Digging for Insurance Coverage for Pre-1986 Environmental Contamination

Environmental cleanup liability can be costly, and in many cases, it stems from contamination that occurred decades ago, often before the current property owner ever acquired the site. Current and former owners of contaminated properties can face liability in both civil litigation and federal and state enforcement proceedings. 

This article focuses on a frequently overlooked strategy for managing that liability: locating and pursuing coverage under pre-1986 insurance policies. Working closely with an experienced California environmental compliance lawyer is critical, as legal counsel can help locate and review insurance coverage.

As with many types of disputes, insurance coverage often plays a critical role in environmental liability matters. For example, if a property owner is held liable for cleanup under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the availability of insurance coverage may significantly impact their options. While modern commercial general liability (CGL) policies exclude pollution coverage, older policies, especially those issued before 1986, may still provide a valuable source of financial protection.

1986: The Year of the Pollution Exclusion in CGL Insurance Policies

The 1980s were an important decade for environmental regulation and environmental liability in the United States. Congress passed CERCLA in 1980, prompting a wave of new rules and regulations promulgated by EPA aimed at addressing hazardous waste and contaminated sites.

It also led to changes in the insurance industry.

In 1986, Insurance Services Office, Inc. (ISO)—the entity responsible for developing the form language contained in CGL policies (among others) in the United States—revised its form CGL language to include what is now known as the “absolute pollution exclusion.” While it is subject to certain exceptions, the absolute pollution exclusion largely protects insurers against having to pay for their insureds’ pollution-related liabilities.

But the absolute pollution exclusion does not impact insurers’ obligations under policies that were already in place when the exclusion became the standard in 1986.

This is important because many pollution-related liabilities that existed prior to 1986 still exist today, including those involving historic waste disposal and soil contamination. If a pre-1986 owner of a contaminated property had an occurrence-based insurance policy that covered pollution-related liability (as was generally the case), then the current owner may be able to file a pollution claim if it is now facing liability as a potentially responsible party (PRP) under CERCLA.

Today’s PRPs and Pre-1986 Pollution Liability Insurance Claims

Under CERCLA, all PRPs can be held jointly and severally liable for the costs of cleaning up contaminated properties. Broadly speaking, PRPs can include current and former owners of the property, among other entities. A PRP’s liability under CERCLA can be substantial, and EPA devotes considerable resources to identifying PRPs and holding them accountable. As EPA explains:

“Effective PRP searches are fundamental to the Agency’s ‘enforcement first’ strategy of maximizing PRP involvement in conducting cleanup response activities. When PRPs are identified and notified early in the Superfund cleanup process, there is a greater likelihood that they will decide to negotiate a settlement agreement with the Agency on the appropriate action to address contamination at the site. . . .”

While there are various defenses available to a PRP under CERCLA–such as those available to bona fide prospective purchasers (BFPPs) and innocent landowners who have conducted “all appropriate inquiries”–not all PRPs qualify for these protections. Those without a viable defense may face substantial cleanup costs through CERCLA’s joint and several liability scheme. In particular, the current owner of contaminated property is strictly liable, regardless of the owner’s lack of contribution of contaminants to the property. If the property became contaminated before the PRP took ownership, the PRP may be able to seek contribution from a prior owner for the costs of the cleanup. However, if the contamination occurred decades ago, the relevant prior owner may no longer exist or may be a defunct entity with no remaining assets to fund the cleanup.

In that case, the prior owner’s insurance company may still exist—and may still be liable under a pre-1986 occurrence policy, if one can be located.

For this reason, current owners facing strict liability for cleanup costs under CERCLA should identify and pursue historical insurance coverage to help offset cleanup costs. In many cases, decades-old insurance policies remain valid, and identifying a former owner’s insurance company may be key to securing contributions. While insurers may dispute coverage under long-dormant policies, resolving these disputes is often far more cost-effective than bearing the full burden of remediating contamination that has existed since the mid-1980s or earlier.

Responding to Contamination-Related Enforcement

With all of this in mind, what can (and should) companies do to mitigate their liability exposure when responding to contamination-related enforcement actions in 2025 (and beyond)?

In this scenario, a key first step is to assess all of the potential strategies that are available. For example, a current property owner may challenge its identification as a PRP through various defenses under CERCLA. It may also seek contribution from other PRPs, including former owners and operators at the property. In addition, the owner may seek coverage from insurance companies based on historical pre-1986 policies.  Another option is to ask EPA or the state to add other PRPs to the enforcement action, which can help motivate those PRPs to pursue insurance coverage, given CERCLA’s joint and several liability framework.

Schedule a Call with a California Environmental Compliance Lawyer at Bick Law LLP

If you would like more information about the strategies that current property owners can use to avoid (or mitigate) cleanup liability under CERCLA, we invite you to get in touch. To schedule a call with a California environmental compliance lawyer at Bick Law LLP, give us a call at 949-432-3500 today.