Articles Posted in Environmental

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GettyImages-1359747893-coal-ash-plant-300x200Early in 2021, we wrote about potential insurance implications that could arise from the then-new Biden Administration’s expected regulatory priorities. Among other things, we noted that heightened scrutiny on coal ash was expected. On January 11, 2022, the U.S. Environmental Protection Agency (EPA) confirmed that prediction, issuing a press release announcing “key steps” it is taking to “protect groundwater from coal ash contamination.” As companies with coal ash liabilities consider EPA’s new guidance and next steps, they should be aware that they may have insurance that could cover some of their coal ash cleanup costs.

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PFAS-1332327258-300x283In August, we provided an overview of the recent increase in regulatory and private litigation activity around per- and polyfluoroalkyl substances (PFAS), colloquially known as “forever chemicals,” and potential insurance coverage for PFAS liability. There have been important developments on the PFAS front in the past few months. Companies with any connection to PFAS need to be cognizant of the evolving regulatory landscape and be prepared to defend against potential PFAS liability. Fortunately, insurance coverage may be available to help mitigate these fast-growing claims—including coverage under historic general liability policies.

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Danger Hazardous Chemicals Sign on a stained storage barrelA key component of a company’s risk management function is to keep a close eye on new and developing sources of liability and to put in place appropriate insurance to respond in the event those liabilities ripen. In recent years, there has been a significant increase in legal and regulatory attention on per- and polyfluoroalkyl substances, more commonly known as “PFAS” or “forever chemicals.” PFAS are used in countless applications, and many companies across the country bear potential liability, from chemical companies to manufacturers to retailers to corporate end users. PFAS-related enforcement is focused on remedying impacts to both the environment and human health. Importantly, a company’s liability for PFAS-related contamination or bodily injury may be covered under historic general liability policies and/or modern-day pollution liability policies. As regulation and litigation relating to these ubiquitous substances continues to surge, corporate policyholders with potential exposure should be proactive to examine their insurance portfolios and position themselves for potential insurance coverage in the event they become a PFAS liability target.

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Red sign hanging at the glass door of a shop saying: "Going out of business".In recent weeks, two insurers with significant legacies of occurrence-based general liability coverage took important steps to liquidate their estates.

Bedivere Insurance Company (OneBeacon) Liquidation

The first insurers are associated with Bedivere Insurance Company, formerly known as OneBeacon Insurance Company (OBIC). OBIC’s history stretches back to the 1800s but is most well known as the successor to the General Accident and Commercial Union families of insurers. These companies wrote many policies from the 1960s through the 2000s and include Commercial Union Assurance Company, Employers Commercial Union Insurance Company, Employers’ Surplus Lines Insurance Company, Employers’ Liability Assurance Corporation Limited, General Accident Insurance Company, and CGU Insurance Company (and many other smaller companies). OBIC stopped writing new business in 2010 and entered run-off, paying claims from its historic exposures. In 2014, OneBeacon Group, OBIC’s parent, sold its run-off business to a Bermuda entity called Armour Group. The transaction included OBIC and other subsidiaries (Potomac Insurance Company, OneBeacon America Insurance Company, and The Employers Fire Insurance Company). OBIC changed its name to Bedivere Insurance Company in 2015, and in October 2020, absorbed its subsidiaries by merger.

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White House, blue skyThe Biden administration has hit the ground running with executive orders, regulatory and legislative priorities, and cabinet-level and other top posts being announced on a daily basis. Our public policy colleagues have been closely tracking many of the policy priorities of the new administration and highlighting important regulatory and legislative developments that businesses can expect coming down the pipeline.

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iStock-104272289-300x249In recent years, Wisconsin generally has been a pro-policyholder jurisdiction when it comes to long-tail environmental coverage cases. That trend continues with a decision by a Wisconsin appellate court in a case involving coverage for environmental cleanup costs at a former manufactured gas plant site. In Superior Water, Light & Power Co. v. Certain Underwriters at Lloyd’s, London Subscribing to Policy Nos. K22700, CX2900, and CX2901, the court reversed a lower court and held that there may be coverage under historic policies if there was damage to groundwater during the policy period, notwithstanding that site operations had ceased years earlier. This is an important decision, as the same historic London Market “occurrence” definition was used in many policies issued to other policyholders by London Market Insurers during the same time frame. (A description of some of the unique aspects of the London insurance market can be found here.)

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iStock-176958755-300x199Insurers have recently argued that environmental property damage claims for “closure” costs arising out of historic pollution are not covered, because the claimed damages are just “ordinary costs of doing business.” Policyholders should strongly resist denials based on this argument, which is unsupported custom and practice in the insurance industry and contradicts the terms of standard-form third-party liability policies, applicable environmental laws, and insurance law in nearly all jurisdictions.

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iStock-907906404-anadarko-300x200The Supreme Court of Texas delivered good news to policyholders insured under a “Joint Venture Provision” endorsement commonly used in the oil and gas industry. In Anadarko Petroleum Corp. v. Houston Casualty Co.—a case arising from the 2010 Deepwater Horizon disaster—the court held that insurers assumed the obligation to reimburse the full amount of a joint venture partner’s defense costs, rejecting the insurers’ argument that their obligation was reduced by the “scaling” language of a Joint Venture Provision. As a result, the court held the insurers liable to Anadarko for over $100 million in defense costs, not just the $37.5 million they had already paid.

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iStock-612401378-environmental-long-tail-300x211The conflict between policyholders and insurers over “long-tail” insurance coverage took an unfortunate turn with a recent decision by the New York Court of Appeals on the issue of allocation for long-tail claims. On March 27, 2018, the court issued a decision in Keyspan that significantly impacts policyholders by decreasing the insurers’ proportionate share of financial responsibility and increasing the share imposed on the insured. This case involved long-term and continuous environmental contamination that began before comprehensive general liability insurance became available in the marketplace and continued, unobserved, across multiple policy periods. At issue was whether, under the “pro rata time-on-the-risk” method of allocation, Century Indemnity Company was liable to its insured, KeySpan Gas East Corporation, for years outside of its policy periods when there was no applicable insurance coverage offered on the market.

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Recently the Eleventh Circuit spent a lot of ink discussing how the marketing and sale of sashimi-grade tuna is affected when myoglobin iStock-164867924-fish-300x300reacts with oxygen to produce oxymyoglobin, and with carbon monoxide to form carboxymyoglobin before oxidizing into metmyoglobin—or, in other words, how quickly raw tuna meat turns from bright red (good) to brown (not so good). In the end, the court held, it doesn’t really matter—at least as to insurance coverage for advertising injury—unless the insurance company is given proper notice. And not just notice of a claim, but notice of the specific claim for which coverage is requested.

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