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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

INDUSTRIAL ENTERPRISES, INC. Plaintiff v. PENN AMERICA INSURANCE COMPANY Defendant

* * * * * * * * * * * Civil Action No. RDB-07-2239

MEMORANDUM OPINION Plaintiff Industrial Enterprises, Inc. filed this action against Defendant Penn America Insurance Company in order to recover defense costs under a comprehensive general liability policy. Specifically, Industrial Enterprises seeks reimbursement for past insurance defense costs, as well as future defense costs, related to its opposition of efforts by the United States Environmental Protection Agency ("EPA") to include property owned by Industrial Enterprises as a National Priority List ("NPL") or "Superfund" site under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9601, et seq. Pending before this Court is Plaintiff's Motion for Partial Summary Judgment (Paper No. 23), which relates only to Defendant's duty to defend and does not address the cost of that defense. This Court held a hearing on August 14, 2008 pursuant to Local Rule 105.6 (D. Md. 2008). For the reasons set forth below, Plaintiff's Motion for Partial Summary Judgment (Paper No. 23) is GRANTED.

BACKGROUND In Policy No. SMP12848, Penn America insured Industrial Enterprises from January 10, 1984 to January 10, 1985 for first party property coverage (Section I) and third-party liability coverage (Section II). The third-party liability coverage portion of the policy provides that Penn America "will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage, to which this insurance applies, caused by an occurrence, and arising out of the ownership, maintenance, or use of the insured premises . . . , and [Penn America] shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage." (Def.'s Resp. Ex. 2.) The grant of liability insurance coverage in the policy is subject to certain limitations, including a pollution exclusion. The pollution exclusion provision provides that the insurance policy does not apply to bodily injury or property damages arising out of the discharge dispersal, release or escape of smoke vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or other water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden or accidental. (Id. (emphasis added).) Therefore, the pollution exclusion does not apply to "sudden and accidental" pollution, and thus the insured is covered in such circumstances.1

The policy also contains an "owned property" exclusion. The owned property exclusion states that the insurance policy does not apply "to property damage to (1) property owned or occupied by or rented to the insured; (2) property used by the insured, or (3) property in the care, custody or control of the insured or as to which the insured is for any purpose exercising physical control." (Def.'s Resp. Ex. 2.) Penn America does not rely on that -2-

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On July 9, 1999, the EPA issued a demand letter to Industrial Enterprises that identified the company as a "Potentially Responsible Party" ("PRP") with respect to five parcels of land that it owned within the 68th Street Dump Site ("the Site"). The Site is a 168-acre property in the City of Baltimore and Baltimore County. The letter advised that Industrial Enterprises "may have incurred liability under Section 107(a) [of CERCLA, 42 U.S.C.

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Maryland Law