The Fallacy of Personal Injury Liability Insurance Coverage for Environmental Claims
By William J. Bowman and Patrick F. Hofer
INTRODUCTION
In recent years, many companies have faced an avalanche of environmental, asbestos and pollution claims brought by government agencies or private parties to recover cleanup costs, natural resource damages and other costs of environmental remediation. These companies in turn have sought to require their liability insurers to pay the enormous defense and indemnity costs incurred in connection with these claims. Accordingly, courts and attorneys have closely scrutinized the insuring provisions of these liability policies.
In the search for ever greater coverage, policyholders subject to these pollution and asbestos claims have recently argued that personal injury liability insurance covers the alleged damage to property involved in these claims. This extravagant interpretation is based on the claim that one of the particular offenses covered by personal injury liability insurance—wrongful entry or eviction or other invasion of the right of private occupancy—is essentially equivalent to the torts of trespass and nuisance. Policyholders are frequently charged with trespass and nuisance in claims resulting from their pollution. They turn to their insurers and argue that those claims are covered by personal injury liability insurance for wrongful entry or eviction.
Equating wrongful entry or eviction and related torts with trespass or nuisance is a serious fallacy for a number of reasons. Wrongful entry or eviction is a narrow cause of action in tort for violation of the personal right not to be forcefully or wrongfully evicted from the possession or occupancy of real property. With roots in the oldest of common law actions, it is enforced in most American jurisdictions today, limited primarily to the landlord-tenant context. Trespass and nuisance, by contrast, are broad causes of action in tort for interference with property rights. Like wrongful entry or eviction, trespass and nuisance are rooted in history and recognized in contemporary jurisdictions. To equate wrongful entry or eviction with trespass and nuisance erodes distinctions made by the common law for centuries. Consequently, the courts should reject attempts by policyholders to secure insurance coverage under the personal injury endorsement for environmental claims for wrongful entry or eviction.
The question of the proper interpretation of personal injury insurance is of enormous practical significance. Insureds have effectively sought to double, triple or even more greatly multiply the aggregate limits of their available policies to cover extensive liability for the environmental claims. In turn, the massive costs of these claims—neither anticipated nor assessed by insurance underwriters at the time policies were written—threaten the financial well-being of insurers. Over the last ten years, a number of property and casualty insurers have become insolvent, and others now face severe financial burdens, largely due to the unprecedented costs of environmental claims. The unwarranted double-dipping that would result from application of personal injury insurance to environmental claims, in addition to that of the general liability insurance already available, undoubtedly would serve only to accelerate the financial crippling of the insurance industry.
Many of the courts construing personal injury insurance have demonstrated a remarkably poor understanding of the common law torts it covers. The purpose of this Article is to trace the common law roots of the torts covered by personal injury insurance, to show that wrongful entry torts are fundamentally distinct from trespass and nuisance, and otherwise to demonstrate that personal injury insurance provides no coverage for environmental claims. First, parts II.A and II.B of the Article will summarize what personal injury insurance is and how it is distinguished from the more commonly encountered “comprehensive general liability” (CGL) insurance. Second, in part II.C., the Article will lay out the argument made by policyholders that this narrowly defined insurance has, according to their reasoning, an enormous breadth that includes environmental pollution claims for trespass and nuisance. Third, part III will pinpoint the fallacy of the policyholders' argument by demonstrating how the personal injury tort of “wrongful entry or eviction” is completely distinct from the torts of trespass and nuisance. Finally, in part IV, the Article will analyze insurance cases taking up the policyholders' argument and will show that those cases that remain faithful to the distinctions made by our law between these two sets of torts have rejected the policyholders' position.
In recent years, many companies have faced an avalanche of environmental, asbestos and pollution claims brought by government agencies or private parties to recover cleanup costs, natural resource damages and other costs of environmental remediation. These companies in turn have sought to require their liability insurers to pay the enormous defense and indemnity costs incurred in connection with these claims. Accordingly, courts and attorneys have closely scrutinized the insuring provisions of these liability policies.
In the search for ever greater coverage, policyholders subject to these pollution and asbestos claims have recently argued that personal injury liability insurance covers the alleged damage to property involved in these claims. This extravagant interpretation is based on the claim that one of the particular offenses covered by personal injury liability insurance—wrongful entry or eviction or other invasion of the right of private occupancy—is essentially equivalent to the torts of trespass and nuisance. Policyholders are frequently charged with trespass and nuisance in claims resulting from their pollution. They turn to their insurers and argue that those claims are covered by personal injury liability insurance for wrongful entry or eviction.
Equating wrongful entry or eviction and related torts with trespass or nuisance is a serious fallacy for a number of reasons. Wrongful entry or eviction is a narrow cause of action in tort for violation of the personal right not to be forcefully or wrongfully evicted from the possession or occupancy of real property. With roots in the oldest of common law actions, it is enforced in most American jurisdictions today, limited primarily to the landlord-tenant context. Trespass and nuisance, by contrast, are broad causes of action in tort for interference with property rights. Like wrongful entry or eviction, trespass and nuisance are rooted in history and recognized in contemporary jurisdictions. To equate wrongful entry or eviction with trespass and nuisance erodes distinctions made by the common law for centuries. Consequently, the courts should reject attempts by policyholders to secure insurance coverage under the personal injury endorsement for environmental claims for wrongful entry or eviction.
The question of the proper interpretation of personal injury insurance is of enormous practical significance. Insureds have effectively sought to double, triple or even more greatly multiply the aggregate limits of their available policies to cover extensive liability for the environmental claims. In turn, the massive costs of these claims—neither anticipated nor assessed by insurance underwriters at the time policies were written—threaten the financial well-being of insurers. Over the last ten years, a number of property and casualty insurers have become insolvent, and others now face severe financial burdens, largely due to the unprecedented costs of environmental claims. The unwarranted double-dipping that would result from application of personal injury insurance to environmental claims, in addition to that of the general liability insurance already available, undoubtedly would serve only to accelerate the financial crippling of the insurance industry.
Many of the courts construing personal injury insurance have demonstrated a remarkably poor understanding of the common law torts it covers. The purpose of this Article is to trace the common law roots of the torts covered by personal injury insurance, to show that wrongful entry torts are fundamentally distinct from trespass and nuisance, and otherwise to demonstrate that personal injury insurance provides no coverage for environmental claims. First, parts II.A and II.B of the Article will summarize what personal injury insurance is and how it is distinguished from the more commonly encountered “comprehensive general liability” (CGL) insurance. Second, in part II.C., the Article will lay out the argument made by policyholders that this narrowly defined insurance has, according to their reasoning, an enormous breadth that includes environmental pollution claims for trespass and nuisance. Third, part III will pinpoint the fallacy of the policyholders' argument by demonstrating how the personal injury tort of “wrongful entry or eviction” is completely distinct from the torts of trespass and nuisance. Finally, in part IV, the Article will analyze insurance cases taking up the policyholders' argument and will show that those cases that remain faithful to the distinctions made by our law between these two sets of torts have rejected the policyholders' position.
