Businesses and property owners can often have their own insurance companies pay for the costs to investigate and clean up environmental contamination on their own property under old liability insurance policies, such as commercial general liability (or CGL) policies. Many older policies either do not have pollution exclusions or have pollution exclusions that courts have decided are unenforceable because they are too broad and ambiguous. It often comes down to how your state law treats a particular policy’s pollution exclusion. For instance, since 1996, Indiana courts have consistently held that pollution exclusions in various insurance policies are ambiguous and, therefore, do not exclude coverage for claims related to past environmental contamination.
While there are many nuances to pursuing insurance companies to pay for environmental claims, once an insurance company has agreed or been ordered to defend a claim, you and your lawyer may want to monitor how the insurance company allocates funds spent for the environmental consultant’s work to investigate and respond to the contamination. You’ll want to do this because many, but not all, insurance policies have two buckets for coverage: a bucket for “costs of defense” and another bucket for “indemnification” costs. An insurer’s duty to defend its insured is broader than the duty to indemnify. Often, insurance policies do not set an upper limit on costs of defense, whereas indemnification costs are limited to the “policy limits”. Because the costs of defending a claim can often far exceed the amount of a settlement or judgment, the insurer’s duty to defend the insured is one of the most significant rights the insured has under a CGL policy.
To read more about this, please read Bill Wagner's recent blog post on Commonground.