Attorneys

• Richard A. Ejzak
• Andrew M. Roman

Related Practices

• Environmental Law

Many businesses today face environmental liabilities stemming from past operations or waste handling practices.  Those who purchased standard Comprehensive General Liability (CGL) insurance coverage during the years 1970 to 1985 should be aware of a recent landmark decision by the Pennsylvania Supreme Court - Sunbeam Corp. v. Liberty Mutual Ins. Co., a case in which Cohen & Grigsby attorneys represented the appellant, Sunbeam.

Most CGL policies from that timeframe cover liabilities stemming from pollution if it was “sudden and accidental.”  In the past, Pennsylvania courts have said that to qualify as “sudden and accidental,” the pollution event must occur abruptly and last only a short time, and insurers have relied on these cases when presented with claims.  This has meant that many pollution claims have been denied based on the simple fact that they occurred over time or, as the insurers would prefer to say, involved “gradual” pollution.  As a practical matter, this has excluded from coverage many classic pollution problems -- regardless of what the insured knew or did not know at the time -- such as leaking underground storage tanks, wastewater storage impoundments, or leachate from landfills.  

The Pennsylvania Supreme Court’s decision in Sunbeam, however, changes that.  In a ruling handed down on October 19, 2001, the Court recognized that there could be coverage under these standard CGL insurance policies for gradual as well as abrupt pollution or contamination that was not expected or intended by the insured.  “We believe appellants have properly pleaded that the comprehensive general liability policies at issue do indeed provide coverage for both gradual and abrupt pollution or contamination so long as it was unexpected and unintended,” the Supreme Court wrote in its decision.  

The A.M. Best Company, in a BestWire story, reported that the ruling “could have a substantial impact on all commercial environmental coverages since 1970,” and The Legal Intelligencer has called the decision a “huge blow to the insurance industry.”  Aside from its precedential effects in Pennsylvania, Business Insurance has reported that the ruling “could have significant ramifications outside of Pennsylvania.”  

The impact of the ruling is all the more significant because most of these CGL policies continue today to cover liabilities arising out of harm that took place during the time they were in effect, regardless of when the claim was made, and many environmental liabilities can be traced to activities before 1986.  

The Court’s ruling means that CGL insurers can no longer routinely deny claims for environmental coverage that are governed by Pennsylvania law on the grounds that the pollution happened gradually or over time.  The decision also calls into question all past claim denials that were issued on that basis.  Any businesses with environmental liabilities -- even past claims -- will want to revisit the question of whether they are covered by their CGL insurance policies.

Cohen & Grigsby attorneys Andrew M. Roman, Richard A. Ejzak, and Mark A. Grace represented Sunbeam in this suit.  For more information on the Sunbeam decision or insurance coverage for environmental liabilities, please contact any one of them or your Cohen & Grigsby attorney.