Last week, the U.S. Supreme Court heard oral argument in an appeal by Chubb Custom Insurance Co. to a Ninth Circuit ruling that the insurance carrier could not seek recovery from otherwise responsible parties under CERCLA of the $2.4 million it paid to clean up a polluted site in California owned by its policyholder, Taube-Koret Campus for Jewish Life. In a divided 2-1 decision, the Ninth Circuit held in March that Section 107 of CERCLA does not permit a subrogated cost recovery action, and that insurers like Chubb must instead pursue their claims under the statute's more restrictive Section 112, which requires that policyholders first make a claim against the other responsible parties.
The suit stems from Chubb's efforts to recover money it paid to Taube-Koret, a retirement home situated on polluted land previously owned by Sun Microsystems, Inc., Ford Aerospace & Communications Corp. and others. Taube-Koret was held strictly liable for the cleanup under CERCLA and ordered to pay for the cleanup. The Ninth Circuit held that CERCLA Section 107 did not clearly support the insurer's asserted right to subrogated cost recovery, and that the language of the statute itself indicates clear Congressional intent against such claims. The Ninth Circuit also held that Section 112 of CERCLA does authorize a subrogation action, but only where the claimant has demanded compensation from the Superfund or from a liable party, which Chubb's insured never did.
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