Harford County v. Harford Mut. Ins. Co.

• Decision Date: 01 September 1991
• Docket Number: No. 83,83
• Citation: 327 Md. 418,610 A.2d 286
• Parties: HARFORD COUNTY, Maryland v. HARFORD MUTUAL INSURANCE COMPANY et al. ,
• Court: Maryland Court of Appeals

Page 418

327 Md. 418

610 A.2d 286

HARFORD COUNTY, Maryland v. HARFORD MUTUAL INSURANCE COMPANY et al.

No. 83, Sept. Term, 1991.

Court of Appeals of Maryland.

Aug. 19, 1992.

Joseph D. Tydings (Jerold Oshinsky, Catherine J. Serafin, Anderson, Kill, Olick & Oshinsky, Washington, D.C., Emory Plitt, Jr., County Atty., Jefferson L. Blomquist, Asst. County Atty., Bel Air, on brief), for petitioner.

Charles Taylor, Gordon, Feinblatt, Rothman, Hoffberger, & Hollander, Baltimore, Jordan S. Stanzler, Anderson, Kill, Olick & Oshinsky, P.C., New York City, amicus curiae for Bausch & Lomb Inc.

Wilbur D. Preston, Jr. (William F. Ryan, Jr., Albert J. Mezzanote, Jr., Denise Y. Hansberry, Whiteford, Taylor & Preston, Baltimore, John R. Spielberger, Bel Air, on brief), Roger E. Warin (Stephen A. Fennell, Robert R. Lawrence, Steptoe & Johnson, Washington, D.C., on brief), Dennis M. Flannery, Lynn Bregman, John J. Kim, Wilmer, Cutler & Pickering, Washington, D.C., on brief), for respondents.

Alan N. Gamse, David A. Carter, Christopher J. O'Donnell, Semmes, Bowen & Semmes, Baltimore, amicus curiae for Maryland Ass'n of Mut. Ins. Companies.

Timothy C. Russell, Michelle S. Katz, Sonnenschein, Nath & Rosenthal, Washington, D.C., amicus curiae for U.S. Fidelity and Guar. Co. and Maryland Cas. Co.

M. King Hill, III, Venable, Baetjer & Howard, Towson, John B. Wyss, Michael R. Cannon, Joseph L. Ruby, Wiley, Rein & Fielding, Washington, D.C., amicus curiae for Utica Mut. Ins. Co. Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW, KARWACKI and ROBERT M. BELL, JJ.

MURPHY, Chief Judge.

We granted certiorari to address a single question presented by the petitioner, Harford County, Maryland: Whether, in the context of alleged environmental property damage, standard form comprehensive general liability insurance policies are "triggered for the policy periods when the damages take place, as opposed to the policy period when the damages are first discovered or 'manifested.' "

I.

At various times between 1954 and 1982, Harford County operated five sanitary landfills, namely, Tollgate, Scarboro, Mullins, Bush Valley, and Abingdon. During part of this period, the County carried standard form comprehensive general liability (CGL) insurance with: (1) The Insurance Company of North America (INA) from 1958 to 1964; (2) Harford Mutual Insurance Company (Harford Mutual) from 1965 to 1980; and (3) The Home Insurance Company (Home) from 1980 to 1982. These policies covered, inter alia, the County's liability for property damage arising from the operation of one or more of these landfills for specified periods of time; each policy contained standard form language setting forth the insurer's contractual obligations to the County.

The INA policies provided that the insurer would pay on behalf of the insured, subject to other coverage terms not here pertinent,

"all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident."

These policies applied "only to accidents which occurred during the policy period."

As to Harford Mutual, its last four policies (from 1968 to 1980) provided that the insurer, subject to other policy terms not now in issue, would pay on behalf of the insured

"all sums which the insured shall become legally obligated to pay as damages because of ... property damage to which this insurance applies, caused by an occurrence." ¹

As to two of Harford Mutual's policies (between 1968 and 1974), "occurrence" is defined as

"an accident, including injurious exposure to conditions, which results, during the endorsement period in ... property damage neither expected nor intended from the standpoint of the insured."

As to Harford Mutual's policies between 1974 and 1980, "occurrence" is defined as

"an accident, including continuous or repeated exposure to conditions, which results in ... property damage neither expected nor intended from the standpoint of the insured."

The definition of "occurrence" in the 1974 to 1980 policies did not contain the phrase "which results during the endorsement period"; however, the definition of "property damage" in the policies clearly indicates that this condition upon coverage is applicable. In this regard, "property damage" is defined in these policies as

"(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period."

The Home policy, subject to other terms in the policy, covered all sums that the insured becomes "legally obligated" to pay because of "property damage" caused by an "occurrence." The words "property damage" and "occurrence" are defined in terms identical to those used in the 1974 to 1980 Harford Mutual policies.

II.

After the last of these policies had expired in 1982, Harford County discovered that pollutants from one or more of its landfills had seeped into and contaminated the underlying groundwater. It did not, however, notify any of the insurance companies until August 8, 1990; on that day, it sued each insurer in the Circuit Court for Harford County, seeking a declaratory judgment that the County was entitled to coverage under each policy for property damage claims arising out of the operation of the landfills.

The County averred in its complaint that in 1984 it undertook a preliminary environmental assessment of the Tollgate landfill, after which it approved a plan to install monitoring wells and analyze groundwater samples at this site. The complaint further averred that the County then prepared a remedial investigation plan which it submitted in 1986 to the Maryland Department of Health and Mental Hygiene; and that in 1988, in the course of designing a "cap" for the Tollgate facility, it "discovered off-site migration of certain gases posing a potential health hazard." It was also alleged that the area around the Tollgate facility was being developed as a residential area; that in 1990 a developer who owned a subdivision adjacent to Tollgate threatened to sue the County for damages "because of migration of contaminants from the landfill site onto the subdivision"; that purchasers of townhouses within adjacent subdivisions also were considering filing suit against the County; that in 1990 the County employed an environmental consultant to assess alternatives for the protection of the adjacent subdivisions; that the State of Maryland was "considering seeking a consent order against the County regarding alleged off-site migration of contaminants at this site"; and that the County has avoided judicial action by agreeing to clean up off-site contamination and, to this end, developed "a remedial action program to prevent any alleged off-site property damage." The complaint further alleged that a gas extraction and a water treatment system had been designed for Tollgate "to begin remediation of the alleged off-site contamination," at an expenditure in excess of $1,500,000, with the ultimate cost of remediation being estimated at $2,000,000.

As to the Scarboro landfill, the complaint averred that in 1982 the County installed monitoring wells at this site and that thereafter the State tested the quality of the water taken from the monitoring wells; that in 1984 the County decided to close this site and did so by 1987 when it capped the landfill "by placing a geosynthetic membrane liner over the top, grading the sides, and providing for storm water sediment erosion control." The complaint specified that in 1986 the Maryland Department of the Environment notified the County that contaminants had been detected at the monitoring wells around the Scarboro site; and that the State advised the County of complaints which it had received "of possible off-site groundwater contamination" allegedly emanating from this site. It was further stated in the complaint that in 1986 the State advised the County that leachate from the Scarboro landfill may have caused off-site contamination of the drinking water supply of a nearby resident; that the resident sued the County for damages but that the suit was settled when the County purchased the property; that in 1987 other suits were filed against the County by neighboring residents, some of which alleged that the landfill was being operated as a hazardous waste disposal facility in violation of both state and federal law; that another suit against the County also alleged violations of state and federal law and claimed damages for nuisance, negligence, trespass, strict liability, and fraudulent concealment; that these cases were either dismissed or were settled by the County; and that in 1989 the Scarboro site was placed on a federal list of landfills being evaluated for clean up and other remedial purposes. It was additionally averred that the County entered into negotiations with the Maryland Department of the Environment and that, in an effort to avoid placement of the site on the federal list of facilities mandated for "clean-up," it agreed to undertake a remedial program, the cost of which already exceeded $500,000 for litigation expenses, consulting fees, and settlement costs; and that the ultimate plan for hydrogeologic investigation and remediation of off-site contamination may exceed $750,000.

As to Bush Valley, the complaint alleged that the Federal Environmental Protection Agency, beginning in 1985, investigated this site for inclusion on its list of landfills targeted for remediation activities; and that the County had been directed to perform and finance such an investigation and feasibility study. The County stated in its complaint that it would undertake these measures for which it estimated costs to it between $1,500,000 and...