Ribi Immunochem Research, Inc. (Ribi) developed biopharmaceutical products at its Hamilton, Montana facility. From 1981 to 1985, they used toxic solvents in their processing and, monthly, poured the waste into an open, unlined pit at a sanitary landfill. Ribi hoped that most waste would evaporate before it migrated into the shallow groundwater table but later tests revealed the hazardous contaminants migrated into the groundwater within 30 minutes after disposal.

The Environmental Protection Agency (EPA) discovered the contamination in 1987. Shortly afterwards, the National Institute of Health (NIH) excavated and cleaned the site. Between 1993 and 1998, Ribi was sued by neighboring property owners, by the State and by the Federal government for damages and remediation costs. Ribi settled the EPA, NIH and State claims. On December 6, 1993, Ribi filed claims with its insurance company, Travelers Casualty And Surety Company (Travelers).

Travelers wrote the commercial general liability (CGL) policy for Ribi from 1982 through 1985. After Ribi filed the claim, Travelers issued reservation of rights letters for the property owners’ suits, stating it had no duty to either indemnify or defend Ribi. Ribi never raised an objection. Travelers, after years of repeatedly denying Ribi's claims, sought a declaration that it had no duty to provide coverage or defense costs. Ribi counter-claimed on several issues. A district court granted summary judgment in favor of Travelers and allowed Travelers to recoup all its defense costs in both the government and neighboring property owners' suits. Ribi appealed.

The appellate court agreed that the pollution exclusion in the CGL policy barred coverage for cleanup costs and that Travelers owed no duty to defend Ribi against third-party lawsuits for cleanup costs. Travelers was entitled to recover defense costs expended on behalf of Ribi for underlying claims outside the policy pollution exclusion provision. Travelers explicitly reserved its right to recoup those costs when it notified Ribi of the reservation in a timely manner and also provided specific and adequate notice of the possibility of reimbursement. Since Ribi did not object to those letters, they implicitly accepted Travelers' defense under a reservation of rights. For these reasons, the district court decisions were affirmed.

Travelers Casualty And Surety Company, a foreign corporation, Plaintiff, Respondent and Cross-Appellant, v. Ribi Immunochem Research, Inc., a Delaware corporation, Defendant and Appellant. Montana Supreme Court. No. 04-228. Filed March 1, 2005. . Affirmed. 2005 CCH Personal and Commercial Liability Cases. Paragraph 16,017.