Client Alert

California Supreme Court Ruling Impacts Organizations Subject to Environmental Cleanup Orders

March 01, 2001

Grace Carter and Eve Coddon

In a ruling that impacts organizations subject to environmental cleanup orders – and that could lead to increased litigation over environmental cleanup costs – the California Supreme Court ruled in early February that insurers who issued standard comprehensive general liability policies are not required to pay for expenses incurred by their insureds pursuant to administrative cleanup orders. In Certain Underwriters at Lloyd's London v. Superior Court (Powerine), the Court held that a CGL insurer's duty to indemnify does not extend to expenses required by an administrative agency pursuant to an environmental cleanup statute. The Court therefore found that an insurer is only obligated to pay for cleanup costs if the costs result from a lawsuit.

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