Fluids containing creosote, penta and other chemicals were generated in the normal course of business operations during more than twenty years of operations of a wood treatment facility. Fence posts and other lumber products were treated by the company. Weed and dust control were achieved by pumping the waste or excess fluid onto the ground and spreading it around the plant area. The facility consisted of about twenty acres of land.

The Arkansas Department of Pollution Control and Ecology filed a complaint and sought a permanent injunction against the owners "to cease and abate pollution of Arkansas waters and to remove or contain wastes . . . .that were likely to cause pollution." Shortly thereafter, the United States Environmental Protection Agency directed the owners to "undertake specific remedial actions with respect to the release or threat of release of hazardous substances" from the site.

The owners sought recovery of moneys expended by them, pursuant to the governmental actions, from various insurers that provided general liability insurance for them over the decade involved. All of the policies included a provision to the effect that ". . . .the company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of the bodily injury or property damage to which this insurance applies." It was also stipulated that ". . . .the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage."

The insureds brought an action against one of their insurers seeking a declaration of entitlement to defense and indemnification. The insurer filed a declaratory judgment action against the insured seeking a declaration that the insurance did not cover the expenditures in question.

The trial court concluded that "cleanup costs are not encompassed within the meaning of the word 'damages' in the standard form policies at issue." Accordingly, it entered judgments in favor of the insurance companies and against the insureds.

The appeal court found that "the district court's interpretation of Arkansas law is not wanting for reasoned analysis nor lacking in reasoned authority." The judgments of the trial court were affirmed in favor of the insurance companies and against the insureds.

(GRISHAM ET AL., Appellants v. COMMERCIAL UNION INS. CO. ET AL., Appellees. U.S. Court of Appeals for the Eighth Circuit. No. 89- 1481. March 8, 1991. CCH 1991 Fire and Casualty Cases, Paragraph 3016.)