A Massachusetts company learned the hard way that you need to pay close attention to policy endorsements when you negotiate them. In Market Forge Industries, Inc. v. Indian Harbor Insurance Company, the Appeals Court of Massachusetts held, in an unpublished decision, that a Pollution and Remediation Legal Liability Policy did not cover the costs of cleaning up certain pollution because the “Pollution Conditions” were not specifically listed in the “Known Conditions” endorsement. This despite the fact that the policy was intended to cover known pollution conditions and the policyholder had… More
Category Archives: Insurance
What Triggers Excess Coverage In An Environmental Case: Not Necessarily the Payment of the Full Underlying Policy Limits
More and more excess insurers are taking the position that a policyholder which settles with primary or low level excess insurers for less than the full amount of the policy limits has waived its right to obtain coverage from any of the high level excess insurers. A Texas appellate court recently rejected this position in Plantation Pipe Line Company v. Highlands Insurance Company in Receivership. There, the policyholder had expended over $18 million to clean up a contaminated site in North Carolina. Because the policyholder had settled with the lower level insurers and recovered less than the full $8 million in… More
Pollution exclusions first became routine in liability policies in the early 1970s. After a decade of often unsuccessful litigation trying to enforce those exclusions, insurers introduced a so called “absolute” pollution exclusion into their commerical liability policies. Given that the language of absolute pollution exclusions has almost universally been found to be unambiguous, there has been a surprising amount of litigation on the subject. What emerges from that litigation is a general rule: the exclusion will virtually always be enforced where the claim involves contamination of the environment, but enforcement is far less certain where the claim involves damage to a product, such as defective wallboard, or bodily injury from a defective product, such as harm to… More
Ever since the Supreme Court’s decision in Citizen’s United, an effort has been made to humanize corporations, culminating in Mitt Romney’s infamous pronouncement that “Corporations are people my friend.” Now it turns out that corporations may not be entirely like people. In a recent decision, the Delaware Court of Chancery in In the Matter of Krafft-Murphy Company, Inc. ruled that corporations are in at least one respect immortal in that their liability to third parties lives forever.
In Krafft-Murphy, asbestos claimants sought to reach the unexhausted liability insurance of a dissolved corporation long after the expiration of the Delaware three year wind-down period. The… More
The battle over the scope of the absolute pollution exclusion in general liability policies continues to be fought in the context of defective drywall manufactured in China. An earlier blog entry discussed a Virginia court that had concluded that there was no coverage for defective drywall claims, rejecting decisions from a number of states that had ruled that the absolute pollution exclusion should be limited to industrial pollution claims, particularly Superfund claims.
In Probuild Holdings, Inc. v. Travelers Property Casualty Company of America, a Colorado court relying on Massachusetts and Florida law recently took the other side from the Virginia court. The Colorado court… More
For the first time in CERCLA’s history, a court has concluded that a Superfund claim was barred by the “act of war” defense. In that case, In Re September 11 Litigation, the judge ruled that a property owner a block from Ground Zero could not recover the costs of cleaning up dust on his building from the collapse of the World Trade Center towers because the dust resulted from an act of war. The judge had originally dismissed the case on statute of limitations grounds and the absence of a “release” within the meaning of CERCLA, but the Second Circuit remanded the matter for a determination whether… More
Reverse Coverage Suits: What Happens When Policyholders Agree to Defend and Indemnify Their Insurers
Increasingly, when settling coverage disputes, insurers require policyholders to agree to defend and indemnify the insurer against any additional claims asserted against the insurer. This produces the curious result that the policyholder and insurer functionally switch places. For example, Hartford Fire Insurance Company recently sued its policyholder, Lanxess Sybron Chemicals Company. Lanxess had settled a coverage dispute with Hartford concerning the Kearny Superfund Site in New Jersey. As part of that settlement, Lanxess agreed to defend and indemnify Hartford against other claims involving the Kearny Site. Hence, when Hartford was sued by another PRP at the Kearny Site (apparently an… More
Most people would likely consider pollution to be a concept that is tied to harm to the environment — contamination of soil, groundwater, or ambient air. Consistent with this common understanding of pollution, courts have repeatedly rejected the attempt by insurers to expand the scope of pollution exclusion provisions to bar coverage simply because an injury or loss involved the discharge of something that can be characterized as “an irritant or contaminant”. For example, in Western Alliance Insurance Co v. Gioll, the Massachusetts Supreme Judicial Court rejected the argument that an insurance claim for carbon monoxide poisoning in a restaurant was barred by a pollution exclusion provision. … More
Indemnification Agreements Under CERCLA Do Not Affect Liability to Entities That Are Not Parties to the Agreement
Section 107(e) of CERCLA provides that
No indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section.
It’s always been understood that the first sentence of § 107(e) means that one cannot contract away… More
Like a comet which drags a long trail in its wake, large CERCLA cases in federal court often are accompanied by related insurance coverage cases in state court. That is true with the Lower Fox River Superfund Site in Wisconsin. While a firestorm of litigation has raged for many years in federal court relating to the billion dollar liability for PCB contamination in the Lower Fox River, the key PRP in that litigation – NCR — has sought in Wisconsin state court to establish that it can pass some or all of that liability on to its insurers.
The First Circuit recently confirmed the traditional rule that it doesn’t take much to trigger an insurer’s duty to defend a policyholder against an environmental claim. In Travelers Casualty and Surety Company v. Providence Washington Insurance Company, the First Circuit overturned the trial court’s conclusion that there could be no coverage for contamination under liability policies issued after a property owner had ceased the activities giving rise to that contamination.
As the appellate court noted, Rhode Island’s trigger of coverage rule is based on manifestation of property damage – that is, when the property damage manifests itself or… More
Last week, the Virginia Supreme Court ruled (for the second time) that a CGL policy issued to AES Corporation did not require Steadfast Insurance to provide a defense to AES for claims brought again AES in Kivalina v. Exxon Mobil. The decision, in AES Corporation v. Steadfast Insurance, held simply that, based on the “eight corners” of the complaint and the insurance policy, the claims against AES did not allege an “occurrence” under the CGL policies at issue.
Obviously, if climate change is real, and at least unless and until courts… More
Last week, the Geneva Association, which describes itself as “the leading international insurance think tank for strategically important insurance and risk management issues,” issued a report entitled “Extreme events and insurance: 2011 annus horribilis.” Quick take-away? Insurance losses are growing. Why? While there were large earthquakes in 2011, the bigger long-term concerns are extreme weather events and an increasing number of people and resources located in areas subject to such events.
What’s my primary response to reports such as this, other than that dog is biting man again? It’s to wonder what climate skeptics think of all this. I understand the inclination of conservatives… More
And you thought that the explanation was just partisan gridlock in Washington? According to a study that has been accepted for publication in Environmental Research Letters, it will be somewhere between 120 years and 550 years before losses caused by Atlantic tropical storms can be statistically attributed to anthropogenic climate change. It’s important to note that this study is not by climate skeptics; nor are the authors opposed to Congressional action. They are simply pointing out that it’s damn hard to attribute causation to specific storms or on short time scales. As they note in their conclusions:
Just over a year ago, we noted the surprising, unanimous decision by the National Association of Insurance Commissioners (NAIC) to adopt rules requiring insurers to publicly disclose the impacts of climate change on their business decisions, to begin May 1, 2010. Well, not so fast. As Climate Wire reported, at Sunday’s NAIC meeting, a the commissioners voted 27-22 to make the disclosure rules optional for states to adopt, submissions to be voluntary, and insurers’ survey answers to be kept confidential.
The US Securities and Exchange Commission released a staff bulletin yesterday that reverses a Bush administration policy that excluded shareholder resolutions which asked companies to disclose their climate-related financial exposure. While not the rule-making we discussed last week, this could be a significant change for the boards of large companies who may now be forced to respond to shareholder concerns about the risks that greenhouse gases and climate change can create.
The Bulletin states that going forward, the Corporation Finance Division will no longer automatically allow the exclusion of proposals that deal with the evaluation of risk,… More
An update to a development we noted a few weeks ago — as reported by Climate Wire today, at the national meeting of the National Association of Insurance Commissioners (NAIC) yesterday, regulatory officials from all 50 states, the District of Columbia and five U.S. territories (American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands) unanimously voted in favor of rules requiring insurers to disclose the impacts of climate change on their business decisions.
Sometimes it seems as though the days for coal are short. With a new administration that seems truly committed to addressing climate change, it can be difficult to envision a long-run future.
Other days, coal, like Citigroup, seems too big to fail. Today, I’m in the latter camp. Yesterday, Zurich Financial Group announced that it would provide insurance to cover risks associated with carbon capture and sequestration (CCS) projects. It’s one thing for Congress, where climate change advocates may need votes from coal-state legislators, to support CCS projects, but when the market starts suggesting that CCS projects are viable, it’s time to sit… More