Excess Insurer On The Hook For Cleanup Costs At Seven Industrial Sites
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Categories: Excess

A New York district court has held that an insurer must provide coverage under three excess insurance policies issued in 1970 for defense and cleanup costs incurred by Olin Corporation in remediating environmental contamination at seven sites in Connecticut, Washington, Maryland, Illinois, New York, and Washington. Seven of the remaining sites at issue presented questions of fact for trial, with only one site being dismissed due to lack of coverage.

For decades, Olin has been involved in ongoing insurance coverage disputes with its insurers regarding costs it incurred in remediating various industrial sites across the county. Olin has settled many claims with its primary and excess insurers, but is now seeking coverage from excess insurer Lamorak Insurance Co. for cleanup costs at fifteen remaining sites. In the recent opinion, Olin Corporation v. Lamorak Insurance Company , No. 84-cv-1968 (JSR), 2018 WL 3442955 (S.D.N.Y. July 17, 2018), the district court found that Olin had submitted sufficient evidence that Lamorak was legally liable for damages sustained at seven industrial sites insured under the 1970 excess policy. The court noted that, for most sites, Lamorak had not provided expert testimony to dispute the conclusions of Olin’s experts and, therefore had not seriously disputed that summary judgment was warranted, except with respect to damages.

In reaching its conclusions, the court addressed several of Lamorak’s defenses, including its contention that Olin “expected or intended” the property damage at issue. In opposing Olin’s summary judgment motion, Lamorak had argued that Olin expected or intended the relevant damage because, by the 1970s, the general public—including Olin, through its membership in trade associations and attendance at industry conferences—was aware of pollution and waste disposal risks at industrial sites like the Olin work sites at issue. The court disagreed and, under New York law, narrowly construed the “expected or intended” provision to bar recovery only where the insured intended the damages and not simply the act leading to such damages. Because Lamorak had not presented site-specific evidence that Olin had expected or intended the damages at many of the sites, summary judgment was warranted.

Lamorak also tried to exclude coverage for one Washington site based on a policy endorsement precluding coverage for costs incurred before February 1, 1964, arguing that Olin’s only connection to the Washington site related to activities between 1956 and 1963. Olin argued that Lamorak had forfeited reliance on that endorsement, however, by failing to reference the endorsement among its twenty-six affirmative defenses, despite having knowledge of the facts underlying the defense at the time it answered the complaint. The court agreed, finding that Lamorak’s reservation of rights to add new defenses as new information became available did not preclude a finding of waiver.

Furthermore, with respect to the affirmative defenses Lamorak raised in its answer, the court agreed with Olin that the insurer had waived or forfeited all such defenses because it had failed to meet its burden of proof: “In its ample briefing, Lamorak has not directed the Court to any evidence in the record substantiating any of its affirmative defenses. Nor must this judge trudge the dry desert of the record of this case, searching for some rumored water hole.”

The most recent Olin insurance coverage decision provides several takeaways. First, policyholders should not assume that historical insurance policies do not provide coverage for legacy environmental liabilities due to the presence of a pollution exclusion or similar restriction on coverage for environmental contamination (including where such policies are unclear or incomplete). The court’s recent decision, based on three excess policies from 1970, involved more than thirty million dollars in coverage from a single insurer, and policyholders should identify and pursue all potential sources of recovery. Second, policyholders should carefully consider whether the insurer waived or forfeited any rights under applicable state law, either through its handling of the claim or during litigation in failing to preserve rights in its affirmative claims or defenses. And finally, policyholders should pay careful attention to applicable state law, which varies widely on many critical issues. The court’s grant of summary judgment turned in part on favorable New York law on scope of coverage, waiver, and other issues, all of which should be evaluated early on when performing venue and related choice-of-law analysis of potential claims and defenses. And finally, just as insurers will hold policyholders to their initial burden of proving that a claim falls within the scope of coverage, policyholders should hold insurers to their burden of proving any affirmative defenses, especially for any exclusions, which courts will narrowly construe in favor of coverage.

  • Partner

    Geoff helps corporate policyholders and their directors and officers resolve high-stakes insurance disputes. A Boston-based partner in Hunton’s top-ranked insurance coverage practice, he has recovered hundreds of millions ...

  • Partner

    A nationally recognized insurance coverage litigator, Lorie handles all aspects of complex, commercial litigation and arbitration for policyholders. Chambers-ranked and recognized as a “top 10 Super Lawyer,” Lorie has ...


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