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Liability under the federal Superfund law applies to indemnification clauses in contracts signed before the statute was enacted, the Pennsylvania Superior Court has ruled in a case of first impression. Joining several other jurisdictions that have ruled on the issue, a three-judge panel in County of Delaware v. J.P. Mascaro & Sons Inc. said the key to deciding whether liability under the Comprehensive Environmental Response, Compensation and Liability Act applies can be found in the boundaries of the indemnification clause itself. “To include CERCLA liability, the clause in question must be either specific enough to include CERCLA liability, or so general as to include any and all environmental liability,” Superior Court Judge John T.J. Kelly said in the opinion. Judges Correale F. Stevens and Frank J. Montemuro also sat on the panel “In determining whether an indemnification clause covers CERCLA liability, courts look to whether language limiting the indemnity exists, and whether the language indicates the intent to allocate all potential liabilities among the parties. An indemnification clause does not cover CERCLA liability if it contains limiting language.” According to the opinion, J.P. Mascaro & Sons Inc. won a bidding war to remove and dispose of waste created by one of two incinerators in Delaware County in 1975. Under the ensuing contract, Mascaro chose the method of hauling and disposing of the waste, although the county had final approval of the disposal site. Mascaro chose to use the Gloucester Environmental Management Systems (GEMS) landfill in Gloucester County, N.J., and Delaware County approved. Mascaro hauled waste under the contract from Dec. 17, 1975, until Dec. 16, 1976. In 1997, Kelly said, Delaware County was joined as a third-party defendant in a federal suit filed against GEMS by the New Jersey Department of Environmental Protection. The suit alleged illegal dumping in the landfill. The county was also later joined in a New Jersey state court action brought by homeowners bordering the GEMS landfill, Kelly said. The county demanded that Mascaro defend and indemnify against the claims on the basis of their 1975 contract, but Mascaro took no action. Eventually, the county settled both suits, $73,565 for the federal action and $25,000 for the state action. It incurred legal fees and costs for both actions in the amount of $163,745, Kelly said, although $40,000 of those fees had been paid under a policy with Travelers Insurance Co. The county filed a contractual indemnification claim against Mascaro in Delaware County Common Pleas Court, resulting in a $305,910 verdict in the county’s favor. The court denied Mascaro’s post-trial motions. Mascaro appealed. Mascaro argued that nowhere in the indemnification clause did it agree to assume any CERCLA liability as the contract pertained to 1975-76, years before CERCLA was enacted. While the issue had never been decided in Pennsylvania, Kelly said, other jurisdictions had held uniformly that a pre-CERCLA indemnification clause could include CERCLA liability. The language of Mascaro’s contract with Delaware County, Kelly said, was “extremely broad.” “Based upon Delaware County’s intent to allocate all liability to Mascaro, the general language of the indemnification clause, and the lack of language indicating a limit on its reach, we agree with the trial court that the indemnity clause at issue is general enough to include CERCLA liability,” Kelly said. Mascaro also argued that the services it provided under the contract involved only collection and transportation, not disposal. Mascaro contended that while it transported the waste to the landfill, it had no part in the disposal. The fact that the county required final approval of the landfill site, Mascaro argued, indicated the parties’ intention that a third-party landfill would perform the disposal duties and that Mascaro was only responsible for collection and transportation. The contract’s language limiting indemnification to suits occurring “in the course of [Mascaro's] performance,” Mascaro argued, precluded its liability for any action that did not arise immediately during the time it was collecting and transporting the Delaware County waste. The court looked to the language of the contract, which stated: “[Mascaro] offers to furnish and operate equipment for full and complete removal and disposal of residue from the Delaware County Refuse Incinerator.” Kelly said the contract further stated that Mascaro would defend and indemnify the county against any injury occurring in the course of the performance of the contract. Mascaro’s argument, therefore, ignored the clear and unambiguous language of the contract stating that it was responsible for disposal, Kelly said. “Moreover, Mascaro’s assertion that it was responsible for only transportation of the waste residue is belied by the fact that it had the responsibility of choosing the location of the disposal,” Kelly said. “Mascaro’s claim that it actually performed only the transportation aspect of the contract is also disingenuous considering it accepted full payment under the transportation and disposal contract.” In addition, Mascaro’s decision to dump at GEMS, made in the course of the contract, created an injury that led to the suits against the county, Kelly said. Mascaro was therefore obligated to defend and indemnify the county, he said.

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