Insurer Liable for Chemical Maker Claims, Justices Rule : Environment: Admiral Insurance must cover Montrose Chemical, even though the damage became apparent before the policy went into effect.

In a case that may have broad implications for the insurance industry, the state Supreme Court ruled Monday that an insurance company is responsible for covering claims against Montrose Chemical Corp. of California, even though the environmental damages in question first occurred before the policy went into effect.

The court upheld a 1992 decision of the state Court of Appeals in Los Angeles, which had rejected a lower court’s summary judgment absolving Admiral Insurance Co. of Cherry Hill, N.J., from covering claims against Montrose in connection with the dumping of toxic waste at the Stringfellow Acid Pits in Riverside County.

Admiral had argued it was not required to pay claims because the dumping of DDT pesticide had occurred before the company became Montrose’s insurance carrier, and that Montrose had failed to disclose its potential liability.

But the Supreme Court reasoned that since the damages were “continuous or progressively deteriorating” through several policy periods, claims could be made against all insurance policies in effect. Admiral was one of seven companies to insure Montrose.

“Policyholders are the big winners today, receiving the benefits of what they paid for,” said David Mulliken, Montrose’s lawyer. “This is an extraordinarily important acknowledgment by the California Supreme Court that, after collecting premiums year after year with lavish promises of comprehensive liability coverage, a carrier cannot back out of its contractual obligations.”

Peter Abrahams, the attorney representing Admiral, said he expects the case to go back to the trial court, where the issue of Montrose’s alleged failure to disclose the damage claims will probably be contested.

“How it will ultimately be resolved remains to be seen,” Abrahams said.

The ruling offered welcome relief for Montrose, the Trumbull, Conn.-based chemical giant that is battling the Environmental Protection Agency and other plaintiffs in litigation over the dumping of DDT, which it manufactured in California and Nevada until environmental regulations banned production.

The company is accused of dumping millions of pounds of DDT in the ocean off the Palos Verdes Peninsula, waste from its defunct plant in Torrance.

Federal agencies are attempting to collect hundreds of millions of dollars from Montrose and other defendants in civil litigation.

In March, a federal judge threw out the case against Montrose, arguing that the government’s lawsuit was filed too late. Federal agencies are appealing that decision, according to John Lyons, assistant regional counsel for the EPA.

Lyons said Monday’s ruling by the state Supreme Court would have no effect on pending federal litigation against Montrose.