The Commonwealth Court recently held that certain comprehensive general liability (CGL) “occurrence” insurance policies issued before the institution of a blanket pollution exclusion cover latent environmental contamination that occurred during the policy period, even when such contamination does not manifest until after the policy period expires. This holding identified latent environmental contamination as falling within an exception to the longstanding rule that CGL occurrence insurance policies are triggered by the first manifestation of injury, as in Pennsylvania Manufacturers' Association Insurance v. Johnson Matthey, No. 330 (Pa. Commw. Ct. April 21).

Determining when an “occurrence” under a CGL policy is triggered by environmental contamination can have important practical implications. Insurers take the position that the “first manifestation rule” applies. The first manifestation rule limits the occurrence to one trigger—the time the contamination first manifested. Insureds take the position that the “multiple trigger exception” applies, covering latent contamination over a broader period of time and giving insureds access to multiple policies for a single event. The difference in when a policy is triggered can be significant for how insureds conduct themselves and for how other PRPs (including for example, insureds' contribution defendants) conduct themselves.

In Johnson Matthey, the Commonwealth Court ruled on this issue in favor of insureds by holding latent environmental contamination may give rise to multiple triggers to a pre-pollution exclusion CGL policy. Defendant Johnson Matthey Inc. (JMI) is the owner of the Bishop Tube Site, which was allegedly contaminated by trichloroethylene (TCE) used in the manufacture and process of alloy tubes and equipment. In 2010, the Pennsylvania Department of Environmental Protection (DEP) named JMI as a defendant in an underlying suit seeking cost recovery under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) and its state counterpart, the Pennsylvania Hazardous Sites Cleanup Act, for costs incurred in remediation required as a result of disposal of hazardous substances, including TCE, into the environment. Pennsylvania Manufacturers' Association Insurance Company (the insurer), agreed to defend JMI in the underlying action, but reserved rights to establish a defense to its duty to defend or indemnify as set forth in the relevant insurance policies. After approximately five years of defense, the insurer sued JMI and sought a declaratory judgment that the Insurer had no duty to defend or to indemnify JMI for recovery of costs sought by the DEP because the contamination was not detected during the policy period.