413 S.W.2d 268,

273 (Mo. 1967).

The majority finally argues that black letter insur-

ance law holds that claims for equitable relief “are not

claims for “damages” under liability insurance contracts.

It cites Maryland Casualty Co. v. Armco, Inc., 643 F.

Supp. 430, 432 (D. Md. 1987) (citing Haines v. St. Paul

Fire & Marine Insurance Co., 428 F. Supp. 435, 439-41

(D. Md. 1977) (applying Maryland law); Aetna Casualty

& Surety Co. v. Hanna, 224 F.2d 499, 503-04 (5th Cir.

1955); and Desrochers v. New York Casualty Co., 99

N.H. 129, 106 A.2d 196, 198-99 (1954)), in support of

this proposition. Then, with the candor that one expects

from one’s colleagues, the majority cites a number of

cases to the contrary: New Castle County v. Hartford

Accident & Indemn. Co., 673 F. Supp. 1359 (D. Del. 1987)

(applying Delaware law); United States Aviex Co. v.

Travelers Insurance Co., 125 Mich. App. 579, 336 N.W.2d

838, 843 (1983); Broadwell Realty Services, Inc. v. Fidel-

ity & Casualty Co.. 218 N.J. Super. 516, 528 A.2d 76, 82-83

A26

(App. Div. 1987) (citing cases). In view of the clear

conflict, we doubt that the term “black letter law” is

appropriate.’

The majority places great reliance on Aetna Casualty

and Surety Company v. Hanna, 224 F.2d 499 (5th Cir.

1955). The case is of doubtful applicability. It simply

holds that under Florida law an insurance company can-

not be required to defend an action in equity seeking

an injunction to prevent the insured from allowing con-

tinuing deposits of boulders, trash and dirt on another’s

land. It did not decide whether the insurer would have

been required to reimburse the insured if a judgment

for damages had been rendered. In so holding, the Fifth

Circuit noted that in Florida the measure of damages

is the difference in the property value before and after

a trespass. In the case before the Fifth Circuit, the Court

found no evidence of a dimunition in value as a result

of the trespass. Thus, the sole meaningful remedy avail-

able was injunctive relief. See Id. at 503.

Missouri has not adopted this inflexible rule. It rather

permits a plaintiff to recover, as damages, the cost of re-

storing real property to its pre-damaged condition. Jack

L. Baker, 413 S.W.2d at 273.

The majority concludes that because state courts are

divided on the question of whether recovery may be had

from an insurance company for the cost of restoring prop-

erty, it is free to choose what it feels is the better rule.

The fact of the matter, however, is that the Missouri courts

have clearly held that the cost of restoring real property

1. “Black letter law” is “an informal term indicating the

basic principles of law generally accepted by the courts and/or

embodied in the statutes of a particular jurisdiction.” Black’s

Law Dictionary 154 (5th ed. 1979).

A27

is the proper measure of damages where the cost of clean-up

does not exceed the value of the property interest damaged.

Id.

Here, there is no doubt that the cost of cleaning up

and abating environmental damage at the Denny farm site

is less than the value of the damage to the government’s

property interest in the environmental resources damaged.

Thus, Baker controls. (Moreover, were there any doubt

on this issue, we should remand to the district court for

a determination of the issue.)

The majority is also clearly in error when it states

that the limited construction that it gives to the term

“damages” is consistent with the statutory scheme of

CERCLA, § 107(a)(4). 42 U.S.C. § 9607(a)(4). In so

holding, it relies on Maryland Casualty Co. v. Armco, Inc.,

822 F.2d 1348 (4th Cir. 1987), cert. denied, ........ 8 AAO ;

56 L.W. 3460 (Jan. 11, 1988). There, the Fourth Circuit

stated:

Judicial decisions, although not rejecting the rule

of construction that terms of an insurance contract are

to be given their ordinary meaning, have nevertheless

limited the breadth of the definition of “damages”

somewhat more narrowly than the appellant suggests,

“Damages,” as distinguished from claims for injunctive

or restitutionary relief, includes “only payments to

third persons when those persons 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

meaning in law.” Hanna, 224 F.2d at 503. Maryland

law, which governs the construction of this agreement,

A28

has similarly adopted the somewhat narrow, tech-

nical definition of damages.

Id. at 1352.

It is clear that reliance on Armco is misplaced because

Maryland law is inconsistent with established Missouri

law. Under Maryland law, the term “ ‘damages’ is to be

construed in consonance with its” somewhat narrow tech-

nical definitior. of “damages”. Id. In Missouri, on the

other hand, we must accord the term the meaning that

lay persons would give it.”

2. It is an interesting sidelight to this case that in applying

Maryland law and finding for the insurer, the Armco court

noted another action involving damage to property in the same

vicinity as that involved in his case. In that action, Judge

Scott O. Wright of he United States District Court for the

Western District of Missouri appointed a special master, Pro-

fessor Robert H. Freilich, of the University of Missouri at Kansas

City, to help resolve the litigation. See Maryland Casualty Co.

v. Armco, Inc., 643 F. Supp. 430, 432-33 (D. Md. 1986) (citing

United States v. Conservation Chem. Co., 653 F. Supp. 152 (W.D.

Mo. 1986). After hearing the matter, Freilich stated that the

government's complaint (similar to the complaint in this case)

alleged “damages” for purposes of a comprehensive general lia-

bility policy. Judge Wright entered an order adopting the

special master’s recommendation, thus indicating his view as

to the proper interpretation of the term “damages” in a com-

prehensive general liability policy such as the one at issue in

this case. The Maryland court, in adopting a narrow technical

definition of the term damages, noted that Judge Wright’s order

was vacated as to Maryland Casualty and two other insurers

because they had entered into a settlement before the order

was entered. Id. at 432.

More recently, the view of the Maryland court has been

criticized. In United States Fidelity and Guaranty Co. v. Thomas

Solvent Co., No. K85-415 slip op. (W.D. Mich. Jan. 15, 1988)

the court stated:

Maryland Casualty rejected the recommendation of the spe-

cial master who suggested—in my view—a more reason-

able view of property damage from the standpoint of the

insured. It is clear to me that once property damage is

found as a result of environmental contamination, clean-up

(Continued on following page)

A29

CONCLUSION

A close reading of the cases cited by the majority in

support of its view as to the meaning of the term “dam-

ages” reveals that they all apply the law of a state which

has adopted a restrictive definition of the term “damages.”

On the other hand, the cases applying state law requiring

the words in an insurance policy to be given their ordinary,

non-technical meaning support the position of this dissent.

See Port of Portland v. Water Quality Ins. Syndicate, 796

F.2d 1188 (9th Cir. 1986); New Castle v. Hartford Acci-

dent and Indemnity Company, 673 F. Supp. 1359 (D. Del.

1987); Consolidated Rail Corp. v. Certain Underwriters at

Lloyds, Civ. No. 84-2609 (E.D. Pa. June 5, 1986) (un-

reported decision available on Westlaw at 1986 WL 6547);

Fireman’s Fund Ins. Co. v. Ex-Cell-O Corp., 662 F. Supp.

71 (E.D. Mich. 1987); Independent Petrochemical Corp. v.

Aetna Casualty & Surety Co., 654 F. Supp. 1334 (D. D.C.

1986), reconsideration in part denied, 674 F. Supp. 354

(1987); CPS Chem. Co. v. Continental Ins. Co., No.

A-3799-86TS (N.J. Super. Ct. App. Div. Jan. 15, 1988);

Broadwell Realty Services, Inc. v. Fidelity & Casualty

Footnote continued—

costs should be recoverable as sums that the insured was

liable to pay as a result of property damage. In this con-

text the argument concerning the historical separation of

damages and equity is not convincing and it seems to me

that the insured ought to be able to rely on the common

sense expectation that property damage within the meaning

of the policy includes a claim which results in causing

him to pay sums of money because his acts or omissions

affected adversely the rights of third parties. * * * The

short answer is that from the standpoint of the insured

damages are being sought for injury to property. It is

that contractual understanding rather than some artificial

and highly technical meaning of damages which ought to

control.

Id. at 55.

A30

Co., 218 N.J. Super. 516, 528 A.2d 76 (N.J. Super. Ct. App.

Div. 1987); City of Thief River Falls v. United Fire &

Casualty Co., 336 N.W.2d 974 (Minn. 1983); Seaboard

Surety Co. v. Ralph Williams Northwest Chrysler Plym-

outh, Inc., 81 Wash.2d 740, 504 P.2d 1139 (1973). Be-

cause Missouri law is clear that words in an insurance

policy are to be given their ordinary meaning, we are obli-

gated to do the same.

Accordingly, we would adhere to the panel opinion.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH

CIRCUIT.

A31

(Filed January 22, 1987)

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 85-1940

Continental Insurance Companies,

Appellee,

Le

Northeastern Pharmaceutical and Chemical Company, Inc.,

Milton Turkel, Edwin B. Michaels and John W. Lee,

Appellees,

State of Missouri,

Intervenor-Appellant.

Appeal from the United States District Court for the

Western District of Missouri.

Submitted: January 15, 1986

Filed: January 22, 1987

Before HEANEY and McMILLIAN, Circuit Judges, and

MURPHY’, District. Judge.

HEANEY, Circuit Judge.

This appeal raises the question of whether hazardous

waste cleanup costs under the Comprehensive Environ-

mental Response, Compensation and Liability Act, 42

*The Honorable DIANA E. MURPHY, United States Districi

Judge for the District of Minnesota, sitting by designation

A32

U.S.C. §§ 9601-9657 (1982) (CERCLA) are recoverable

under a liability policy that covers “property damage” that

“occurs” during the life of the policy, where disposal and en-

vironmental contamination took place during the policy pe-

riod but cleanup costs were incurred later. We reverse the

district court’s order on Count I of Continental's complaint,

affirm its dismissal of the State of Missouri’s counterclaim,

and hold that state and federal governments suffer “prop-

erty damage” at the time hazardous wastes are improp-

erly “released” into their environment and that cleanup

costs are a recoverable measure of damages for this envi-

ronmental property damage. We also affirm the district

court’s dismissal without prejudice of Count II of Con-

tinental Insurance Company’s complaint relating to cov-

erage for private individuals’ personal and property dam-

age due to improper hazardous waste disposal.

I. FACTS.

From 1970 to 1972, the Northeastern Pharmaceutical

and Chemical Company (NEPACCO) produced hexachlo-

rophene at a chemical plant in Verona, Missouri. The

process produced a variety of wastes, among which was

dioxin, a highly toxic chemical. In July, 1971, NEPACCO

made arrangements to dispose of at least eighty-five fifty-

five-gallon drums of these wastes in a trench on a farm

near Verona, Missouri (the “Denny farm” site). When

the deteriorated drums were dumped in the trench in

July, 1971, a “strong odor” shortly emerged. persisting

for several months. United States v. Northeastern Pharm.

& Chem. Co., 579 F. Supp. 823, 828-30 (W.D. Mo. 1984)

Later in 1971 or 1972, NEPACCO hired Independent Petro-

chemical Corporation (IPC) which, in turn, hired Russell

Bliss to dispose of more dioxin-contaminated wastes. In

Times Beach, Missouri.’ Later, in 1974, a Mr. Minker

During the two-year pericd from 1970 to 1972 that

NEPACCO was in business, it was insured under a Com-

1971, to August 5, 1972: and August 5, 1972, to Novem-

ber 5, 1972.3 Each policy requires Continental to:

-<ccesenasnsiensteeesinee,

l. Times Beach was a town of approximately 2.200 people

areas. In February, 1983, the EPA announced that the govern-

ment would purchase the entire town of Times Beach using $33.7

million from the federal Superfund. The State of Missouri con-

tributed an additional $3.3 million to the buy-out.

2. The drafting history and background of the standard-

form CGL Policy is discussed in American Home Prods. Corp. v.

Liberty Mut. Ins. Co., 565 F Supp. 1485. 1500-03 (Sp NLY.

1983). aff'd as modified, 748 F.2d 760 (2d Cir. 1984).

The latter two Policies, covering the period August 5,

1971, to November 17, 1972. contain the following “pollution and

contamination” exclusion clause:

It is agreed that the imsurance does not apply to bodily in-

Persal, release or escape of smoke. Vapors, soot, fumes, acids.

aikalis, toxic chemicals. liquids or Bases, waste materials or

other irritants. contaminants or Pollutants into or upon land.

the atmosphere or any watercourse or body of Water: but

this exclusion does not apply if such discharge. dispersal, re-

lease or escape is sudden or accidental].

(Continued on following Page)

A34

pay on behalf of the insured all sums which the insured

shall become legally obligated to pay as damages be-

cause of A. bodily injury or B. property damage'*!

to which this insurance applies caused by an occur-

rence,*) and the Company shall have the right and

Footnote continued—

The United States Court of Appeals for the First Circuit has held

that coverage for damages caused by hazardous wastes improperly

disposed of by the plaintiff in the regular course of its business

is excluded by the same “pollution exclusion” clause. Great

Lakes Container Corp. v. National Union Fire Ins. Co., 727 F.2d

30 (ist Cir. 1984); see also Travelers Indemn. Co. v. Dingwell,

414 A.2d 220 (Me. 1980). Other courts have reached the opposite

conclusion where the hazardous waste discharge was sudden

or accidental or the wastes were negligently disposed of by a

third-party contractor or were disposed of in full compliance

with all applicable rules and regulations, or the wastes were

generated other than in the regular course of the insured’s busi-

ness. See, e.g., Payne v. United States Fid. and Guar. Co., 625

F. Supp. 1189 (S.D. Fia. 1985); Technicon Electronics Corp. v.

American Home Assurance Co., No. 08811/85 (N.Y. Sup. Ct.

Feb. 13, 1986); Buckeye Union Ins. Co. v. Liberty Solvents &

Chemicals Co., 17 Ohio App. 3d 127, 477 N.E.2d 1227 (Ohio Ct.

App. 1984), Niagara County v. Utica Mutual Ins. Co., 80 A.D.2d

415, 439 N.Y.S.2d 538 (N.Y. App. Div.), mot. for lv. to app. dism.,

54 N.Y.2d 608, 427 N.E.2d 1191, 443 N_Y.S.2d 1030 (1981); Lansco,

inc. v. Department of Envtl. Protection, 138 N.J. Super. 275, 350

A.2d 520 (N.J. Super. Ct. Ch. Div. 1975), aff'd, 145 N.J. Super.

433. 368 A.2d 520 (N.J. Super. Ct. App. Div. 1976), cert. denied,

73 N.J. 57, 372 A.2d 322 (1977). Whether the “pollution exclu-

sion” clause excludes coverage in this case is not at issue on

appeal because the district court found a lack of coverage on

other grounds.

4 All three policies define “property damage” as follows:

(1) Physical injury or destruction of tangible property

which occurs during the policy period, including the loss

of use thereof at anytime resulting therefrom,

(2) Loss of use of tangible property which has not

been physically injured or destroyed provided such loss of

use is caused by an occurrence during the policy period * * °.

5 All three policies define “oecurrence” as “an accident,

including continuous or repeated exposure to conditions, injury

or property damage neither expected nor intended from the

standpoint of the insured.” Several courts have held that the

discharge of hazardous wastes is an “oecurrence”™ within this type

(Continued on following page)

A35

duty to defend any suit against the insured seeking

damages on account of such bodily injury or property

damage.

All three provide that: “[t]his insurance applies only

to bodily injury or property damage which occurs during

the policy period.”

In 1980, the EPA investigated the Denny farm site

and found that the NEPACCO wastes in the trench and

underlying soil contained “alarming[{ly] high concentra-

tions of dioxin.” Id. at 831. It cleaned up the site, and

then sought to recover its costs through a lawsuit against

NEPACCO and others. United States v. Northeastern

Pharm. & Chem. Co., 579 F. Supp. 823 (the “EPA” suit).

The district court found NEPACCO and the other defen-

dants jointly and severally liable under CERCLA for

the cost of the cleanup.’ A separate appeal in that action

is now pending before another panel of this Court.

Footnote continued—

of provision where the discharge or the extent of the damage

was not expected or intended. See, e.g., Mraz v. American Uni-

versal Ins. Co., 616 F. Supp. 1173, 1177-78 (D. Md. 1985), appeal

docketed, No. 85-2399 (4th Cir., Dec. 27, 1985); Steyer v. West-

vaco Corp., 450 F. Supp. 384, 388 (D. Md. 1978); Waste Manage-

ment of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 340

S.E.2d 374, 380 (1986); CPS Chem. Co. v. Continental Ins. Co.,

199 N.J. Super. 558, 489 A.2d 1265, 1269 (NJ. Super. Ct. Law

Div. 1984), rev’d and remanded on other grounds, 203 N.J. Super.

15, 495 A.2d 886 (N.J. Super. Ct. App. Div. 1985); Buckeye

Union Ins. Co., 477 N.E.2d at 1233. But see American States Ins.

Co. v. Maryland Cas. Co., 587 F. Supp. 1549 (E.D. Mich. 1984).

This is not an issue on this appeal because the district court

found a lack of coverage on other grounds.

6. The district court entered judgment in favor of the EPA

for $155,171.93. Although the court noted that the stored wastes

at the Denny farm site no longer present an imminent and sub-

stantial danger to health and environment, 579 F. Supp. at 832,

the waste necessitates future monitoring and further response

costs for which NEPACCO and the other defendants remain

liable Id. at 852-53,

rica ii, |

A36

On March 7, 1983, a number of former residents

of Times Beach and Imperial, Missouri, filed an action

against NEPACCO and others which seeks recovery for

personal injuries and property damage allegedly caused

by the dumping of NEPACCO’s wastes at the Minker/

Stout/Romaine Creek site and on the streets of Times

Beach. Capstick v. Independent Petrochemical Corp., No.

832-0453 (Cir. Ct. City of St. Louis, Mo. filed Mar. 7,

1983) (the “Capstick” suit).

To protect against potential liability arising out of

its status as insurance carrier for NEPACCO during the

time NEPACCO’s hazardous wastes were improperly dis-

posed of, Continental filed this action against NEPACCO

and its former officers and directors. Count I seeks a

declaration that Continental is under no duty to defend

or indemnify NEPACCO for liability arising out of the

EPA’ suit. Count II seeks the same declaration with

respect to the Capstick suit. On November 14, 1984,

Continental moved for summary judgment. NEPACCO

and the other defendants failed to enter an appearance

or file an answer.®

7. On February 25, 1985, the United States filed a garnish-

ment action seeking to collect from Continental, as NEPACCO's

liability insurer, the sums awarded in the underlying EPA suit

United States v. Continental Ins. Co., No. 85-3069-CV-S-4 (W.D

Mo. filed Feb. 25, 1985). The district court initially eniered

judgment in favor of Continental based on its judgment in the

present action, Continental v. NEPACCO, No. 84-5034-CV-S-4g

(W.D. Mo. filed June 25, 1985), then granted the United States's

motion for reconsideration. Continental then moved for sum-

mary judgment, and resolution of this motion has been held in

abeyance until the appeal in the EPA suit, 579 F. Supp. 823 is

resolved.

8. NEPACCO’s corporate charter was forfeited by the Dela-

ware Secretary of State in August, 1976. NEPACCO never filed

a formal certificate of dissolution, but in 1974, its assets were

(Continued on following page)

A37

The State of Missouri was then granted leave to

intervene to protect its interests arising out of claims

that it had made against NEPACCO and the other defen-

dants in a third hazardous-waste lawsuit filed in the

United States District Court for the Eastern District of

Missouri. Missouri v. Independent Petrochemical Corp.,

No. 83-3670 (E.D. Mo. filed Nov. 23, i983) (the “IPC”

suit). The complaint in IPC alleges that NEPACCO, its

officers, and others are liable under CERCLA for costs

incurred by the state in excavating and removing dioxin-

contaminated soil from the Minker/Stout/Romaine Creek

site. The state filed an answer to Continental’s complaint

and a counterclaim alleging that Continental is obligated

to indemnify the state for the amount of any judgment

imposed on NEPACCO in the underlying IPC lawsuit.

On June 25, 1985, the district court granted summary

judgment to Continental on Count I of its complaint (no

insurance coverage for the EPA claims), and against the

state on its counterclaim (no coverage for the IPC claims).

The court reasoned that the cleanup costs sought by the

United States and the state in the EPA and IPC suits

are not “property damage” as that term is defined in

the CGL policies and that “no * * * damages were in-

curred by the government entities during the policies’

effective dates” because the policies were only in effect

from 1970 to 1972, and the cleanup costs were incurred

later. The court also granted Continental’s motion to

dismiss without prejudice Count II of its complaint (the

Footnote continued—

liquidated and the proceeds distributed to shareholders after

payment of outstanding debts. See United States v. Northeastern

Pharm. & Chem. Co., 579 F. Supp. 823, 827 (W.D. Mo. 1984).

Thus, at the time Continental filed its complaint, NEPACCO had

been a defunct or “shell”’ corporation for some ten years.

A38

Capstick claims), stating that “more specific findings of

bodily injury and property damage” were needed first.

The State of Missouri appeals.”

II. DISCUSSION.

A. EPA and IPC Claims.

The first issue is whether the district court erred

in holding that cleanup costs under CERCLA are not

“property damage” as defined in the CGL policies.’ Al-

though the district court cited no case and gave no ex-

planation for its holding, Continental and amicus AIA

advance two arguments in support.

Continental argues that only the actual owners of

the land on which hazardous wastes are improperly dis-

posed of sustain “property damage,” and that any injury

suffered by governmental entities from the improper dis-

posal is merely an economic injury.’ We disagree.

9. The United States and Armco, Inc., AT&T Technologies,

Inc., FMC Corporation, and Internationa! Business Machines Corp-

oration appear as amicus curiae in support of the state. The

American Insurance Association (AIA) appears as amicus curiae

in favor of Continental.

10. We agree with the district court that Missouri law

governs the interpretation of the insurance policies at issue be-

cause that state has the most significant relation with the negotia-

tion and terms of the insurance contract. Havenfield Corp. v. H.

R. Block, Inc., 509 F.2d 1263 (8th Cir.), cert. denied, 421 US.

999 (1975); Ryder Truck Rental, Inc. v. U. S. Fid. and Guar. Co.,

527 F. Supp. 666 (E.D. Mo. 1981); National Starch & Chem.

Corp. v. Newman, 577 S.W.2¢d 99 (Mo. Ct. App. 1978).

11. Continental cites to Giddings v. Industrial Indemn. Co.,

112 Cal. App.3d 213, 219, 169 Cal. Rptr. 278, 281 (Cal. Ct. App.

1981), where the court stated that “strictly economic losses like

lost profits, loss of goodwill, loss of anticipated benefit of a

bargain, and loss of an investment, do not constitute damage or

injury to tangible property covered by a comprehensive general

liability policy.” See also CMO Graphics, Inc. v. CNA Ins., 115

Ill. App.3d 491, 450 N.E.2d 860, 863-64 (Ill. App. Ct. 1983).

A39

The Supreme Court of the United States has held

that state and federal governments suffer injury to their

“quasi-sovereign” interests when pollutants are released

into the soil, water, and air within their jurisdiction.

See Georgia v. Tennessee Copper Co., 206 US. 230, 51

L.Ed.2d 1038, 1044 (1907) (state); cf. Illinois v. City of

Milwaukee, 406 U.S. 91, 31 L.Ed.2d 712, 722-26 (1972)

(federal). The question here is whether this injury

to governmental “quasi-sovereign” interests constitutes

“property damage” within the meaning of an insurance

policy. Although the Supreme Court has not squarely

confronted the issue, two thoughts expressed in cases

decided by the Court lead us to reject Continental’s

argument. First, it has implied that an injury to a gov-

ernment’s quasi-sovereign interest in natural resources

is a form of property damage. Second, it has held that

the government has power, in its quasi-sovereign capacity,

to seek redress for the environmental property damage

suffered by the actual owners of the land affected by

pollution.

In Georgia v. Tennessee Copper Co., 206 US. 230,

51 L.Ed. 1038, for example, the State of Georgia brought

suit against certain Tennessee copper companies to en-

join the discharge of noxious gases over its territory. In

holding that it had jurisdiction and that Georgia was

entitled to an injunction, the Court stated:

The state owns very little of the territory alleged

to be affected, and the damage to it capable of esti-

mate in money, possibly, at least, is small. This is

a suit by a state for an injury to it in its capacity

of quasi-sovereign. In that capacity the state has

an interest independent of and behind the titles of

its citizens, in all the earth and air within its domain.

A40

It has the last word as to whether its mountains

shall be stripped of their forests and its inhabitants

shall breathe pure air. It might have to pay indi-

viduals before it could utter that word, but with it

remains the final power. The alleged damage to

the state as a private owner is merely a make-weight,

and we may lay on one side the dispute as to whether

the destruction of forests has led to the gullying of

its roads.

51 L.Ed. at 1044.

The Court’s discussion of a governmental interest in “title”

to all the soil, water, and air within its jurisdiction sug-

gests that the government has a property interest in

natural resources. A similar implication arises from Mis-

souri v. Illinois, 180 U.S. 208, 45 L.Ed. 497 (1901), where

the Court held that Missouri was permitted to sue as

parens patriae to enjoin the discharge of sewage from

Chicago, Illinois into the Illinois and Mississippi rivers:

“impairment of the health and prosperity of the towns

and cities of the state situated on the Mississippi river

* * * would injuriously affect the entire state.” 45 L.Ed.

at 512. The Court suggested that although a dispute

between states over interstate waters may not involve

“direct property rights” of a state, the injury to the

state’s “quasi-sovereign” rights is akin to an injury to

state property rights.* Id. Furthermore, the Court

stressed that in environmental damage suits, a state has

the power to seek redress in court for the property dam-

age caused to the general public. Id.; see also Maryland

vy. Louisiana, 451 U.S. 725, 68 L.Ed.2d 576, 608 (1981)

12. See also, e.g., State v. Leavitt, 105 Me. 76, 79, 72 A.

875. 877. 72 A. 875 (1909) (Each state’s interest in the natural

resources within its borders “is in fact a property right.’’).

A41

(Rehnquist, J., dissenting on other grounds) (pointing

out that when a state sues to advance its quasi-sovereign

interests, it is not suing simply to protect the economic

interests of its citizens). Similarly, in Toomer v. Witsell,

334 U.S. 385, 408, 68 S. Ct. 1156, 92 L.Ed. 1460 (1948),

Mr. Justice Frankfurter, joined by Mr. Justice Jackson,

concurring, stated:

A state may care for its own in utilizing the bounties

of nature within her borders because it has technical

ownership of such bounties or, when ownership is

in no one, because the state may for the common

good exercise all the authority that technical owner-

ship ordinarily confers.

This conclusion is supported by statements in a wide

array of cases and statutes that state and federal gov-

ernments have property interests in wildlife* inter-

and intra-state waters," and natural resources in gen-

13. See, e.g., Geer v. Connecticut, 161 U.S. 519 (1896) (State

has property interest in and police power over wild game within

its jurisdiction because of its sovereign capacity as representa-

tive of the people in their common ownership of wild game.) ;

State v. Taylor, 358 Mo. 279, 214 S.W.2d 34, 36 (1948) (State

has “property right” in wildlife of state.); Mo. Ann. Stat.

§ 252.030 (Vernon 1963) (‘The ownership of and title to ail

wildlife of and within the state * * * are hereby declared to be

in the State of Missouri.”). The federal government would also

seem to have a protectable interest in wildlife, an interest which

might be characterized as a form of property right. Cf. Missouri

v. Holland, 252 U.S. 416 (1920).

14. It has been generally stated that interstate navigable

waters and their watersheds are “public property of the nation,”

United States v. Chicago. M., St. P. & P. R. Co., 312 U.S. 592,

85 L.Ed. 1064, 1069 (1941), and that “waters of the state,” see

Mo. Ann. Stat. § 260.500(11) (Vernon 1963) (defining “waters

of the state’’ as all rivers, streams, lakes and other bodies of

water’) are property of the state. See McCready v. Virginia, 94

U.S. 391, 394, 24 L.Ed. 248 (1876) (“The principle has long

(Continued on following page)

A42

eral.» Moreover, state and federal governments have “di-

rect property interests” in public land holdings which may

be damaged by environmental contamination.

Footnote continued—

been settled in this Court, that each State vwns the beds of all

tide-waters within its jurisdiction. * * * In like manner, the

states own the tide-waters themselves, and the fish in them, so

far as they are capable of ownership while running. For this

purpose the State represents its people, and the ownership is

that of the people in their united sovereignty.); United States

v. Turner, 175 F.2d 644, 647 (9th Cir.), cert. denied, 338 U.S.

85 (1949) (State has property interest in intrastate navigable

waters.) ; Maine v. M/V Tamano, 357 F. Supp. 1097, 1100 (D. Me.

1973) (State has sufficient quasi-sovereign or property interest

in its coastal waters and marine life to maintain suit for damages

caused by oil spill.); Maryland v. Amerada Hess Corp., 350 F.

Supp. 1060, 1066-67 (D. Md. 1972) (State has “proprietary in-

terest” in its waters and may recover damages for cost of clean-

ing up oil-spill damage to these waters.); California v. S. S.

Bournemouth, 307 F. Supp. 922, 929, clarified, 318 F. Supp.

839 (C.D. Cal. 1970) (State suffers property damage when its

waters are damaged by oil spill.); Hickey v. Hazard, 3 Mo. App.

480 (Mo. Ct. App. 1877) (State of Missouri has property in-

terest in waters of the state.).

15. See, e.g., Mo. Const., art. 4 § 12 (establishment of de-

partment of conservation and Department of Natural Resources) ;

Mo. Ann. Stat. § 67.870-.910 (Vernon Supp. 1986) (open space

conservation); Mo. Ann. Stat. § 253.010 (Vernon 1963) (state’s

interest in “land” includes “every estate, interest and right,

legal or equitable, in land or water’); Mo. Ann. Stat. § 256.010

(Vernon 1963) (appointment of state geologist to survey state

resources); Mo. Ann. Stat. § 260.435-.550 (Vernon Supp. 1986)

(state’s interest in preventing harm to property and people by

abandoned hazardous waste dumps); Clean Air Act, 42 U.S.C.A.

§§ 7401-7642 (1982) (protection of “nation’s air resources’’) ;

National Environmental Quality Act, 42 U.S.C.A. 8§ 4321-4396

(1982) (protection of “nation’s environment”); Federal Water

Pollution Control Act, 33 U.S.C. §§ 1251-1376 (1982) (protection

of “nation’s waters”); CERCLA, supra (see 42 U.S.C. § 9601(16),

which states: ‘ ‘natural resources’ means land, fish, wildlife,

biota, air, water, ground water, drinking water supplies, and

other such resources belonging to, managed by, held in trust by,

appertaining to, or otherwise controlled by the United States

(including the resources of the fishery conservation zone estab-

lished by the Magnuson Fishery Conservation and Management

Act [16 U.S.C.A. § 1801 et seq.]) any State or local government,

or any foreign government.”

A43

In light of these extensive statements of governmen-

tal property interests in environmental resources, it does

not seem unreasonable to assume that an insurance com-

pany, providing liability coverage for a chemical pro-

ducer, would contemplate environmental damage as a

form of covered “property damage for which govern-

ments may seek recovery.” See Lansco, Inc. v. Depart-

ment of Envtl. Protection, 138 N.J. Super. 275, 350 A.2d

520, 524-25 (NJ. Super. Ct. Ch. Div. 1975), aff'd, 145

N.J. Super. 433 (N.J. Super. Ct. App. Div. 1976), cert.

denied, 73 N.J. 57, 372 A.2d 322 (1977). The policies’

definition of “property damage” as damage to “tangible

property” or “physical injury” seems to contemplate dam-

age to tangible property such as land, trees, air, and

water. Supportive of this is the inclusion in the latter

two of the three policies at issue of clauses generally

excluding environmental damage from coverage for prop-

erty damage. See Port of Portland v. Water Quality

Ins. Syndicate, 549 F. Supp. 233, 235 (D. Ore. 1982) (The

pollution exclusion clause “itself states that ‘property

damage’ may result from the discharge of pollutants.”).

Finally, all of the cases which have squarely con-

sidered Continental’s argument have rejected it.® In

Mraz v. American Universal Ins. Co., 616 F. Supp. 1173

16. The two cases cited by Continental are inapposite. In

Atlantic City Mun. Util. Auth. v. CIGNA, No. A-1320-84TF (N.J.

Super. Ct. App. Div. Dec. 19, 1985), the court held that costs

incurred by a municipal water authority in drilling new wells and

adding filtering devices to prevent potential contamination of

its wells by nearby hazardous waste dumps are not recoverable

under a CGL policy. In Linda Walls v. Waste Resources Corp.,

No. 2-83-418 (E.D. Tenn. Oct. 11, 1983), the court adopted a

magistrate’s report suggesting distinction, for statute of limita-

tions purposes, between suits for recovery of cleanup costs

and suits claiming damages for injury to or loss of natural re-

sources.

A44

(D. Md. 1985), for example, the court rejected as “un-

tenable” the insuror’s claim that state and federal gov-

ernments do not sustain “property damage” for insurance

policy purposes when hazardous wastes are improperly

disposed of and ultimately cleaned up by the govern-

ment. A similar conclusion was reached in Lansco, 350

A2d at 524-25, and Kutsher’s Country Club Corp. v.

Lincoln Ins. Co., 119 Misc.2d 889, 465 N.Y.S.2d 136, 139

(N.Y. Sup. Ct. 1983).*

In sum, we agree with the position taken in Mraz

Lansco, and Kutsher’s that the improper release of toxic

wastes may cause “property damage’’ not only to the

actual owner of the land, water, or air, but also to state

and federal governments because of their “interest inde-

pendent of and behind the titles of its citizens in all

the earth and air within [their] domain.” Tennessee

Copper Co., 51 L.Ed.2d at 1044.

Amicus AIA assumes, at least for purposes of argu-

ment, that environmental contamination may cause “prop-

erty damage” for which state and federal governments

may seek relief. However, it argues that while the gov-

ernments might be able to recover for the diminution

17. For other cases implicitly finding that cleanup costs are

recoverable “property damage,” see, e.g., Mercury Refining Co. v.

Hartford Fire Ins. Co., No. 84-CU-495 (N.D. N.Y. July 19, 1985);

Payne v. United States Fid. and Guar. Co., 625 F. Supp. 1189,

1193 (S.D. Fla. 1985); Port of Portland, 549 F. Supp. at 235;

Technicon Electronics Corp. v. American Home Assurance Co.,

No. 08811/85 (N.Y. Sup. Ct. Nov. 1, 1985); Shapiro v. Public

Service Mut. Ins. Co., 19 Mass. App. Ct. 648, 477 N.E.2d 146, 154

(Mass. App. Ct. 1985); Buckeye Union Ins. Co. v. Liberty Solvents

and Chem., 17 Ohio App.3d 127, 477 N.E.2d 1227, 1239 (Ohio Ct.

App. 1984); Waste Management of Carolinas, Inc. v. Peerless Ins.

Co.. 72 N.C. App. 80, 323 S.E.2d 726, 735 (N.C. Ct. App. 1984),

rev’d on other grounds, 315 N.C. 688, 340 S.E.2d 374 (1986);

CPS Chem. Co. v. Continental Ins. Co., 199 N.J. Super. 558, 489

A 2d 1265. 1269 (N.J. Super. Ct. Law Div. 1984).

A45

in value of environmental resources, cleanup costs them-

selves are not recoverable. It bases this argument on

the language of section 107 of CERCLA which provides:

(4) any person who accepts or accepted any

hazardous substances for transport to disposal or

treatment facilities or site selected by such person,

from which there is a release, or a threatened re-

lease which causes the incurrence of response costs,

of a hazardous substance, shall be liable for—

(A) all costs of removal or remedial action in-

curred by the United States Government or a State

not inconsistent with the national contingency plan;

(B) any other necessary costs of response in-

curred by any other person consistent with the na-

tional contingency 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.

42 USC. § 9607(a) (4).

A close reading of this section fails to support AIA’s

argument that only an action under the last subsection,

section 9607(a)(4)(C), is an action for “property dam-

age.”'* 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. This

18. The CERCLA claims in the EPA and IPC suits were

brought solely under 42 U.S.C. § 9607(a)(4)(A) for cleanup

costs.

A46

conclusion is supported by all of the on-point cases cited

by the parties or revealed by our independent research.”

See, e.g., Askew v. American Waterways Operators, 411

U.S. 325, 36 L.Ed.2d 280, 286 (1973) (In discussing the

Water Quality Improvement Act of 1970, 84 Stat. 91, 33

U.S.C. §§ 1161 et seq. (1972), and a similar Florida Act,

the Court stated, “While the Federal Act determines

damages measured by the cost to the United States for

cleaning up oil spills, the damages specified in the Florida

Act relate in part to the cost to the State of Florida in

cleaning up the spillage.”); Riehl v. Travelers Ins. Co..,

22 Env’t Rep. Cas. (BNA) 1544, 1546 (W.D. Pa. Aug. 7,

1984), rev’d on other grounds, 772 F.2d 19 (3d Cir. 1985)

(Measure of damages to ground water and streams caused

by seepage of wastes from insured’s landfill “is not pre-

cisely calculable but includes abatement costs relative

to preventing further pollution.”); Port of Portland, 549

F. Supp. at 235 (Cost of cleaning up oil spill is recover-

able “property damage” under CGL policy.); Chem. Ap-

plication Co. v. Home Indem. Co., 425 F. Supp. 777, 778

(D. Mass. 1977) (Cleanup and removal expenses incurred

by insured measure the “damages” for which indemni-

fication is available.); Waste Management of Carolinas,

Inc. v. Peerless Ins. Co., 72 N.C. App. 80, 323 S.E.2d 726,

735 (N.C. App. 1984), rev’d on other grounds, 315 N.C.

19. On March 10, 1986, the United States Supreme Court in

Exon Corp. v. Robert Hunt, 106 S. Ct. 1103, 89 L.Ed.2d 364 (1986),

held that the New Jersey Spill Compensation and Control] Act’s

(N.J. Stat. Ann. §§ 58:10-23.11 to 58:10-23.112 (West 1982 and

Supp. 1985) imposition of a “spill fund” tax on major petroleum

and chemical facilities in the state is partially preempted by

section 114(c) of CERCLA, 42 U.S.C. § 9614(c). Dicta in the

opinion points both ways as to whether governmental cleanup

costs may be considered “property damage.” Given that the

issues there have no relation to the issues here, we find this

dicta not helpful in resolving the present case.

A47

688, 340 S.E.2d 374 (1986) (Cleanup costs are “essentially

compensatory damages for injury to common property,”

the ground water of the State of North Carolina.);

Kutsher’s Country Club Corp., 465 N.Y.S.2d at 139 (“The

cost of cleanup * * * is clearly reflective of the state's

power to establish damages with respect to legislation

designed to preserve the sovereign state’s interest in the

Preservation of natural resources.”): Lansco, Inc. v. De-

partment of of Envtl. Protection, 350 A.2d at 525 (Mea-

sure of damages for pollution discharge in river is “the

cost of eliminating the harmful substance from “Se waters

of the state.”). But cf. Atlantic City Mun. Util. Auth.,

No. A-1320-94TF (N.J. Super. Ct. App. Div. 1985): Linda

Walls, No. 2-83-418 (E.D. Tenn. Oct. 11, 1983).

Finally, the language of the CGL policies at issue

supports the view that cleanup costs are a measure of

recoverable damages for injury to environmental re-

sources. The language of the policies specifically require

Continental to “pay on behalf of the insured all sums

which the insured shall become legally obligated to pay

Cos. v. Pasley Mfg. & Distrib. Co., 413 S.W.2d 268 (Mo. 1967),

suggests that Missouri would follow this majority view. There.

the Court held that under Missouri law, damages in rea] property

cases are calculated as either the difference in value before the

injury and after, or the cost of restoring the real property to

its original condition, whichever is the lesser. Id. at 273-74.

Because the hazardous waste contamination alleged in the EPA

and IFC suits spread widely from the originally contaminated

Property to other property and the groundwater of the state, it

seems clear that the cost of cleaning up the contamination would

be the lesser measure of damage. Moreover. although the Mis-

souri courts have not squarely confronted the issue, the appro-

priate measure of damages in a case involving improper disposa!

of hazardous wastes may include both the cost of cleanup and the

damages measured by the remaining diminution in the value of

natural resources. In the case at hand, we are faced, however,

only with the question of whether cleanup costs are recoverable.

A48

as damages * * * because of property damage.” This

language suggests that once there is property damage—

here, environmental contamination—then the damages

that flow from that property damage—here, cleanup costs

—are recoverable.”

In sum, the cases, the CGL policy language, the com-

mon meaning of “property damage,” and section 107 of

21. The state points out that this distinction between prop-

erty damage and their compensatory damages is so well established

it is set forth in Black’s Law Dictionary (4th ed. 1951):

Damage. Loss, injury or deterioration, caused by the neg-

ligence, design or accident of one person to another, in re-

spect of the latter's person or property, The word is to be

distinguished from its plural,—"damages’”’—which means a

compensation in money for a loss or damage.

Citation to meaning given ordinary language in a respected

dictionary is particularly relevant in a case involving the con-

struction of insurance policy terms because of the well-estab-

lished principle that insurance policy language must be given

the meaning that it would convey to an ordinary insured. Robin

vy. Blue Cross Hospital Service, Inc., 637 S.W.2d 695, 698 (Mo.

1982} (en banc). We agree with the state and supporting amici

that an ordinary insured chemical company would read the

term “property damage’ to include environmental damage and

would also conclude that the cost of cleaning up such damage

is recoverable. Moreover, to the extent the term “property dam-

age” is ambiguous as applied te environmental property damage,

the ambiguities must be construed against the insurer and in

favor of finding coverage for the insured. See Hon v. Director,

Office of Workers’ Comp. Programs, 699 F.2d 441, 443 (8th Cir.

1983); Bellamy v. Pacific Mut. Life Ins. Co., 651 S.W.2d 490,

495-96 (Mo. 1983).

Additionally, the United States Supreme Court’s decision in

St. Paul Fire and Marine Ins. Co. v. Barry, 438 U.S. 531 (1978),

supports the state’s claim that under an “occurrence” policy like

that at issue here, only the property damage rather than the

claim for compensation for this damage must occur during the

policy period:

An “occurrence” policy protects the policyholder from

liability for any act done while the policy is in effect, whereas

a “claims made” policy protects the holder only against

claims made during the life of the policy.

Id. at 535.

A49

CERCLA all support the governments’ argument that clean-

up costs under CERCLA are compensatory damages for

“property damage” within the meaning of the CGL pol-

icies. Accordingly, we adopt this view.

The remaining issue is whether the district court erred

in holding that the governments did not suffer an “occur-

rence” of property damage during the policy period be-

cause, although the improper waste disposal occurred dur-

ing the policy period, the cleanup costs were not incurred

until long after the policies expired.22 We hold that it

did and adopt the majority view that environmental dam-

age occurs at the moment that hazardous wastes are im-

properly released* into the environment and that a liabil-

ity policy in effect at the time this damage is caused pro-

vides coverage for the subsequently incurred costs of

cleaning up the wastes.* In Mraz, 616 #. Supp. at 1179,

for example, the court rejected the same argument made

by the insurer here and held that further fact findings

were called for on an allegation that “environmental dam-

age began to take place immediately in 1969 upon dumping

at the Leslie site creating the potential for liability within

22. Under Missouri law, the time of an “occurrence” within

the meaning of an indemnity policy is the time the loss or damage

was sustained and not the time when the negligent or wrongful

act was committed. Hawkeye-Security Ins. Co. v. Iowa Nat’l

Mut. Ins. Co., 567 S.W.2d 719, 720 (Mo. Ct. App. 1978).

23. CERCLA section 107, 42 US.C. § 9607, provides for

liability under the Act whenever there is a “release, or a threat-

ened release which causes the incurrence of response costs, of a

hazardous substance.” 42 U.S.C. § 9601(22) states, in relevant

part, «

“release” means any spilling, leaking, pumping, pouring,

emitting, emptying, discharging, injecting, escaping, leaching,

dumping, or disposing into the environment{. ]

24. However, various other policy provisions and exclusions

may exclude coverage, but these issues are not before us on this

appeal.

A50

the scope of the 1969 policy.” A similar conclusion has

been reached in numerous other cases. See, @.g. Payne,

625 F. Supp. at 1103 (Implicitly finding that improper

disposal of hazardous wastes during policy period is an

“occurrence” of “property damage” at the time of release

into the environment.); Mercury Refining Co. v. Hartford

Fire Ins. Co., No. 84-CU-495, (N.D. N.Y. July 19, 1985)

(same); Riehl, 22 Envtl. Rep. Cas. (BNA) at 1546, rev’d and

remanded on other grounds for further findings, 772 F.2d

19 (3d Cir. 1985) (same); Buckeye Union Ins. Co., 477

N.E.2d at 1233 (Insurer during the time period when haz-

ardous wastes were “released” into surrounding soil and

groundwater has duty to defend CERCLA cleanup suit

under CGL policy.); CPS Chem. Co., 489 A.2d at 1269

(“Time of discovery of the accident does not determine

when [damage] took place. The complaint alleges dam-

ages commencing with the date of dumpings.”’).”°

Quite similar to this line of decisions are cases involv-

ing insurance coverage for “progressive diseases” where

exposure to a harmful substance occurred during the pol-

icy period but the disease or illness developed later after

the policy expired. The majority of federal cases on this

issue have found coverage by adopting the ‘“exposure,’”° or

25. See also Shapiro, 477 N.E.2d at 149: Techalloy Co. v.

Reliance ins. Co., 338 Pa. Super. 1, 487 A.2d 820, 823-26 (Pa.

Super. Ct. 1984). Cf. Jackson Tp. Mun. Util. Auth. v. Hartford

Accident & Indem. Co., 186 N.J. Super. 156, 451 A.2d 990, 995

(N.J. Super. Ct. Law Div. 1982); Waste Management of Carolinas,

393 S.E.2d 726; Port of Portland, 549 F. Supp. at 233; Kutsher’s,

465 N.Y.S.2d at 136; Niagara County, 439 N.Y.S.2d at 538.

26. See, e.g., Commercial Union Ins. Co. v. Sepco Corp.,

765 F.2d 1543, 1546 (11th Cir. 1985); Hancock Laboratories, Inc.,

v. Admiral Ins. Co., 777 F.2d 520, 524 (9th Cir. 1985); Ducre

v. Executive Officers of Halter Marine Co., 752 F.2d 976, 994 (5th

Cir. 1985); Forty-Eight Insulations, Inc., 633 F.2d 1212, 1223

(6th Cir. 1980), aff'd and clarified on reh’g, 657 F.2d 816, cert.

denied, 451 U.S. 1109 (1981) (Date of occurrence is the date

on which the injury-producing agent first contacts the body.).

A51

the “continuous exposure,”*’ theory of when injury occurs.

These decisions rest on the view that exposure to the dan-

gerous substance at issue during the policy period caused

immediate, albeit undetectable, physical harm which ulti-

mately led to disease or physical impairment after the ex-

piration of the policy period. For example, in Forty-Eight

Insulations, 633 F.2d at 1223, the Court, in finding coverage

for a progressive disease which manifested itself after the

policy period, stated, “We see nothing in the policy which

requires that the underlying cause of action accrue within

the policy period. There exists a clear distinction between

when bodily injury occurs and when the bodily injury that

has occurred becomes compensable.” Accord Porter v.

American Optical Corp., 641 F.2d 1128, 1145 (5th Cir.),

cert. denied, 454 U.S. 1109 (1981).

These cases are distinguishable from cases where a

negligent act was committed during the policy period but

an accident or injury did not occur until after the policy

expired.** For example, if one negligently fails to shovel

27. See, e.g., Keene Corp. v. Insurance Co. of North America,

667 F.2d 1034, 1047 (D.C. Cir. 1981), cert. denied, 455 U.S. 1007

(1982) (Date of occurrence is the continuous period from ex-

posure to manifestation.).

28. The case which the district court relied on, Kirkham and

Michael & Assoc., Inc. v. Travelers Indem. Co., 361 F. Supp. 189

(D. S.D. 1973), aff'd, 493 F.2d 475 (8th Cir. 1974), falls into

this category. In Kirkham, an engineering corporation contracted

with the City of Rapid City, South Dakota, to design, oversee the

construction of, and to make a final inspection of a waste treat-

ment plant for the city. Once the plant was finally inspected,

turned over to the city, and set in operation, the city learned that

the plant was “deficient” in several respects. The city sued

the engineering firm and the firm’s insurance carrier brought

an action seeking a declaration that its policy during the construc-

tion period (later policies contained an exclusion fur damages

arising from professional malpractice/negligence suits) did not

provide coverage. The insurer’s argument was that, although

(Continued on following page)

A52

snow off his sidewalk during the policy period, there is no

compensable accident until and if someone slips and in-

jures himself during the policy period. This distinction

was discussed in Mueller Fuel Oil Co. v. Insurance Co. of

North America, 95 N.J. Super. 564, 232 A.2d 168, 175 (N.J.

Super. Ct. App. Div. 1967), a case involving insurance cov-

erage for a claim of malicious prosecution, where the court

wrote:

The tort of negligence is not committed unless and

until some damage is done. Therefore, the important

time factor in determining insurance coverage where

the basis of the claim is negligence, is the time when

the damage has been suffered. In a claim based on

malicious prosecution the damage begins to flow from

the very commencement of the tortious conduct—the

making of the criminal complaint. The wrong and

damage are practically contemporaneous * * *.

Footnote continued—

the negligent construction and supervision occurred during the

policy period, the city did not suffer damage until the plant

was turned over to it and operation of the plant revealed its

deficiencies. The district court agreed and held that there was

no coverage and, thus, no duty to defend the firm in the city’s

suit. 361 F. Supp. at 193-94. This Court affirmed on the basis

of the district court’s opinion. 493 F.2d at 475. Kirkham is

distinguishable from the present case in many respects. First of

all, the factual situation is inapposite. Second, it is an example

of a negligence case where the negligence was not accompanied

by immediate damage or injury, as was the case in the above-

cited hazardous waste and progressive disease cases. See also

Kissel v. Aetna Cas. & Sur. Co., 380 S.W.2d 497 (Mo. Ct. App.

1964) (Finding insurance coverage for damage manifested after

policy lapsed because the act of negligence during the policy

period was accompanied by immediate physical damage or in-

jury.). Third, the city in Kirkham had no ownership interest in

the sewage plant until it was turned over to it. It was only at

that time. after the relevant policy lapsed, that the city was in-

jured by learning that the plant did not work as projected.

A53

It seems to us that in the case of improper hazardous

waste disposal, the wrong and the resulting damage may

also be practically contemporaneous.

The decision in Kissel v. Aetna Cas. & Sur. Co., 380

S.W.2d 497 (Mo. Ct. App. 1964), is particularly relevant

on the crucial question of how the Missouri courts would

likely rule on the question of when property damage

occurs for purposes of insurance coverage. In Kissel,

a building contractor hired to build a school employed a

subcontractor to dig the foundation and to do landscaping

work. During the excavation work in 1952, a series of

pressure cracks developed in the ground around the school.

The cracks were filled in with dirt and the school con-

struction and landscaping were completed in 1953. The

contractor carried a comprehensive general liability policy

which covered property damage done by itself and its

subcontractors in the course of their construction work.

The CGL policy expired in late 1952. In 1957, the cracks

reappeared and spread to several pieces of property ad-

joining the school. Five owners of these pieces of prop-

erty brought suit, and the construction company insti-

tuted suit seeking a declaration that the CGL policy in

effect in 1952 covered the damage which occurred in

1957. The insurance carrier argued “that the accident

in question occurred in 1957, and not during the policy

period, which was November 1951 to November 1952.

Under those circumstances, * * * it cannot be held re-

sponsible for the damages shown in evidence.” 380 S.W.

2d at 507. The court rejected this contention, noting

that there was not merely an act of negligent excavation

during the policy period, but that this negligence also

caused immediate property damage during the policy

period which, by 1957, after the policy period, spread to

A54

adjoining property. “We agree * * * that the accident

mentioned in the policy may be a process and the evi-

dence in the instant case is sufficient to show that the

process started during the term of the policy and pro-

gressed until the filing of the lawsuits. We rule this

point against defendant.” Id. at 509. We find that the

Kissel case clearly indicates that Missouri would follow

the majority view of the courts which have ruled that

“property damage,” within the meaning of a CGL policy,

generally occurs at the time hazardous wastes are im-

properly disposed of and that the insurer at that time

may be held liable for cleanup costs incurred after the

policy expired.

Applying these principles, it is clear that the “prop-

erty damage” proved in the EPA case, 579 F. Supp. at

830, first occurred in July, 1971, during the period of

time when the first insurance policy issued by Conti-

nental to NEPACCO was in effect. EPA, 579 F. Supp.

at 830 (noting that NEPACCO’s agents dumped leaking,

deteriorated barrels into the trench at the Denny Farm

site and that, upon dumping of the wastes, a “strong

odor emitted” and “continued for several months, maybe

years.”).2? Under Kissel, it is also clear that Continental

29. We hold that in a cleanup cost recovery case, the date

of the insured “occurrence” is the date on which the hazardous

wastes were improperly disposed of. In other words, we adopt

the “exposure” view of coverage. Accordingly, only the first

CGL policy at issue provides coverage for the damages proved

in the EPA case. See, e.g., Hancock Laboratories, Inc., 777 F.2d

at 524-25. A recent Harvard Law Review comment argues that

the appropriate standard for property damage caused by hazardous

waste should be the “continuous trigger’ rule which provides

that the property damage occurrence is continuous, extending

from disposal to manifestation of the damage. Developments

in the Law, Toxic Waste Litigation, 99 Harv. L. Rev. 1458, 1581-83

(Continued on following page)

A55

may additionally be liable for the continuing spread of

the “property damage” at and around the Denny farm

site, which first began in July, 1971. Kissel, 380 S.W.2d

at 509. Accordingly, we reverse the district court’s order

with respect to Count I of Continental’s complaint and

remand for resolution of the remaining issues*® which

must be resolved before it can be determined whether

Continental must indemnify NEPACCO for the damages

awarded in the EPA suit.

It also follows, however, from our holding on the

question of the time of the relevant “property damage”

“occurrence,” that Continental is not liable to defend or

Footnote continued—

(1986). See also, Note The Applicability of General Liability

Insurance to Hazardous Waste Disposal, 57 S. Cal. L. Rev. 745,

758-59 (1984). Perhaps most supportive of the continuous trig-

ger theory is the presumption of maximum coverage. See Ameri-

can Home Prods. Corp., 565 F. Supp. at 1491-92. Additionally,

hazardous waste damage is a continuous process, which suggests

that the time of the property damage occurrence extends from

the time of improper disposal to the time the damage is mani-

fested. However, the Kissel case suggests that, under Missouri

law, the continuing damage would be covered under the policy

in effect when the damage first occurred, 380 S.W.2d at 509, at

least where, as here, this can be readily determined. As the

Harvard Law Review article suggests, the continuous trigger

theory might have merit in fact situations different from that

posed here, such as where it is impossible to determine when

the improper release occurred. In this situation, it may be rea-

sonable to view the time of the occurrence as the time the acci-

dent or release is first discovered. We are not faced with such

a situation here, however, and we are not persuaded that the

continuous trigger theory has merit in a cleanup cost recovery

case such as this one where the date of the first property damage

occurrence is clear and where the cleanup efforts have been

pinpointed at the site of this damage.

30. See supra note 5, on the “occurrence” question. There is

no remaining issue on the “pollution exclusion” clause, however,

because the property damage proved in the EPA case occurred

during the first CGL policy does not contain a pollution exclusion

clause.

A56

indemnify NEPACCO for liability arising from the IPC

suit. The complaint in IPC alleges that in 1971 or 1972,

Russell Bliss, pursuant to an agreement with IPC and

NEPACCO, transported dioxin-contaminated waste oil

from the NEPACCO plant in Verona, Missouri, and spread

the contaminated oil on the premises of the Bubbling

Springs Stable in Fenton, Missouri. This would be the

relevant time of the “property damage” “occurrence” for

purposes of cleaning up the Bubbling Springs Stable.

However, the IPC complaint does not seek to recover

costs for cleaning up the Bubbling Springs Ranch, nor

does it seek recovery for the diminution in the value

of resources at or around the Bubbling Springs Ranch

and its watershed. Instead, the state seeks to recover

the costs of cleaning up the Minker/Stout/Romaine Creek

site which was contaminated when twenty loads of con-

taminated fill dirt from the Bubbling Springs Ranch were

deposited there in 1974, after the CGL policies had ex-

pired. Because the damage at the Minker/Stout/Romaine

Creek site first occurred after the last CGL policy’s

effective date, we find that it would be beyond the

reach of the reasoning in Kissel to hold Continental liable

for this damage which began after the policy lapsed.

Accordingly, we affirm the district court’s finding on

the state’s counterclaim that Continental has no duty

to defend or indemnify NEPACCO for potential liability

in the pending IPC suit.

B. Capstick Claims.

The State of Missouri contends that the district court

erred in dismissing, without prejudice, Count II of Con-

tinental’s complaint which seeks a declaration of no duty

to defend or indemnify NEPACCO in the Capstick law-

A57

suit. The Capstick suit differs in several respects from

the EPA and IPC suits. The latter involve governmen-

tal cleanup cost recoveries under CERCLA; the former

involves claims by private individuals for personal and

property damage arising out of improper disposal of

NEPACCO’s hazardous wastes. We agree with the trial

court that resolution of the insurance coverage issues in

Capstick requires additional fact finding and analysis,

see Independent Petrochemical Corp. v. Aetna Cas. and

Sur. Co., Civ. No. 83-3347, (D. D.C., filed Feb. 4, 1986),

which may be pursued most effectively in a different

proceeding. Accordingly, the district court’s decision

granting Continental’s motion to voluntarily dismiss

Count II without prejudice is affirmed.

A58

McMILLIAN, Circuit Judge, concurring in part and dis-

senting in part.

For the reasons discussed below, I would affirm the

order of the district court, although for reasons different

than those set forth in its memorandum order. This ap-

peal presents difficult issues the resolution of which will

have a substantial effect upon liability insurance cases in-

volving hazardous waste disposal.

I agree with much of the analysis set forth in the

majority opinion. Specifically, I agree that Missouri law

applies to these insurance policies. Missouri is the state

that has the most significant relationship with the com-

prehensive general liability (CGL) insurance policies at

issue. Slip op. at 8, note 10. I also agree with the ma-

jority that environmental damage is “damage to prop-

erty” and that the release into the environment of hazard-

ous wastes may cause property damage not only to the

actual owners of land, water and air, but also to the quasi-

sovereign interests of governmental entities. Slip op. at

8-14.

I also agree with the majority, slip op. at 18-25, that

under Missouri law “the issue of liability under a policy

insuring against ‘loss’ or ‘damage’ occurring during the

policy period is determined by the time when the loss or

damage occurs and not by the time of the negligent [or

wrongful] act.” Hawkeye-Security Insurance Co. v. Iowa

National Mutual Insurance Co., 567 S.W.2d 719, 720 (Mo.

Ct. App. 1978), citing Kirchner v. Hartford Accident & In-

demnity Co., 440 S.W.2d 751 (Mo. Ct. App. 1969).

Given the specific facts in the present case, | further

agree that property damage “occurred” in mid-July 1971,

at a time within the policy period of the first CGL policy.

A59

Slip op. at 23. Here, the crucial events—the wrongful act,

the release of hazardous wastes into the environment

(“property damage”) and the “occurrence”—all happened

virtually simultaneously. In some hazardous waste dis-

posal cases, the act of disposal may cause the release of

hazardous wastes into the environment at some point in

the future. For example, the initial disposal may not re-

sult in a release of hazardous wastes within the policy

period but much later after the policy has lapsed. In the

present case, however, the disposal of the hazardous

wastes immediately resulted in their release into the en-

vironment and, because by definition hazardous wastes

are extremely harmful, there was clearly an “occurrence”

of “property damage” within the policy period. Here, the

geological and hydrological characteristics of the site made

it unsuitable for the disposal of hazardous wastes; the

hazardous wastes had been stored in drums that at the

time of disposal were in a deteriorated condition; the

drums were simply buried in an excavated trench: a strong

odor emerged shortly thereafter and persisted for several

months. Thus, the “occurrence” issue is something of a

false issue on these facts.

I do not agree, however, with the majority that

“cleanup costs under CERCLA are compensatory damages

for ‘property damage’ within the meaning of the CGL pol-

icies.” Slip op. at 18 (emphasis added). I would hold

that under these CGL policies the insurer has no obligation

to pay cleanup costs because cleanup costs constitute

equitable monetary relief but not legal damages.

“An insuring obligation is a contract, and coverage

exists only if assumed by the terms of the policy.” Aetna

Casualty & Surety Co. v. Hanna, 224 F.2d 399, 503 (5th

Cir. 1955). Here, under the terms of the CGL policies,

A60

the insurer is required to “pay on behalf of the insured all

sums which the insured shall become legally obligated to

pay as damages because of ... B. property damage to

which this insurance applies caused by an occurrence. . . .”

“The obligation of the insurer to pay is limited to ‘dam-

ages,’ a word which has an accepted technical meaning in

law.” Aetna Casualty & Surety Co. v. Hanna, 224 F.2d at

503. “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.” Maryland Casualty Co. v. Armco,

Inc., 643 F. Supp. 430, 432 (D. Md. 1986), citing Haines

v. St. Paul Fire & Marine Insurance Co., 428 F. Supp. 435,

439-41 (D. Md. 1977), Aetna Casualty & Surety Co. v.

Hanna, 224 F.2d at 503-04, and Desrochers v. New York

Casualty Co., 99 N.H. 129, 106 A.2d 196, 198-99 (1954).

See also Garden Sanctuary, Inc. v. Insurance Co. of North

America, 292 So. 2d 75, 77-78 (Fla. Ct. App. 1974); Ladd

Construction Co. v. Insurance Co. of North America, 73 Il.

App. 3d 43, 391 N.E.2d 568, 570-73 (1979). But see United

States Aviex Co. v. Travelers Insurance Co., 125 Mich.

App. 579, 336 N.W.2d 838, 843 (1983) (rejecting analysis

in Aetna Casualty & Surety Co. v. Hanna as interpreting

“damages” too narrowly).

“Traditionally, courts have found no insurance cover-

age for the costs of complying with an injunction even in

cases where the suits could have been brought for dam-

ages.” Maryland Casualty Co. v. Armco, Inc., 643 F. Supp.

at 434. Here, the federal government in the EPA lawsuit

and the state of Missouri in the ]PC lawsuit seek recovery

of cleanup or response costs pursuant to CERCLA § 107

(a) (4) (A), 42 U.S.C. § 9607(a) (4) (A). These actions are

essentially equitable actions for monetary relief in the

A61

form of restitution or reimbursement of costs. See United

States v. Northeastern Pharmaceutical & Chemical Co., No.

84-1837, slip op. at 44 (8th Cir. Dec. 31, 1986). The federal

and state governments do not seek recovery of “damages

for injury to, destruction of, or loss of natural resources,”

pursuant to CERCLA § 107(a)(4)(C) (emphasis added),

42 U.S.C. § 9607(a)(4)(C) (emphasis added).

In short, I cannot agree that cleanup costs are the

equivalent of “damages,” Maryland Casualty Co. v. Armco,

Inc., 643 F. Supp. at 435. CERCLA defendants are liable

for both cleanup costs under CERCLA § 107(a) (4) (A), 42

U.S.C. § 9607(a) (4) (A), and for damages to natural re-

sources under CERCLA § 107(a) (4)(C), 42 U.S.C. § 9607

(a)(4)(C); in a particular case, the measure of liability

for cleanup costs and for damages to natural resources may

be the same. Slip. op. at 15-20 & note 20, citing Jack L.

Baker Cos. v. Pasley Manufacturing & Distributing Co., 413

S.W.2d 268, 273-74 (Mo. 1967). Merely because “no prac-

tical difference exists between the sums which the insured

|, that is, the CERCLA defendant,} must pay the court

under some equitable remedy as opposed to sums payable

for damages,” Maryland Casualty Co. v. Armco, Inc., 643

F. Supp. at 435 (emphasis added), does not mean that

the sums constitute equivalent obligations to pay on the

part of the insurer.

In United States Avier Ce. v. Travelers Insurance

Co., 336 N.W.2d at 843, the court described as “merely

fortuitous from the standpoint of either plaintiff [insured]

or defendant [insurer] whether the state chooses to pur-

sue an equitable remedy rather than to sue to recover

damages, because “the damage to the natural resources

is simply measured in the cost to restore the [environ-

ment] to its original state.” In my view, that analysis

|

A62

must be limited to the liability of the insured and the

measurement of that liability under environmental laws

like CERCLA. ‘The liability of the insurer is a distinct

issue, and I would argue that, at least with respect to

the liability of the insurer under the CGL policies,

whether the federal and state governments choose to

pursue equitable remedies or to recover damages is not

“merely fortuitous.”

I also agree that the insurer has no duty to defend

the IPC lawsuit because the property damage occurred

in 1974 after the policies lapsed, slip op. at 24-25, and

because, as discussed above, cleanup costs are not “dam-

ages.”

I also agree that the issues in the Capstick lawsuit

require additional factfinding and analysis and are there-

fore unsuitable for summary disposition. Slip op. at 25.

Because the private individuals in Capstick are seeking

damages for personal injury and property damage due

to the improper disposal of hazardous wastes and not

cleanup costs consistent with the national contingency

plan pursuant to CERCLA § 107(a)(4)(B), 42 USC.

§ 9607(a) (4) (B), I would hold the insurer cannot refuse

to defend the Capstick lawsuit for that reason.

Accordingly, I would affirm the order of the district

court.

A true copy.

ATTEST:

CLERK, U.S. COURT OF APPEALS,

EIGHTH CIRCUIT.

A63

(Filed June 25, 1985)

IN THE UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF MISSOURI

SOUTHERN DIVISION

No. 84-5034-CV-S-4

CONTINENTAL INSURANCE COMPANIES,

Plaintiff,

VS.

NORTHEASTERN PHARMACEUTICAL AND CHEM-

ICAL COMPANY, INC., et al.,

Defendants.

ORDER

PROCEDURAL AND FACTUAL BACKGROUND

Continental Insurance Company filed this declaratory

judgment action on February 9, 1984. The declaratory

judgment action sought a declaration of the rights and

liabilities concerning two separate lawsuits concerning

certain hazardous wastes initially produced by the defen-

dant Northeastern Pharmaceutical and Chemical Com-

pany (NEPACCO) at their manufacturing site near

Verona, Missouri. The initial suit, United States ». North-

eastern Pharmaceutical and Chemical Company (NEPAC-

CO), 80-5066-CV-SW-4 (hereinafter referred to as the

EPA suit) was tried before this Court and a memorandum

opinion was issued January 31, 1984, reported at 579 F.

Supp. 823 (W.D. Mo. i984). In that order, the Court

found the defendants jointly and severally liable pursu-

ant to §§ 104, 106(a) and 107(a) of the Comprehensive

Environmental Response, Compensation, and Liability Act

A64

(CERCLA) of 1980, 42 U.S.C. §$ 9604, 9606(a) and 9607

(a) for costs of removal or remedial action incurred in

cleaning up certain disposed of hazardous wastes at the

Denney farm site, near Verona, Missouri, after Decem-

ber 10, 1980, as well as litigation costs, including attor-

ney’s fees, salaries and expenses and future costs of re-

moval or remedial action. The second lawsuit is Capstick

v. Independent Petrochemical Corp., et al, filed March 7,

1983 in the Circuit Court of the City of St. Louis, Mis-

souri, No. 832-00453 (hereinafter referred to as the Cap-

stick suit). The Capstick lawsuit named as defendants

the same defendants in the EPA suit, as well as numerous

individuals and corporations which were alleged to have

transported and spread upon the streets and roads of

Times Beach, Missouri certain hazardous wastes in 1972

or 1973. In addition the Capstick lawsuit includes an

allegation that certain hazardous wastes produced at the

NEPACCO plant, near Verona, Missouri, were sprayed

by certain defendants on the Bubbling Springs Stables

farm in Fenton, Missouri. Allegedly, the contaminated

soil was subsequently taken and spread on adjacent prop-

erty in Imperial, Missouri.

The plaintiffs in the Capstick lawsuit seek: (1) re-

covery for present and future personal injury and prop-

erty damage; (2) payment for clean-up operations; and

(3) punitive damages. No claims pursuant to CERCLA

or § 7003 of the Resource Conservation and Recovery Act

of 1976 (RCRA), 42 U.S.C. § 6973 (1980) were made.

On December 24, 1985, the State of Missouri filed

a motion for leave to intervene. Plaintiffs did not oppose

the motion to intervene but sought to respond to the

State’s allegation. The motion to intervene was granted

on January 25, 1985. The State's interest arises from a

A65

suit filed by the State of Missouri against Independent

Petrochemical (IPC); NEPACCO, Michaels, Lee, Bliss,

Jerry-Russell Bliss, Inc., Syntex Laboratories, Inc., Syntex

Agribusiness, Inc. in the United States District Court for

the Eastern District of Missouri, Eastern Division, No.

83-26.0-C-C (hereinafter referred to as the IPC suit),

filed November 23, 1983, pursuant to § 107(a) of CERCLA,

42 U.S.C. § 9607(a) (1976) and Supp. VI (1981), and

Missouri common law of public nuisance. The action was

filed for the purpose of seeking (1) the reimbursement

to the State of Missouri by the defendants of money ex-

pended by the State and its agencies in protecting mem-

bers of the general public and the environment from

the danger of soil contamination and (2) a declaratory

judgment that defendants are liable for all future costs

of remedial action at the above sites. The IPC and Cap-

stick lawsuits are factually similar.

The State filed an answer to Continental’s declaratory

judgment action on January 25, 1085 and made a coun-

terclaim against Continental for the reimbursement of past

and future clean up costs at the sites noted in the IPC

lawsuit.

On February 11, 1985, a motion was filed by Ray-

mond F. Wehner to intervene. In support of said motion,

the movant notes that numerous lawsuits by Wehner and

approximately 1,000 other individuals are or will be pend-

ing in the United States Court, Eastern District of Missouri

and the Circuit Court for the City of St. Louis, State

of Missouri. The actions are substantially identical in

fact to the EPA, IPC and Capstick lawsuits. In addition,

the actions seek damages for personal injury and prop-

erty damage based upon negligence, strict liability, and

products liability. The movant suggests that there are

a |

A66

common legal and factual issues. Plaintiff filed a re-

sponse and suggestions in opposition to Wehner’s motion

to intervene on March 11, 1985. Essentially, the plaintiff

contends that the movant Wehner lacks standing, his

claims are unrelated to the subject lawsuits, and that

whatever interests the movant Wehner has are already

protected by the State of Missouri. To date, the Court

has not ruled upon the pending motion to intervene by

Wehner.

The plaintiff, Continental Insurance Company, filed

a motion for summary judgment on November 14, 1984.

Intervenor, State of Missouri, filed suggestions in oppo-

sition to plaintiff's motion for summary judgment on

March 11, 1985. Pending a resolution of this motion for

summary judgment, plaintiff filed a motion to dismiss

Count II of its complaint for declaratory judgment with-

out prejudice relative to its obligation to defend and in-

demnify the defendants in the Capstick lawsuit. The

defendant intervenor, State of Missouri, filed suggestions

in opposition to plaintiff's motion to dismiss Count II

without prejudice.

On March 29, 1985, this Court granted a joint motion

by the State of Missouri and the United States to con-

solidate their lawsuits for purposes of discovery since

there were common questions of fact and law pursuant

to Fed.R.Civ.P. 42(a). Numerous discovery motions have

also been filed by the parties. Movant and suggested

intervenor Raymond F. Wehner filed a motion to with-

draw his motion to intervene on June 10, 1985.

For the following reasons, the Court finds that sum-

mary judgment should be granted in favor of Continental

Insurance Companies as to Count I of its declaratory

A67

action, and that summary judgment should be granted

in favor of Continental Insurance Companies as to the

counterclaim pled by the intervenor, State of Missouri.

In addition, the Court finds that plaintiff’s motion to

dismiss Count II of its declaratory judgment action with-

out prejudice should be granted and plaintiff’s motion

to dismiss the defendant-intervenor State of Missouri’s

counterclaim should be denied. Finally, movant-inter-

venor Raymond R. Wehner’s motion to withdraw motion

to intervene should be granted. All other motions will

be denied as moot and the parties are to bear their own

costs.

CONCLUSIONS OF LAW

Granting declaratory relief is within the sound dis-

cretion of the trial court. C. Wright, A. Miller and Kane,

Federal Practice and Procedure, § 2759 (2d Ed. 1983).

The elements and general criteria for declaratory judg-

ment relief are sufficiently set forth by the Eighth Cir-

cuit in Alsager v. District Court of Polk County, Iowa,

Juv. Div., 518 F.2d 1160, 1163-64 (8th Cir. 1975). In

determining whether or not declaratory relief is proper

in a given situation it is appropriate to focus on two

criteria: (1) whether the declaratory judgment will serve

a useful purpose in clarifying and settling important legal

issues between the parties; and (2) whether a declar-

atory judgment will afford relief from uncertainty, in-

security and controversy. Id.; Twin City Federal Sav-

ings and Loan Association v. Gelhar, 525 F.Supp. 802,

804 (D. Minn. 1981), aff'd, 681 F.2d 528 (8th Cir. 1982).

Certainly, for a declaratory judgment to issue there must

be a dispute which does not call “for an advisory opin-

ion upon a hypothetical basis but for an adjudication of

A68

present rights based upon established facts.” Ashcroft

v. Mattis, 431 U.S. 171, 172 (1977).

In contemplating a motion for summary judgment

under Fed.R.Civ.P. 56, this Court is mindful of the strict

standards imposed by the Eighth Circuit Court of Appeals.

McGee v. Hester, 724 F.2d 89, 91 (8th Cir. 1983); Roberts

v. Browing, 610 F.2d 528, 531-32 and 536 (8th Cir. 1979).

The issue sought to be resolved is whether or not

the plaintiff, Continental Insurance Companies, owes the

defendants a duty to defend and a duty to indemnify in

the various actions. The plaintiff issued three Compre-

hensive General Liability (CGL) policies covering the

operations of NEPACCO, and its officers and employees,

including Edwin B. Michaels and John W. Lee. The

three CGL policies were in effect from August 5, 1970

until November 17, 1973. It is undisputed that the plain-

tiff is presently providing the above-mentioned defen-

dants a defense to all the above-named actions with a

reservation of rights. Plaintiff has specifically denied

said obligation to defend or indemnify in the various

actions. The duties to defend and/or indemnify are suf-

ficiently set forth by the Eighth Circuit in Howard v.

Russell Stover Candies, Inc., 649 F.2d 620, 624 (8th Cir.

1981):

Under Missouri law, the duty of a liability insurer

to defend pursuant to its agreement is ordinarily de-

termined by comparing the language of the insurance

contract and the allegations of the petition or com-

plaint in the action brought by the person injured

or damaged against the insured. * * * Courts have

generally placed the burden of uncertainty as to the

policy’s coverage on the insurer. Where the allega-

A69

tions of a plaintiff's complaint * * * state a claim

which is potentially or arguably within the policy’s

coverage, the insurer must accept defense of the

claim. (citation omitted).

* * * *

We note that the duty to defend is not coexistent

with the duty to indemnify. Rather, “the duty of

an insurer to defend its insured is broader than its

duty to pay a judgment rendered against its insured.”

U.S. Fidelity and Guaranty Co. v. Louis A. Roser Co.,

585 F.2d 932, 936 (8th Cir. 1978) (construing a pro-

vision similar to ours which gives U.S.F.&G. the “right

and duty to defend any suit against the insured * * *

even if any of the allegations of the suit are ground-

less, false, or fraudulent... .”

Id. at 624-625. See also, Missouri Terrazzo v. Iowa Nat’l

Mut. Ins., 566 F.Supp. 546, 554 (E.D. Mo. 1983); Ranger

Ins. Co. v. Mercantile Trust Co., 363 F.Supp. 795, 800

(E.D. Mo. 1973); Fidelity and Cas. Co. of New York v.

Wrather, 652 S.W.2d 245, 247 (Mo. App. 1983). In addi-

tion, the insurer may provide a defense with the reser-

vation of rights and does not concede his obligation to

provide such a defense or to indemnify. Hawkeye-Secu-

rity Ins. Co. v. Iowa Nat'l Mut. Ins. Co., 567 S.W.2d 719,

720-21 (Mo. App. 1978).

The parties, as well as this Court, agree that Mis-

souri law applies to the interpretation of the insurance

policies at issue; since, the State of Missouri has the

most significant relation with the negotiation and terms

of the insurance contract. Havenfield Corp. v. H & R

Block, Inc., 509 F.2d 1263 (8th Cir.), cert. denied, 421

U.S. 999 (1975); Ryder Truck Rental v. U.S. Fidelity

ii

A70

and Guaranty Co., 527 F.Supp. 666 (E.D. Mo. 1981);

National Starch and Chemical Corp. v. Newman, 577 S.W.

2d 99 (Mo. App. 1978).

Each of the comprehensive general liability policies

have the following provisions:

The Company [Continental] will pay on behalf of

the insured all sums which the insured shall become

legally obligated to pay as damages because of A.

bodily injury or B. property damage to which this

insurance applies caused by an occurrence, and the

Company shall have the right and duty to defend

any suit against the insured seeking damages on

account of such bodily injury or property damage... .

All three policies contain the following definition of an

occurrence:

‘Occurrence’ means an accident, including continuous

er repeated exposure to conditions, injury or prop-

erty damage neither expected nor intended from the

standpoint of the insured.

All three CGL policies issued to NEPACCO provide:

“This insurance applies only to bodily injury or property

damage which occurs during the policy period... .’ The

applicable insurance policy provisions in the second and

third policies, effective August 5, 1971 through Novem-

ber 17, 1973, contain a pollution and contamination ex-

clusion clause:

It is agreed that the insurance does not apply to

bodily injury or property damage arising out of the

discharge, dispersal, release or escape of smoke,

vapors, soot, fumes, acids, alkalis, toxic chemicals,

liquids or gases, waste materials or other irritants,

A71

contaminants or pollutants into or upon land, the

atmosphere or any watercourse or body of water;

but this exclusion does not apply if such discharge,

dispersal, release or escape is sudden and accidental.

The plaintiff contends that it owes no duty to defend

or indemnify because: (1) the damages which are al-

leged in the underlying lawsuits either were not caused

by an “occurrence” or were excluded from coverage by

the pollution exclusion clause; (2) the damages alleged

in the underlying lawsuits did not occur within any of

the three policy periods, August 5, 1971 through Novem-

ber 17, 1973; (3) the EPA lawsuit is not predicated on

insurable “bodily injury” or “property damage”; and (4)

the punitive damages sought in the Capstick lawsuit are

excluded from coverage.

Initially, the defendants and intervenors contend that

the policy language either clearly provides for such cov-

erage or such policy language is ambiguous and should

be construed in favor of the insured giving rise to a

duty to defend and indemnify on the part of the plain-

tiff, Continental Insurance Companies. As noted in Pearce —

v. General American Life Ins. Co., 637 F.2d 536 (8th Cir.

1980):

As a general rule, plain and unambiguous language

will be given its ordinary meaning and effect; the

need to resort to construction arises only where an

ambiguity exists. [citations omitted]. The language

in the policy is ambiguous where it is reasonably

susceptible of two interpretations. [citations omitted].

Such ambiguities are construed against the insurer,

and in favor of the insured [citation omitted]. But

where a term is defined in the policy, the Court

A72

must look there and nowhere else [citation omit-

ted]. ...

Id. at 539. Such a construction should give a reasonable

meaning to the reasonable expectations and intentions of

the parties in entering such a contract. The Court can-

not create an ambiguity where no such ambiguity exists

merely to enforce a particular construction which it might

feel applicable. State Farm Mut. Auto Ins. Co. v. Uni-

versal Underwriters Ins. Co., 594 S.W.2d 950, 953-54 (Mo.

App. 1980); Reiiance Insurance Co. of Pa. v. Community

Fed. S. & L. Ass’n, 440 S.W.2d 929, 931 (Mo. 1969). The

purpose of an insurance contract is to furnish protection

where reasonably possible. Such a contract should be

construed to provide protection to the insured, if pos-

sible. Bellamy v. Pacific Mut. Life Ins. Co., 651 S.W.2d

490, 496 (Mo. banc 1983). Finally, restrictive exclu-

sionary clauses which would tend io limit or restrict the

insurance coverage provided are to be strictly construed

against the insurer. McMichael v. American Ins. Co., 351

F.2d 665, 669 (8th Cir. 1965); Ranger Ins. Co. v. Mer-

cantile Trust Co., 363 F.2d at 801; McRaven v. F-Stop

Photo Labs. Inc.. 660 S.W.2d 459, 462 (Mo. App. 1983);

Ins. Co. v. West Plains Air, 637 S.W.2d 444, 446 (Mo.

App. 1982).

A. Damages Incurred in the EPA and the

IPC Lawsuits

Pursuant to the insurance contract, the insurer is

liable only for “bodily injury or property damage which

occurs during the policy period.” The Court finds that

the insurance contracts, relative to the time of the occur-

rence, is unambiguous as applied to the instances giving

rise to liability in the EPA and IPC lawsuits. It is set-

A73

tled law in the State of Missouri, that the time of an

“occurrence” within the meaning of an indemnity policy

is the time the loss or damage was sustained and not

the time when the negligence or wrongful act was com-

mitted. Hawkeye-Security Ins. Co. v. Iowa Nat'l Mut.

Ins. Co., 567 S.W.2d at 720; Kirchner v. Hartford Accident

and Indemnity Co., 440 S.W.2d 751, 756 (Mo. App. 1969).

Consequently, this Court must analyze the actual loss

sustained by the parties and determine at what time

such loss was sustained.

As noted above, the defendants were found liable in

the EPA lawsuit pursuant to §§ 104, 106(a) and 107(a),

CERCLA, for removal and remedial costs, litigation costs,

attorney fees, salaries and future expenses of removal and

remedial action after December 10, 1980. This finding was

based upon the premise that no liability was found under

RCRA and that CERCLA did not become effective until

December 11, 1980. United States v. Northeastern Pharm.

& Chemical Co., 579 F.Supp. at 850-852. The alleged

wrongful acts in the EPA lawsuit took place in the early

1970’s.

The IPC lawsuit was filed by the State of Mis-

ouri against Independent Petrochemical Corporation and

others. Among the party defendants in the IPC lawsuit

are NEPACCO, Michaels and Lee, who are also the party

defendants in the EPA lawsuit. The IPC lawsuit seeks

compensation for all costs incurred by the State of Mis-

souri for its efforts in cleaning up an area near Imperial,

Missouri, commonly referred to as the Meeker/Stout/Ro-

maine Creek site and for a declaratory judgment that the

party defendants are liable for all future costs of remedial

action at the site which are incurred by the State and/or

its agencies. The IPC lawsuit alleges that the Meek-

A74

er Stout/Romaine Creek site became contaminated with

dioxin because of various actions and inactions on the part

of NEPACCO, Michaels, Lee, Bliss and the remaining de-

fendants in the IPC lawsuit. A complaint was brought

pursuant to §§ 107(a) of CERCLA, 42 U.S.C. § 9607(a)

(1976 and Supp. VI 1981), and Missouri common law of

public nuisance. All of the alleged wrongful and/or neg-

ligent acts committed in the IPC lawsuit took place from

1970 to 1973. Briefly, the IPC lawsuit alleges that

NEPACCO arranged for the disposal of the dioxin-con-

taminated waste; that Bliss spread the dioxin-contam-

inated waste on the grounds of the Bubbling Springs

Ranch near Imperial, Missouri as a dust suppressant; that

because of the unexplained dilatorious effects of the

spraying on the health of horses and/or other animals,

the owner and/or operator of the Bubbling Springs

Ranch had the soil upon which the contaminated waste

had been sprayed excavated and removed; that the dioxin

contaminated soil was then hauled away and a portion of

it was used as fill material at various locations, including

the Meeker Stout/Romaine Creek site. Reviewing the

IPC complaint, it becomes apparent that the State did not

incur any remedial or removal costs until late 1982. Once

again, as in the EPA lawsuit, a governmental entity is

seeking indemnification for response costs incurred due to

a toxic waste clean up and contamination prevention op-

eration. If the State of Missouri does prevail in the IPC

lawsuit, then according to this Court's prior holding in the

EPA lawsuit, only those costs incurred after December 10,

1980 can be recovered in such an action. It is significant

in both the EPA and IPC lawsuits, that there are not alle-

gations that damages were incurred by the governmental

entities during the time of the policies’ effective dates. In

fact, a very lengthy span of time separates the alleged

A75

wrongful or negligent acts and the loss incurred by the

governmental entities. The governmental entities do not

seek compensation for bodily injury, or property damage.

This case appears analogous to Kirkham and Michaels

Ass’n, Inc. v. Travelers Indemnity Co., 361 F.Supp. 189

(D. S.D. 1973), aff'd, 493 F.2d 475 (8th Cir. 1974). Kirk-

ham involved a contract for insurance concerning a waste

treatment plant. The city took over the project after a

lapse of the insurance policy, although, the negligent acts

would have been committed during the policy period. The

defendant insurer in denying an obligation to defend or in-

demnity argued that since the sewage treatment plant was

not taken over by the city until after the policy coverage

lapsed, the city could not have been damaged until after

that date. The insured in the Kirkham case argued, as do

the insured and the State of Missouri in the IPC and EPA

cases, that the defendants’ actions constituted a continuous

course of negligence or wrongful acts. The district court

rejected this argument relying upon the general rule that

the time of an occurrence within the meaning of an indem-

nity policy is determined by the time the actual damage

occurred and not the time when the wrongful act was com-

mitted. Such would appear to be the case at hand.

Although the complaint suggests that the wrongful and

negligent act did occur during the policy periods, there is

no allegation that the State of Missouri or the United

States incurred any loss or damage during this same policy

period. It was not until the governmental entities incurred

remedial or removal costs that they sustained a loss which

was compensable.

The insurance clauses concerning the time of the

occurrence relative to the EPA and IPC lawsuits do not

appear to be ambiguous.

A76

Accordingly, since there was no damage or loss in-

curred by the governmental entities until after the policy

period effective dates, there was not an occurrence giving

rise to the insurer’s liability for their losses. Conse-

quently, summary judgment should be granted in favor

of Continental Insurance Company as to Count I of its

declaratory judgment action. In addition, summary judg-

ment should be entered in favor of Continental Insurance

Company on the State’s counterclaim relative to the ia-

surer’s duty to defend or indemnify in the IPC lawsuit,

since, it appears on the face of the complaint that the

State did not incur a loss or damage until after the lapse

of the policies’ periods.

B. Capstick Litigation

Resolution of the declaratory action relative to the

Capstick lawsuit is considerably more difficult. In an-

alyzing these issues, the Court has considered the parties’

arguments relative to the application of the pollution

exclusion clause contained in the insurance contracts,

definition of an “occurrence” as an “accident,” the num-

ber of “occurrences” and whether the parties involved

suffered bodily injury or property damage during the

policies’ periods.

The Court finds that it is unable to determine at

this point the applicability of the pollution exclusion

clauses, the definition of an “occurrence” as applied to

the facts of this case, or the number of occurrences in-

volved. Suffice it to say, there are numerous decisions

which have construed the pollution exclusion clause and

reached various differing opinions as to their applicability.

Great Lakes Container v. National Union Fire Ins. Co..

727 F.2d 30 (1st Cir. 1984); American States Ins. Co. v.

AT77

Maryland Casualty Co., 587 F.Supp. 1549 (E.D. Mich.

1984); Waste Management of Carolinas v. Peerless Ins.,

323 S.W.2d 726 (N.C. App. 1984); Jackson Township Mu-

nicipal Utilities Authority v. Hartford Accident and In-

demnity Co., 451 A.2d 999 (N.J. Super. Ct. Law Div.

1982); Niagara County v. Utica Mut. Ins. Co., 439 N.Y.S.2d

538 (N.Y. App. Div. 1981); Allstate Ins. Co. v. Klock Oil

Co., 426 N.Y.S.2d 603 (N.Y. Super. Ct. App. Div. 1980);

Lansco, Inc. v. Department of Environmental Protection,

350 A.2d 520 (N.J. Super. Ct. Ch. Div. 1980).

The most perplexing issue upon which this Court has

determined that a declaratory judgment is improper is

whether the insured has incurred a loss which occurred

during the policy period. The defendants and intervenor

argue that the initial wrongful or negligent acts and a

certain amount of damage did occur within the policies’

periods, August 5, 1970 through November 17, 1973. Al-

legedly, additional damages occurred outside the policies’

periods. On the other hand, the insurer argues that in

this case coverage will only be triggered if the claimed

injury or damage occurred during the policies’ periods.

The insurer argues that the date of damage or injury is

properly measured by determining the date the damage

became manifest or ascertainable. As noted above, the

general rule in Missouri, relative to bodily injury and

property damage, is that the time of loss and not the

time of the wrongful or negligent acts determines the

time in which the occurrence occurred. The defendants

and intervenor argue that this policy clause is vague

and ambiguous as applied to toxic waste litigation and

that liability should attach from the time of the wrongful

or negligent act (disposal) to the time of the discovery

of the ultimate damage.

iia i |

A78

Numerous courts have analyzed these questions and

the situation most analogous to the case at bar are those

cases dealing with asbestos related diseases. The ultimate

question in those cases was when does an injury, sick-

ness or disease cccur as defined by the insurance policies.

The holdings of these courts can be classified in three

categories: (1) the “exposure” theory; (2) the “man-

ifestation” theory; and (3) the “injury in fact” theory.

First, under the exposure theory, exposure to asbestos

resulting in asbestosis was defined as a continuing tort

and all insurance companies which provided coverage

from the time of the injured’s initial exposure to the time

of the manifestation of the disease are jointly and sev-

erally liable to defend and to indemnify the defendant,

if liability is found. Several courts relying on the expo-

sure theory have construed the CGL policy terms to

provide coverage for the progressive and long term ill-

ness of asbestosis. The exposure theory has been adopted

by the Fifth, the Sixth, and the District of Columbia

Circuits. In doing so, the courts have found the term

“bodily injury and occurrence” inherently ambiguous as

applied to progressive diseases such as asbestosis. Those

courts theorize that the exposure theory tends more to

closely approximate the reasonable expectations of the

manufacturer and the insurer at the time the contract

was entered into. See, Ducre v. Executive Officers of

Halter Marine, Inc., 752 F.2d 976 (5th Cir. 1985); Porter

v. American Optical Corp., 641 F.2d 1128 (5th Cir. 1981):

Ins. Co. of North America v. Forty-Eight Insulators, Inc.,

633 F.2d 1212 (6th Cir. 1980); Keene Corp. v. Ins. Co.

of North America, 667 F.2d 1034 (D.C. Cir. 1981); Owens-

Illinois, Inc. v. Aetna Cas. & Sur. Co., 597 F.Supp. 1515

(D. D.C. 1984).

A79

Second, the manifestation theory holds that only those

insurance companies providing coverage at the time the

injuries manifested themselves or become reasonably as-

certainable by medical diagnosis are liable for damages

or bodily injury. These courts have rejected the expo-

sure theory and found that the CGL provisions actually

support a manifestation theory. Eagle-Picher Industries,

Inc. v. Liberty Mut. Ins. Co., 523 F.Supp. 110 (D. Mass.

1981), modified 682 F.2d 12 (1st Cir. 1982), cert. denied,

eal US. ........, 103 S.Ct. 1279 (1983). The manifesta-

tion theory was also followed by the Third Circuit in

Appalachian Ins. Co. v. Liberty Mutual Insurance Com-

pany, 676 F.2d 56 (3rd Cir. 1982) when dealing with

sex discrimination, but the court carefully distinguished

that case from the various asbestosis cases. Id. at p. 62

n.14. See also, U.S. Fidelity and Guaranty Co. v. Amer-

ican Ins. Co., 345 N.E.2d 267 (Ind. App. 1976).

Third, the injury in fact theory rejects both expo-

sure and manifestation theories, instead, holding that the

insured must prove an injury in fact during the policy

period in order for coverage to apply. The most thorough

examination of the various theories is provided by the

district court in American Home Products v. Liberty Mut.

Ins. Co., 565 F.Supp. 1485 (S.D. N.Y. 1983), aff’d as

modified, 748 F.2d 760 (2d Cir. 1984). Although not

determining this issue at this time, this Court does find

itself in agreement with the scholarly and thorough opin-

ion written by District Judge Sofaer in American Home

Products. The appellate court agreed with the injury

in fact theory, but felt that the lower court’s requirement

that the injury in fact be “diagnosable” or “compensable”

during the policy period was unwarranted. In quoting

the district court, the second circuit stated: “[A] real

|

A80

but undiscovered injury, proved in retrospect to have

existed at the relevant time, would establish coverage,

irrespective of the time the injury became [diagnosable].”

748 F.2d at 766, quoting the district court at 565 F.Supp.

at 1497. Although this is an issue of first impression

in the Eighth Circuit, it does appear that the Eighth

Circuit agrees in principle that the terms “bodily injury”

and “property damage” as applied to CGL policies are

inherently ambiguous as applied to progressive diseases.

Such a conclusion was reached in Hon v. Director, Office

of Workers Compensation Programs, 699 F.2d 441 (8th

Cir. 1983). In making such a determination, the Eighth

Circuit noted the split among the various other circuits,

adopting either the exposure or manifestation theories.

Id. at 443. This was particularly important when the

case involved cumulative illnesses such as the black lung

disease considered in Hon.

This Court finds that a declaratory judgment as to

the rights and obligations of the various parties at this

juncture in the Capstick and Wehner litigation is pre-

mature. Initially, the Court notes that those courts which

have considered the various theories, manifestation, ex-

posure, or injury in fact, have at least had substantial

medical evidence as to the progression and nature of the

diseases in question. To date, this Court, nor any other

court to its knowledge, has analyzed the exact nature

and progression of the diseases or illnesses related to

hazardous waste. In addition, the cases at issue involve

both bodily injury and property damage. Given these

uncertainties in factual allegations, it does not appear

that these actions are ripe for a determination as to the

rights and liabilities of the various parties. Suffice it

to say, this Court finds that a more proper determination

A81

of the various issues concerning the insurer’s duty to

defend and to indemnify can be made after more specific

findings of bodily injury and property damage are made.

Certainly, a court could not attempt to resolve those

major issues concerning insurance coverage for victims

of hazardous waste disposal without having determined

the various policy considerations and medical facts of

each individual case.

Finally, the pollution exclusion clause specifically

states that it “does not apply if such discharge, dispersal,

release or escape is sudden and accidental.” Whether the

events giving rise to the Capstick and Wehner lawsuits

amount to a “sudden and accidental” occurrence will in-

evitably depend upon findings of fact after a trial on the

merits. Those courts construing the applicability of the

pollution exclusion clause, supra, have consistently been

called upon to determine whether the pollution incident

amounted to an “accident” as defined in the CGL policies.

Such a determination may involve ascertaining whether

the polluting acts were intended or unintended and

whether the pollution results were intended or unintended,

in that the pollution results were the “natural” and “prob-

able consequences” of the insured’s acts. See also, Amer-

ican Cas. Co. v. Minn. F.B.S. Co., 270 F.2d 686 (8th Cir.

1959); Missouri Terrazzo v. Iowa Nat'l Mut. Ins., 566

F.Supp. 546 (E.D. Mo. 1983); Fidelity & Cas. Co. of New

York v. Wrather, 652 S.W.2d 245 (Mo. App. 1983); Truck

Ins. Exchange v. Pickering, 642 S.W.2d 113 (Mo. App.

1982); Travelers Ins. Co. v. Cole, 631 S.W.2d 661 (Mo. App.

1982); White v. Smith. 440 S.W.2d 497 (Mo. App. 1969);

Evans v. Aetna Cas. & Sur. Co., 435 N.Y.S.2d 933 (N.Y.

Super Ct. 1981); Aetna Cas. & Sur. Co. v. Freyer, 411 N.E.

2d 1157 (Ill. App. 1980); Clark v. London & Lancashire In-

demnity Co. of America, 124 N.W.2d 29 (Wisc. 1963).

| |

A82

Accordingly, it appears that plaintiff’s motion to dis-

miss Count II of its declaratory action without prejudice is

meritorious. In addition, the motion of movant-intervenor

Robert F. Wehner to withdraw his motion to intervene

should be granted.

Since the plaintiff has prevailed in its motion for sum-

mary judgment in Count I of its original declaratory judg-

ment action and on the counterclaim filed by the State of

Missouri, but seeks to dismiss in regard to the Capstick

lawsuit, the Court finds that the various parties should be

liable for their own costs.

Accordingly, for the above reasons, it is hereby

ORDERED that plaintiff's motion for summary judg-

ment is granted as to “ount I of its declaratory judgment

action; and it is further

ORDERED that summary judgment is entered in

favor of the plaintiff Continental Insurance Company and

against the State of Missouri as to the State of Missouri's

counterclaim dated January 25, 1985; and it is further

ORDERED that plaintiff’s motion to dismiss Count II

without prejudice is granted; and it is further

ORDERED that the motion of Robert F. Wehner to

withdraw his motion to intervene is granted; and it is

further

ORDERED that the parties shall be liable for their own

costs; and it is further

ORDERED that all other motions are denied as moot.

/s/ Russell G. Clark

Russell G. Clark, District Judge

United States District Court

Dated: June 25, 1985

A83

(Filed June 26, 1985)

IN THE

UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF MISSOURI

SOUTHERN DIVISION

No. 85-3069-CV-S-4

UNITED STATES OF AMERICA,

Plaintiff,

VS.

CONTINENTAL INSURANCE COMPANY, INC.,

Defendant.

ORDER

Pursuant to the order entered in Case No. 84-5034-CV-

S-4, Continental Insurance Companies v. NEPACCO, et al.,

the defendant-garnishee is entitled to judgment in the

above-captioned case. Therefore, it is hereby

ORDERED that the Clerk is directed to enter judg-

ment in favor of Continental Insurance Company and

against plaintiff United States of America in the above-

captioned case.

/s/ Russell G. Clark

Russell G. Clark, District Judge

United States District Court

Dated: June 26, 1985

A84

(Filed May 4, 1988)

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 85-1940-WM

The Continental Insurance Companies,

Appellee,

vs.

State of Missouri,

Appellant.

Appeal from the United States District Court for the

Western District of Missouri

Appellant’s petition for rehearing en banc has been

considered by the Court and is denied.

Judges Arnold and John R. Gibson did not participate.

Petition for rehearing by the panel is also denied.

May 4, 1988

Order Entered at the Direction of the

Court:

/s/ Robert D. St. Vrain

Clerk, United States Court

of Appeals, Eighth Circuit

A85

(Filed February 19, 1984)

IN THE

UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF MISSOURI

SOUTHWESTERN DIVISION

Case No. 84-5034-CV-SW-O

THE CONTINENTAL INSURANCE COMPANIES,

a New Hampshire Corporation,

Plaintiff,

vs.

NORTHEASTERN PHARMACEUTICAL AND

CHEMICAL COMPANY, INC., a

Delaware Corporation,

[SERVE:

Northeastern Pharmaceutical and Chemical Com-

pany, Inc.,

c/o Missouri Secretary of State,

Attn.: Pat Taggart,

P. O. Box 778,

Jefferson City, Missouri;

Milton Turkel, as Statutory Trustee for North-

eastern Pharmaceutical and Chemical Company,

Inc.,

218 Bedford Street,

Stamford, Connecticut 06901;

Edwin B. Michaels, as Statutory Trustee for

Northeastern Pharmaceutical and Chemical

Company, Inc.,

9 Gregory Court,

East Norwalk, Connecticut 06855; and

A86

John W. Lee, as Statutory Trustee for North-

eastern Pharmaceutical and Chemical Company,

Inc.,

55 Glen Avenue,

Norwalk, Connecticut 06850 |

and

MILTON TURKEL, 218 Bedford Street,

Stamford, Connecticut,

[PERSONALLY SERVE:

Milton Turkel,

218 Bedford Street,

Norwalk, Connecticut 06850 |

and

EDWIN B. MICHAELS, 9 Gregory Court, East

Norwalk, Connecticut 06855,

[PERSONALLY SERVE:

Edwin B. Michaels,

9 Gregory Court,

East Norwalk, Connecticut 06855 |

and

JOHN W. LEE, 55 Glen Avenue, Norwalk,

Connecticut 06850,

[PERSONALLY SERVE:

John W. Lee,

55 Glen Avenue,

Norwalk, Connecticut 06850 ]

Defendants. ‘

COMPLAINT FOR DECLARATORY JUDGMENT

COMES NOW plaintiff, and for its Complaint for

Declaratory Judgment, states and alleges as follows:

A87

ALLEGATIONS PERTAINING TO ALL COUNTS

The Parties

1. Plaintiff, The Continental Insurance Companies

(hereinafter “Continental”), is, and at all times herein-

after mentioned was, a corporation organized and existing

under the laws of the State of New Hampshire, with its

principal place of business in the State of New York, and

was and is licensed to engage in the insurance business in

the State of Missouri.

2. Defendant Northeastern Pharmaceutical and Chem-

ical Company, Inc. (hereinafter “NEPACCO”), is, and at

all times hereinafter mentioned was, a corporation duly

organized and existing under the laws of the State of

Delaware, and, on information and belief, was authorized

to do business in the State of Missouri from March 18,

1970 to January 1, 1973.

3. NEPACCO’s authority to transact business in the

state of Missouri was revoked on or about January 1,

1973. As a result, pursuant to § 351.630 RSMo (1978),

the Secretary of State of the State of Missouri is autho-

rized as the agent and representative of NEPACCO to

accept service of process on behalf of NEPACCO in this

action.

4. Pursuant to § 351.525 RSMo (1978), the officers

and directors in office when NEPACCO’s authority to

do business in Missouri lapsed are now the trustees of

NEPACCO and may be sued.

5. Defendants Milton Turkel, Edwin B. Michaels and

John W. Lee were directors ,and officers of NEPACCO

when the corporation’s authority to transact business was

revoked. Thus, pursuant to § 351.525 RSMo (1978), the

A88

above named defendants are the statutory trustees of

NEPACCO. As a result, defendants Turkel, Michaels

and Lee, as statutory trustees for NEPACCO, are also

authorized as agents and representatives to accept service

of process on behalf of NEPACCO in this action.

6. Defendant Milton Turkel (hereinafter “Turkel’’)

is a citizen of the state of Connecticut and may be served

at 218 Bedford Street, Stamford, Connecticut. Turkel

has, as is more fully set forth herein, transacted business

and/or entered into a contract within the state of Mis-

souri and is, therefore, subject to the personal jurisdic-

tion of this court and to service of process pursuant to

the provisions of § 506.600 RSMo (1978) and Rule 54.06,

Mo. R. Civ. P.

7. Defendant Edwin B. Michaels (hereinafter

“Michaels”) is a citizen of the State of Connecticut and

may be served at 9 Gregory Court, East Norwalk, Con-

necticut. Michaels has, as is more fully set forth herein,

transacted business and/or entered into a contract within

the state of Missouri and is, therefore, subject to the

personal jurisdiction of this Court and to service of pro-

cess pursuant to the provisions of § 506.600 RSMo (1978)

and Rule 54.06, Mo. R. Civ. P.

8. Defendant John W. Lee (hereinafter “Lee’”) is

a citizen of the State of Connecticut and may be served

at 55 Glen Avenue, Norwalk, Connecticut. Lee has. as

is more fully set forth herein, transacted business and /or

entered into a contract within the state of Missouri and

is, therefore, subject to the personal jurisdiction of this

Court and to service of process pursuant to the provi-

sions of § 506.600 RSMo (1978) and Rule 54.06, Mo. R.

Civ. P.

A89g

Jurisdiction and Venue

9. This Court has jurisdiction over this matter pur-

suant to 28 U.S.C. § 1332. The maiter in controversy

exceeds, exclusive of interest and costs, the sum of $10,000

and there is complete diversity of citizenship between

plaintiff and defendants.

10. Venue lies in this Court pursuant to 28 U.S.C

§ 1391(a) which provides that an action founded on

diversity of citizenship may be brought in the judicial

district where all plaintiffs or defendants reside, or in

which the claim arose. As is more fully set forth below,

this action arose within the Western District of Missouri.

Divisional venue lies in the Southern Division of the

Western District of Missouri by virtue of the fact that

United States of America v. Northeastern Pharmaceutical

& Chemical Co., Inc., Edwin B. Michaels, John W. Tee,

Ronald Mills, and Syntex Agribusiness (one of the under-

lying lawsuits, see paragraph 28 infra) is presently pend-

ing in the Southern Division of the Western District of

Missouri. Therefore, defendants are subject to the juris-

diction and venue of this Court.

The Insurance Policies

11. On or before August 5, 1970, Continental ex-

ecuted and delivered its Combined Casualty Insurance

Policy No. L 1669307, in the usual form, to NEPACCO.

The policy period was from August 5, 1970 to August 5,

1971. The policy provided Comprehensive General Lia-

bility Insurance and Comprehensive Automobile Liability

Insurance. Pursuant to the policy, the insured premises

was the NEPACCO manufacturing plant located in Verona,

Missouri which is within the Western District of the State

A90

of Missouri. Under the Comprehensive General Liability

insurance portion of the policy, NEPACCO and any exec-

utive officer or stockholder of the corporation, while acting

within the scope of his duties, as such, were insured up

to the following policy limits:

(a) For liability resulting from “bodily injury;”

a maximum of $1,000,000 for each “occurrence” and

$1,000,000 for each person; and

(b) For liability resulting from “property dam-

age;” a maximum of $100,000 for each occurrence

with an aggregate limit of $100,000.

12. On or before August 5, 1971, Continental ex-

ecuted and delivered its Combined Casualty Insurance

Policy No. L 6334064, in usual form, to NEPACCO. The

policy period was from August 5, 1971 to August 5, 1972.

The policy provided Comprehensive General Liability In-

surance and Comprehensive Automobile Liability Insur-

ance. Pursuant to the policy, the insured premises was

the NEPACCO manufacturing plant located in Verona,

Missouri which is within the Western District of the State

of Missouri. Under the Comprehensive General Liability

portion of the policy, NEPACCO and any executive offi-

cer, director or stockholder of the corporation, while

acting within the scope of his duties as such, were insured

up to the following policy limits:

(a) For liability resulting from “bodily injury;”

a maximum of $1,000,000 for each occurrence and

$1,000,000 for each person; and

(b) For liability resulting from “property dam-

age; a maximum of $100,000 for each occurrence with

an aggregate limit of $100,000.

A91

13. On or before August 5, 1972, Continental executed

and delivered its Combined Casualty Insurance Policy No.

L 4454706, in the usual form, to NEPACCO. The policy

period was from August 5, 1972, to August 5, 1973.

NEPACCO cancelled the policy effective Nove

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