Firm’s Clients Receive More Than $100 Million Through Settlement of Environmental Insurance Claims in 2001

By George M. Plews & Donna C. Marron

Last year was an exciting one for clients of our firm with environmental insurance claims pending in Indiana courts. Four cases that collectively involved hundreds of insurance company defendants and more than 100 cleanup sites across the country settled entirely during or following mediation. Collectively, these settlements provided the policyholders more than $100 million in insurance proceeds for past and future cleanup and other environmental response costs and for defense costs.

The driving force behind these settlements was the body of pro-policyholder environmental insurance cases that Indiana appellate courts and trial courts have handed down during the past five years. Five important appellate decisions, all litigated by or with substantial involvement of Plews Shadley Racher & Braun, invalidate many of the stock defenses that insurance companies assert against coverage of environmental claims. These cases, together with the tenacity of our clients, ardent advocacy on both sides, and the skills and wiles of the mediators jointly selected by policyholders and insurers, made the negotiations that led to all of the settlements productive and memorable.

American States Insurance Company v. Kiger, 662 N.E.2d 945 (Ind. 1996) is the seminal case. Kiger involved claims by IDEM against a gas station in Danville, Indiana, owned and run by Vince and Maria Kiger. The Indiana Supreme Court accepted emergency transfer and held that the term "sudden" in the "standard" pollution exclusion (in effect in 1970-1985 policies) means unexpected or unintended, and further that the standard definition of "pollutant" in the "absolute" pollution exclusion (in effect in policies after 1985) is so broad that it is ambiguous. A month later, the Indiana Supreme Court decided Seymour Mfg. Co. v. Commercial Union Ins. Co., 665 N.E.2d 891 (Ind. 1996). Following Kiger on the pollution exclusions, Seymour held insurers had a duty to defend environment claims, as a matter of law, even when the insurer had evidence to support policy defenses.

The Indiana Court of Appeals followed Kiger and Seymour in three decisions on other major environmental coverage issues during the following years. Hartford Accident & Indemnity Co. v. Dana Corporation, 690 N.E.2d 285 (Ind. Ct. App. 1997), transfer denied (1998) ("Dana I") held that the "suit" for which insurers must provide a defense under comprehensive general liability ("CGL") policies includes a wide variety of adversarial administrative proceedings, and that "damages" covered by such policies include cleanup and other environmental response costs incurred by policyholders when conducting cleanups pursuant to government orders. Travelers Indemnity Company v. Summit Corporation of America, 715 N.E.2d 926 (Ind. Ct. App. 1999) ("Dana II") held that "personal injury" coverage - a separate coverage in most policies, in addition to bodily injury and property damage coverage - applies to environmental claims. Summit also reaffirmed that the "absolute" pollution exclusion is unenforceable under Indiana law. A second Dana decision, Allstate Insurance Company v. Dana Corporation, 737 N.E.2d 1177 (Ind. Ct. App. 2000), transfer granted (2001) ("Dana II") held, among other things, that the policyholder could look to any triggered policy year or years for the entirety of environmental response costs incurred and that the "owned property" exclusion does not apply to sites that the policyholder owns or rents when the contamination at issue has affected the groundwater at the site. Plews Shadley Racher & Braun represented the Kigers, Dana Corporation and Summit Corporation of America. The firm submitted an amicus brief to the Indiana Supreme Court in support of the policyholder’s position sustained in the Seymour case.

The five cases mediated to conclusion or nearly to conclusion in 2000-2001 were brought on behalf of: (1) Inland Paperboard and Packaging, Inc.; (2) Eli Lilly and Company; (3) Dana Corporation; (4) Lear Corporation Automotive Systems and (5) Recticel Foam Corporation. These cases involve a diverse group of claims, from soil and groundwater contamination at massive facilities owned by policyholders to environmental problems at the sites of waste recyclers or land-fills. Sites in nearly every state in the union were at issue, involving cleanups costing tens of millions to tens of thousands of dollars.

The cases took different paths to resolution. Dana, as noted above, was a ground-breaking case in many ways. The later-filed cases have confronted fewer unresolved legal issues, and as such have proceeded more swiftly to resolution. In each case, after periods for discovery of facts about the claims, the matters entered mediation.

Mediation is a relatively new process nationally, but Indiana is on the cutting edge of this process. Two able mediators, Tom Lemon of Warsaw and Bill Baten of Indianapolis, assisted in getting these complicated - collectively the five cases had more than 250 parties and over 100 sites-cases concluded. Along the way a good deal of knowledge of how to maximize the chance of settling these cases has been assembled. In these times, it is good that a combination of good law and hard work has allowed satisfactory settlements for our policyholder clients in these cases.