Shell Oil Co. v. Winterthur Swiss Insurance

Introduction

Shell Oil Company (Shell) raises difficult issues regarding insurance coverage for environmental pollution liability. Shell’s main contentions involve interpreting standard comprehensive or commercial general liability (CGL) insurance language and California’s statutory bar against insuring “wilful” acts. Shell challenges numerous rulings made during a long and complex trial.

In 1952, Shell assumed a lease of part of the Rocky Mountain Arsenal (Arsenal), a United States Army (Army) complex in Colorado. At the Arsenal Shell manufactured chemicals and pesticides and disposed of its wastes using Army facilities. Over the years, toxic wastes from both Shell and the Army contaminated soil and groundwater. The cost to remedy this pollution has been estimated at $1.8 billion. In December 1983, the United States and the State of Colorado (Colorado) sued Shell for remediation costs and environmental damage. Shell and the United States eventually agreed on Shell’s share of the Arsenal’s cleanup costs. Shell’s liability for pollution at the Arsenal could reach hundreds of millions of dollars.

Shell maintained a primary layer of liability insurance and multiple layers…