Environmental Claims Arose from Prior Orders and Deemed Not First Made During Relevant Policy Period

A federal district court in Washington has held that an insurer had no duty to defend four environmental claims brought against an insured by state and federal agencies because the claims at issue were either first made prior to the policy period or fell within the scope of an exclusion barring coverage for claims related to certain of the insured’s preexisting obligations. The Jorgensen Forge Corp. v. Illinois Union Ins. Co., 2016 WL 409822 (W.D. Wash. Feb. 3, 2016).

The insured, a metal forging and manufacturing company, notified its insurer of several environmental claims asserted by state and federal agencies. The insurer denied coverage on the grounds that the claims were not first made during the policy period and that several of the claims were barred by an exclusion for claims related to the insured’s preexisting obligations under two previous orders issued by state and federal agencies. The insured later brought a coverage action against its insurer.

After resolving a number of discovery disputes, the court ultimately held that the insurer did not have a duty to defend any of the four environmental claims at issue. The court ruled that coverage for two of the claims was barred by the policy’s prior claim exclusion because the claims arose from the insured’s preexisting obligations under the relevant orders. In so doing, the court rejected the insured’s argument that the earlier order did not require remedial action, noting that the operative exclusion applied to all remediation costs “arising from” the investigation underlying the prior order, not only to those costs incurred during that investigation. The court also ruled that the other two claims at issue concerned legal rights asserted prior to the policy period and therefore did not constitute claims “first made” within the policy period. On those grounds, the court held that there was no coverage under the policy for any of the four claims.