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Abstract

In Patrons Oxford Mutual Insurance Co. v. Marios, the Supreme Judicial Court of Maine, sitting as the Law Court, joined the current debate in the state and federal judiciaries as to whether comprehensive general liability (CGL) insurance policies obligate the insurer to indemnify the insured for cleanup costs incurred pursuant to governmentally mandated cleanup of hazardous substances. In that decision, the court held that cleanup costs incurred pursuant to court order authorized by the Maine Underground Oil Storage Facilities and Ground Water Protection Act are not covered by such policies. The explicit basis of the court's decision was that the average Maine insured understands that state-mandated cleanup of hazardous spills is a form of equitable relief for which CGL policies provide no coverage. The decision leaves many Maine businesses and individuals uninsured against the risk of liability for cleanup costs, with a resulting negative effect on the manner and speed in which hazardous spills are cleaned up. The Patrons Oxford decision is therefore at odds with a law intended to ensure prompt cleanup of hazardous spills. While this coverage question is supercharged by the growing awareness and concern over environmental policy, the policy debates are ancillary to the question at hand. As the Law Court correctly noted, resolution of this question reduces to a contractual equation and the calculus is quite simple: the court need only apply governing state contract law to the insurance policy at issue. Nevertheless, this Comment will take up the contract issue in its broader national context for two reasons: first, Maine's prevailing principles of insurance contract interpretation are substantially similar to those of every state that has considered this coverage question; second, the language of the special multi-peril liability policy issued to the insureds in the Patrons Oxford case is substantially similar to the language found in standardized, industry-wide CGL policies. Generally, whether cleanup costs are covered by CGL policies is determined by the reasonable expectations of the average layperson unschooled in the law or the insurance field. Therefore, each court must ultimately decide whether the average layperson would understand that the term “damages,” as found in the scope and exclusions clauses of the CGL policies, refers to “legal” as opposed to “equitable” relief. In part, the debate is inspired by the fact that the term “damages” is not defined in these insurance policies. It is important to understand from the outset that the courts denying indemnification for cleanup costs do so on the basis that the legal, technical meaning of the term “damages” excludes equitable relief. The courts that provide indemnification do so on the basis that, notwithstanding the legal definition of “damages,” the average layperson reasonably expects coverage for cleanup costs. This Comment will discuss the distinction between legal and equitable relief only to the extent that a full discussion of the coverage question demands consideration of that distinction. The coverage question as a whole is quite complex, inasmuch as the CGL policies are rife with exclusions, and the relevant environmental statutes are multifaceted. For the purposes of this Comment, it will be assumed that (1) property damage has occurred, (2) the insured is a responsible party, (3) the insured may be compelled to clean up the discharge, and (4) the only issue for determination is whether or not the insured is covered against cleanup costs.

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