Environmental Toxic Torts Blog : Colorado Property Damage, Class Action & Fracking Lawyer & Attorney : Davis Graham & Stubbs Law Firm

In a February 2008 post, we summarized the holding in Mountain States Mutual Casualty Co. v. Kirkpatrick, No. 06-cv-00221-WDM-OES. (See Commercial Waste is a Pollutant, Feb. 19, 2008). Essentially, the Hog’s Breath Saloon & Restaurant dumped used cooking oil and other nontoxic waste into the sewer, clogging it. City workers clearing the clog succumbed to hydrogen sulfide gas trapped behind the clog and were severely injured. They sued the restaurant owner, Kirkpatrick, ultimately obtaining a $3.9 million judgment. 

Kirkpatrick’s insurer, Mountain States Mutual, brought a declaratory judgment action against Kirkpatrick in Colorado federal court. The federal court held that the oil and waste were “pollutants” as defined by the policy and therefore there was no coverage.

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As is probably no surprise to lawyers and real estate professionals, a Pennsylvania appeals court held that title insurance does not protect a buyer from claims arising from the physical condition of the property such as later discovered environmental problems like asbestos, lead paint or abandoned septic tanks.  In Rood v. Commonwealth Land Title Ins. Co., 936 A.2d 488 (Pa. Super. 2007), a landowner made a claim against his title insurance company thirty five years after the policy had been issued, claiming that an abandoned septic tank discovered in his yard was a “defect” under the policy. Mr. Rood asserted that the presence of the tank made his title unmarketable because he would have to disclose the presence of the tank if he tried to sell his home under Pennsylvania’s Real Estate Sellers Disclosure Law and such a disclosure might cause a reduction in the price he was able to obtain. The trial court entered summary judgment in favor of the title company. 

The appellate court affirmed because title insurance insures only marketability of title. It cautioned title insurance policyholders not to confuse economic lack of marketability based on physical conditions possibly affecting property use with title marketability that relates solely to “defects affecting legally recognized rights and incidents of ownership.” 936 A.2d at 494.

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In Friedland v. TIC - The Industrial Co., et al., Case No. 1:04-cv-01263-REB-KLM, slip opinion issued on January 18, 2008, the United States District Court for the District of Colorado joins two other federal district courts in refusing to allow a CERCLA potentially responsible party to collect response costs from other potentially responsible parties when those costs were paid by an environmental or other insurance policy. The other two courts are: the United States District Court for the District of Kansas (Raytheon Aircraft Co. v. United States, 2007 WL 4300221 at *4 (Dec. 8, 2007) ) and the United States District Court for the Eastern District of Texas (Vine Street, LLC v. Keeling ex. rel. Estate of Keeling, 460 F. Supp.2d 728, 765 (2006)).

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In Goodstein v. Continental Casualty Co., No. 05-35805, (9^th Cir. December 3, 2007), a property owner sought reimbursement under his Comprehensive General Liability policy for a discount he provided to purchasers of two contaminated Washington properties. The purchasers did not commit to clean up the properties on their own, but they did agree to be responsible for any cleanup that might be required in the future by government agencies or potential purchasers. Under Washington state law, if Mr. Goodstein had actually cleaned up the properties, his CGL policy would have covered the costs of those cleanups. However, the insurers rejected Mr. Goodstein’s assertion that the price discounts were the functional equivalent of cleanup costs and should be reimbursed under the CGL policy. Mr. Goodstein sued, asserting claims for breach of defense and indemnity duties under the policy. The trial court granted the insurers summary judgment on Mr. Goodstein’s claims. 

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