Rhone-Poulenc Basic Chems. Company v. American Motorists Insurance Company

Supreme Court of Delaware · 1992 · Corporations

616 A.2d 1192 (Del. 1992)

Updated August 22, 2026

CorporationsInsurance contract interpretationEnvironmental liabilityCGL policymitigation provisioncondition precedentenvironmental cleanuppreventive measures

Facts

Stauffer operated a PVC plant in Delaware City and disposed of EDC sludge and other industrial waste at the Tybouts Corner landfill from 1969 to July 1971. Federal litigation over contamination at the site was later settled by consent decree in 1989, requiring RPB to share the costs of designing and implementing remediation. AMICO and Travelers had issued CGL policies to Stauffer containing a mitigation provision requiring the insured promptly, at its own expense, to take reasonable steps to prevent other bodily injury or property damage from arising out of the same or similar conditions, with such expense not recoverable under the policy. The dispute centered on whether that provision precluded coverage for costs of measures taken or to be taken to prevent further release of contaminants from the landfill.

Issue

Whether the mitigation provision in Condition 4(a) of the AMICO and Travelers CGL policies precludes coverage for the costs of measures taken or to be taken to prevent the further release of contaminants from the Tybouts Corner landfill. More specifically, the question was whether the clause is unambiguous and operates as a condition precedent requiring the insured to bear preventive costs itself.

Rule

Clear and unambiguous insurance policy language is given its ordinary meaning, and courts will not create ambiguity where none exists. A policy provision requiring the insured promptly, at its own expense, to take reasonable steps to prevent other bodily injury or property damage from arising out of the same or similar conditions precludes coverage for the cost of preventive measures to stop further harm, and compliance with that provision is a condition precedent to the insurer's performance.

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Lakeview Coatings, a manufacturer in Toledo, stored solvent waste in outdoor tanks. Its CGL policy states that the insured must promptly take, at its own expense, all reasonable steps to prevent other bodily injury or property damage from arising out of the same or similar conditions, and that such expense is not recoverable under the policy. After a leak contaminated part of a neighboring lot, Lakeview spent $900,000 installing liners and pumps to stop further migration, then sought reimbursement from its insurer for those installation costs.

Is the insurer most likely obligated to reimburse Lakeview for the $900,000?

Explanation. The majority held that clear mitigation language requiring the insured to take reasonable steps at its own expense to prevent other bodily injury or property damage precludes coverage for preventive measures aimed at stopping further harm. The insurer may still be liable for already-accrued damages, but not for the insured's cost of preventing additional damage. (Derived from Rhone-Poulenc Basic Chems. Company v. American Motorists Insurance Company (1992).)