Using umbrella general liability insurance policies to avoid getting soaked by nonexistent “suit” and “damages” exclusions

Abstract

Primary comprehensive general liability (CGL) insurance companies typically argue that their broad promise to defend any suit does not encompass their policyholders’ costs in defending state and federal proceedings brought to compel environmental cleanup. Similarly, CGL insurance companies typically argue that their broad promise to indemnify all sums their policyholders become legally obligated to pay as damages excludes costs to implement environmental remediation under compulsion of government authority and, in fact, is limited to costs imposed by a money judgment in a court of law. Such cramped readings of suit and damages conflict not only with the intent of the drafters of the CGL insurance policy, but with the nature and purpose of liability insurance policies generally—to protect policyholders from liabilities to third parties, including the government. Nonetheless, insurance companies are sometimes successful in dodging their obligations through pinched constructions of suit and damages often before courts sympathetic to the insurance industry's puling that it is being bled white by environmental claims. As shown in this article, resort to such constricted construction in a misguided effort to protect the insurance industry is pointless: Even if primary CGL insurance companies are successful in avoiding responsibility for defense and indemnity costs under the putative suit or damages exclusions, such costs are fully recoverable under the incredibly broad promises in typical umbrella and excess general liability (GL) insurance policies.