{"id":35690,"date":"2016-03-31T19:29:34","date_gmt":"2016-04-01T00:29:34","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/recovery-of-natural-resource-damages-under-comprehensive-general.html"},"modified":"2018-03-14T22:02:54","modified_gmt":"2018-03-15T03:02:54","slug":"recovery-of-natural-resource-damages-under-comprehensive-general","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/law-library\/recovery-of-natural-resource-damages-under-comprehensive-general.html","title":{"rendered":"Recovery of Natural Resource Damages Under Comprehensive General Liability Policies"},"content":{"rendered":"
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It is apparent to even a casual observer of trends and developments in environmental law that Federal and State authorities have expressed renewed interest on Natural Resource Damage<\/a> ("NRD") claims. As discussed in this article, there is a fundamental distinction between liability related to damages for the cleanup of environmental sites and liability for damage to natural resources. Indeed, environmental statutes, as well as the common law, draw a distinction between a company’s liability for environmental cleanup response costs (e.g.,<\/i> the cost of investigation and remediation of site conditions), and liability for natural resource damages. Insureds, therefore, may have substantial, viable claims for insurance recoveries where such NRD claims are not specifically released or barred by prior coverage settlement agreements, or otherwise adjudicated and extinguished.<\/p>\n

The Federal Natural Resource Damage Liability Scheme<\/b><\/p>\n

Under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. \u00a7 9601, et seq.<\/a> ("CERCLA"), and comparable federal and state laws, various governmental authorities are designated as trustees for natural resources and are authorized to sue allegedly responsible parties to collect damages for injury to such resources arising from the release of hazardous substances. Primarily, two environmental statutes provide the principal sources of federal authority over natural resource damages: CERCLA, 42 U.S.C. \u00a7\u00a7 9607<\/a>-9675, and the Oil Pollution Act<\/a> (OPA), 33 U.S.C. \u00a7\u00a7 2701-2761. See 33 U.S.C. \u00a7 1321<\/a> of the Clean Water Act. Although other federal statutes also address natural resource damages, CERCLA and the OPA are the most generally applicable and most frequently employed statutory authorities. In addition to these federal natural resource damages schemes, many states have enacted laws authorizing the recovery of natural resource damages from "responsible parties." See, e.g., the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 g.a<\/a>.<\/p>\n

CERCLA and the OPA both establish liability for damages on account of injury to, destruction of, or loss of natural resources. In addition to establishing liability of certain parties (generally referred to as "responsible parties") for "costs of removal or remedial action," 42 U.S.C. \u00a7 9607(a)(4)(A), CERCLA provides, in pertinent part, that such parties shall also be liable for "damages for injury to, destruction of, and loss of natural resources." Liability for such natural resource damages is to the United States Government, to any State, for natural resources belonging to, managed by, controlled by, or appertaining to such State, and to any Indian tribe, for pertinent resources belonging to or held in trust for the benefit of such tribe. The President is authorized to designate federal governmental entities to act as trustees for natural resources, which trustees have explicit authority to assess and recover damages for injury to, destruction of or loss of use of natural resources. State governments are similarly authorized to designate State public authorities to act as trustees for natural resources within such State.<\/p>\n

Pursuant to CERCLA, the term "natural resources" means: land, fish, wildlife biota, air, water, ground water, [and] drinking water supplies. <\/a>[42 U.S.C. \u00a7 9601(16).]<\/p>\n

The term also includes "other such resources" belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States, any State or local government or Indian tribe (among others). Courts have held that resources under private ownership are "otherwise controlled by" the United States when such resources are subject to a substantial degree of governmental regulation. <\/a>[See Ohio v. United States Department of the Interior<\/a><\/i> ("Ohio"), 880 F.2d 432, 461 (D.C. Cir. 1989).]<\/p>\n

CERCLA imposes liability for natural resources damages upon the same parties that are subject to liability for response costs. Such "responsible parties" are the current owners and operators of a facility, owners and operators of a facility at the time hazardous substances were disposed of, persons arranging for disposal (or transport for disposal) of hazardous substances at a facility, and transporters of hazardous substances to a treatment or disposal facility. The statute defines "damages" in somewhat circular fashion to mean "damages for injury or loss of natural resources as set forth in section 9607(a)…."<\/p>\n

The OPA creates liability for discharges of oil into navigable waters or adjoining shorelines or the exclusive economic zone of deep ocean waters. Parties liable under the OPA include the owners, operators or charterers of transport vessels, the owners or operators of onshore facilities, or pipelines, and the lessees of offshore facilities or deepwater ports. Public vessels and permitted discharges are excluded from OPA liability. The OPA contains a definition of "natural resources" that is substantially similar to the CERCLA definition.<\/p>\n

Both CERCLA and the OPA establish a strict and joint and several liability scheme for acts that result in damage to natural resources. <\/a>[See United States v. Monsanto Co.,<\/a><\/i> 858 F.2d 160, 171 (4th Cir. 1988), cert. denied, 490 U.S. 1106 (1989) (Upholding strict and joint and several liability under CERCLA).] CERCLA provides for few defenses to liability (e.g., Act of God), which defenses are of limited practical application. However, natural resource damages may only be recovered by the designated trustees, which include the United States Government, States, Indian tribes, and foreign governments for natural resources under their respective control.<\/p>\n

For purposes of assessing liability and damages, an injury means an observable adverse change in a natural resource that is either directly or indirectly the result of a discharge. A change "in the chemical or physical quality or the viability of a natural resource" qualifies as an adverse change under CERCLA. The OPA regulations include impairment of natural resource services as a component of injury. <\/a>[15 C.F.R. \u00a7 990.30<\/a>]<\/p>\n

Under CERCLA, in order for a trustee to recover natural resource damages, there must be an established causal link between the actions of a responsible party and the injury to the natural resources. In order to recover response costs, it is only necessary for a plaintiff to establish that a defendant is a responsible party, (i.e<\/i>., owner, operator, etc.). However, a trustee must make a showing of causation, as defined under CERCLA regulations, in order to prevail on a claim seeking natural resource damages.<\/a> [43 C.F.R. \u00a7 11.62<\/a>]<\/p>\n

The amount of damages that may be recovered on account of injury to natural resources is based upon the cost of "restoration" or "replacement" of damaged resources or "acquisition of the equivalent" of such resources. The terms "restoration" and "replacement" refer to actions taken with respect to the same resources that have been damaged. The phrase "acquisition of the equivalent" natural resources refers to actions taken to obtain the equivalent of the services to humans or to the environment provided by the damaged resources.<\/a> [43 C.F.R. \u00a7\u00a7 11.14(ii)<\/a>]<\/p>\n

CERCLA provides that the measure of natural resource damages shall not be limited by the amount required to restore, replace, or acquire the equivalent of, such natural resources. Thus, the trustee may also recover the value of the lost use of the damaged natural resources pending restoration or recovery to a "baseline" condition; i.e., the condition of the resource absent exposure to the hazardous substance.<\/a> [43 C.F.R. \u00a7 11.14(e).] As the States enter the arena of assessing alleged damages to their own natural resource it is nearly certain that they will attempt to follow their own statutory and regulatory schemes and employ distinct economic models for quantifying damages.<\/p>\n

Basic Common Policy Terms<\/b><\/p>\n

Courts across the United States have routinely determined that CERCLA-imposed remediation costs are "damages," as such term is used in common CGL policies. As discussed below, the reasoning of these courts makes it abundantly clear that natural resource damages are also covered "damages." Indeed, in many of the cases addressing whether CERCLA-imposed cleanup costs are "damages" within the meaning of such policies, the insurers argued that, because CERCLA expressly distinguishes between response costs and natural resource damages, response costs should not be considered "damages" for purposes of insurance coverage. In so contending, the insurers have impliedly accepted the proposition that natural resource damages are covered under CGL policies. Moreover, even those few courts that have held that response costs are not recoverable "damages" under CGL policies have recognized that coverage is afforded under such policies for natural resource damages.<\/p>\n

The Insuring Agreements of Pre-1986 CGL policies often provide in one similar form or another as follows:<\/p>\n