Like a comet which drags a long trail in its wake, large CERCLA cases in federal court often are accompanied by related insurance coverage cases in state court. That is true with the Lower Fox River Superfund Site in Wisconsin. While a firestorm of litigation has raged for many years in federal court relating to the billion dollar liability for PCB contamination in the Lower Fox River, the key PRP in that litigation – NCR — has sought in Wisconsin state court to establish that it can pass some or all of that liability on to its insurers.
In NCR Corporation v. Transport Insurance Company, the Wisconsin Court of Appeals recently clarified the elements necessary to establish an occurrence under a pre-pollution exclusion liability policy. The policy at issue contained the standard “occurrence” provision requiring property damage that is “neither expected nor intended from the standpoint of the insured.” The Court rejected the insurer’s argument that the existence of an occurrence turned on what a reasonable insured should have known at the time the policy incepted. Instead, the Court ruled that the applicable test for determining an occurrence was what the specific policyholder actually intended or expected at the time of its act that caused the contamination.
Under that subjective test, the Court found there were disputed issues of fact as to what NCR expected or intended from its use of PCBs after 1966 when the first study was released (in Sweeden) indicating the potential environmental harm resulting from disposal of PCBs. According to the Court, a policyholder prior to 1966 would have had no basis for knowing about the potential environmental harm from PCBs. From 1966 until 1978 when PCB use was generally banned, the existence of an occurrence hinges on how familiar a given policyholder was with the emerging evidence of the harmfulness of PCBs.