In Goodstein v. Continental Casualty CO., the United States Court of Appeals for the Ninth Circuit held that the diminution in sale value of property due to pollution does not constitute "property damage" under a comprehensive general liability insurance policy where the sale contract did not require the buyer to remediate as a condition of the sale. In so holding, the court found that diminished property value is not "physical injury to tangible property," nor is it "damage" that the "insured shall become legally obligated to pay" because of "property damage." However, without determining whether the mere designation of property as environmentally contaminated by the Washington State Department of Ecology is a "suit," the Ninth Circuit held that such classification may still trigger the insurer's duty to defend.
Daniel S. Cho,
Dirty Property For Dirt Cheap: CGL Coverage For the Diminished Value of Contaminated Sites Under Goodstein v. Continental Casualty Co., 38 Golden Gate U. L. Rev.