California Supreme Court Issues Sweeping Pro-Policyholder Decision on Environmental Liability Coverage Issues

This post was written by David Weiss and Megan Demeter.

On March 9, 2009, the California Supreme Court issued its decision in State of California v. Allstate Insurance Co., Case No. S149988. In this unanimous decision, the court resolved several issues in favor of the policyholder regarding the application of pollution exclusion provisions in the State's comprehensive general liability insurance policies. The case arises out of the State of California's liability for environmental contamination at the "Stringfellow Acid Pits," a state designed and operated waste-disposal facility in Riverside County, California.

First, the Court addressed the relevant "discharge" for determining whether the "sudden and accidental" exception to the pollution exclusion applied and, therefore, reinstated coverage that otherwise would have been excluded. The contamination at issue was caused by the escape into the environment of pollutants placed into containment ponds on the site. The court affirmed the Court of Appeal's decision that the relevant discharge for purposes of determining whether the discharge was "sudden and accidental" is the release of waste from the containment ponds, rather than the initial disposal of waste into the ponds, as the insurers argued.

Continue Reading...