## Facts

- NEPACCO manufactured hexachlorophene in Verona, Missouri (circa 1970–1972), generating hazardous waste that included dioxin.
- NEPACCO arranged for disposal of approximately eighty-five 55-gallon drums of hazardous waste by burying them at the Denney farm near Verona (July 1971).
- The buried wastes leaked, contaminating the Denney farm site.
- The United States (through EPA) pursued CERCLA-based response and cleanup costs against NEPACCO and others; Missouri asserted interests related to the environmental harm and remediation.
- Continental issued standard-form comprehensive general liability (CGL) policies to NEPACCO, promising to pay sums the insured became legally obligated to pay “as damages” because of property damage.
- Continental filed a federal declaratory judgment action seeking a determination that its policies did not cover CERCLA-related cleanup and response costs for the Denney farm site.

## Issues

1. Whether government-sought CERCLA cleanup and response costs constitute “damages” within CGL language covering sums the insured is legally obligated to pay “as damages” because of property damage.
2. Whether, under Missouri law, “damages” is ambiguous in this context and must be construed to include governmental response and remediation costs.

## Decision

- The en banc Eighth Circuit affirmed summary judgment for Continental.
- The court held that, under Missouri law as predicted by the federal court, “damages” in the CGL policies did not include CERCLA cleanup and response costs.
- Because the government’s remediation claims were characterized as equitable or restitutionary relief rather than legal damages, Continental had no duty to indemnify NEPACCO (or Missouri) for those costs.

## Legal Principles

- In liability policies covering sums the insured must pay “as damages,” “damages” ordinarily means substitutionary monetary compensation awarded in a traditional action at law for injury or loss.
- Government-mandated environmental cleanup and response costs under CERCLA are treated as equitable, restitutionary, or compliance-based relief, not “damages,” even when the remedy requires payment of money.
- Missouri insurance-contract interpretation considers the meaning a lay purchaser would understand, but ambiguity is required before construing policy language against the insurer; the term “damages” was not ambiguous here.
- Courts will not expand standard pre-CERCLA CGL language to cover regulatory remediation obligations absent policy wording that clearly reaches such liabilities.

## Conclusion

The en banc Eighth Circuit held that standard Missouri-law CGL coverage for sums owed “as damages” because of property damage does not extend to governmental CERCLA response and cleanup costs, leaving the insurer without an indemnity obligation for the Denney farm remediation claims.


Continental Ins. Cos. v. Ne. Pharm. & Chem. Co., 842 F.2d 977 (8th Cir. 1988) (en banc)