CERCLA’s Act of War Defense — Potential Collateral Damage

For the first time in CERCLA’s history, a court has concluded that a Superfund claim was barred by the “act of war” defense.  In that case, In Re September 11 Litigation, the judge ruled that a property owner a block from Ground Zero could not recover the costs of cleaning up dust on his building from the collapse of the World Trade Center towers because the dust resulted from an act of war.   The judge had originally dismissed the case on statute of limitations grounds and the absence of a “release” within the meaning of CERCLA, but the Second Circuit remanded the matter for a determination whether the act of war defense would apply (why the Second Circuit focused on the act of war defense rather than the “third party” defense in Section 107(b)(3) is unclear).

To get to his conclusion that the terrible events of 9-11 were an act of war, the judge had to work hard to get around the significant body of cases holding that acts of terrorism are not acts of war and the long-standing requirement that acts of war are limited to the acts of uniformed military personnel.  In the end, one can question whether the contortions in legal reasoning by the judge were appropriate or even fair.  The end result is that a party which incurred significant costs in cleaning up contamination on its building has no claims against third parties and may not even have a viable insurance claim under its own policies since most insurance policies exclude coverage for acts of war.    Apparently, recognizing this possibility, the judge tries to limit the scope of his decision noting it should be understood as very narrow and not precedential in other areas, like insurance.  Nonetheless, it seems likely that a court deciding an insurance coverage issue involving a 9-11 loss would be hard pressed to circumvent the holding in the CERCLA case that the collapse of the World Trade towers was an act of war.  In trying to recharacterize a basic damages claim into a CERCLA cost-recovery claim, the owner of the building a block from Ground Zero may have done more harm than good.  Whatever the effect of the decision in  In Re September 11 Litigation with respect to insurance claims for 9-11 losses, that decision may not be of much consequence for post 9-11 insurance claims given that Congress enacted the Terrorism Risk Insurance Act in 2002.


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