Justices Will Rule on Who Must Foot the Bill for Toxic Cleanups

Entering a far-reaching, high-stakes environmental dispute, the state Supreme Court agreed Thursday to decide whether the costs of government-mandated toxic cleanups must be paid by polluters or by their insurers.

The justices, in a brief order, said they will review one of at least 17 cases that are pending in the California courts raising an issue that has resulted in sharply conflicting rulings by state appellate panels.

The disputes have emerged in cases where government authorities have ordered remedial steps to clean up toxic waste sites under the federal “superfund” law. A final ruling on who must pay--the polluter or the insurer--could involve billions of dollars, attorneys say.

Last August, the state high court let stand a decision by the Court of Appeal in San Francisco upholding contentions by Aerojet-General Corp. that the cost of environmental cleanups was included in the “damages” covered by comprehensive general liability policies held by companies throughout the state.

But in September, another Court of Appeal panel in San Jose reached a contrary result in a separate case, holding that the policy provision would not allow FMC Corp. to pass on the cost of a toxic cleanup to its insurer.

The panel in that decision said that language of the policy clearly limited the insurer’s liability to damages for injury to property--and would not cover the cost of cleaning up pollution.

The appeal court brushed aside FMC’s claims that some polluters would be unwilling or unable to pay the bills for cleanups and that their insurers must be held liable if cleanup efforts were to be successful. There was “no factual support” for such contentions, the panel said, but even if there were, the law clearly bars liability from being imposed on insurers in such situations.

Both sides in the dispute urged the state Supreme Court to review the ruling, pointing to the host of pending cases that would be beset with confusion until the issue is resolved once and for all.

Attorneys for Hartford Accident & Indemnity Co., one of the insurers in the dispute, noted in legal papers filed with the high court that “several billion dollars” is at stake in pending cases.

The polluters, Hartford said, are seeking to avoid responsibility for the costs at issue by asking the courts to “create retroactive coverage neither contemplated nor paid for” under the policies.

Lawyers for FMC Corp. asked the justices to follow the lead of the appeal court ruling in the Aerojet case and hold insurers liable for cleanup costs.

FMC, like other policyholders, had a “reasonable expectation” that the costs of government-ordered cleanups would be covered under the policies, the corporation’s attorneys said.