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DTCI: Potential Issues for Excess Insurers in Long Term Environmental Contamination Cases

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Declaratory judgment actions in which policyholders seek insurance coverage for historical environmental contamination under comprehensive general liability policies, umbrella insurance policies, and/or excess insurance policies present complex legal, factual, and scientific issues to defense practitioners. Often, the alleged contamination at issue took place over decades. These cases usually involve layers of policies offering potential coverage and significant uncertainty regarding the potential scope of remediation costs.

The authors lack the space here to discuss all the potential defenses to coverage that may be available in a given environmental coverage case, although many exist. Instead, we identify several issues for umbrella or excess carriers that may affect potential coverage allocation, including the trigger of coverage and related issues such as horizontal versus vertical exhaustion of coverage, and potential contribution claims. We consider certain issues in the context of published Indiana cases. Finally, we consider how Indiana courts may address other issues in the future based on decisions from other jurisdictions.

The policy language always serves as the starting point of any coverage analysis. Of course, practitioners must evaluate this policy language within the context of Indiana common law. Often, policyholders seek to use the Indiana Supreme Court's opinion in Allstate Insurance Co. v. Dana Corp. ("Dana"), 759 N.E.2d 1049 (Ind. 2001), to create concerns for excess and umbrella insurers where the potentially covered remediation costs might involve millions of dollars. They suggest that where there may be a "continuous occurrence" of "property damage" over many policy years, the policyholder may pick any one policy year and pursue recovery of all sums connected with that occurrence from the primary, umbrella, and/or excess policies in that chosen year. Where the alleged environmental contamination took place over many decades, many questions exist regarding the potential trigger of coverage and the extent of any triggered coverage. For example, practitioners must first determine whether Dana's concept of joint and several liability can even apply to the policy. See Irving Materials, Inc. v. Ohio Cas. Ins. Co., 2008 U.S. Dist. LEXIS 18692 (S.D. 2008) (distinguishing the policy language at issue in that case from the policy language at issue in Dana).

As an initial question, practitioners must consider whether the insured can prove that an occurrence of property damage actually took place within the policy period. To do so, counsel must determine whether the insured must prove, among other things, an unforeseen release of contaminants within the policy period or simply a migration of existing contamination. In PSI Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705 (Ind. Ct. App. 2004), the court of appeals concluded that under certain policy language, an insured need not "specifically prove that new releases of contaminants caused property damage during the relevant policy periods" where the definition of occurrence is designed to be "a restriction limiting the insured's ability to file multiple claims against the insurer for property damage caused by one continuous occurrence." Id., 801 N.E.2d 734. The court in PSI Energy found that the following definition of occurrence fell into that category: "[a]n event or a continuous or repeated exposure to conditions which unexpectedly results in personal injury, property damage or advertising injury during the policy period, all said exposure to substantially the same general conditions existing or emanating from the one premises shall be deemed one occurrence." Id., 801 N.E.2d at 733. The court of appeals held that under such a definition, the insured "must prove [only] that subjectively unexpected and unintended contamination continued to cause damage during the relevant policy period to trigger coverage under these policies." Id. 801 N.E.2d at 734 (citing Dana, 759 N.E.2d at 1060) (emphasis added).

In PSI Energy, the court of appeals also considered a group of policies with the following different definition of occurrence: "one happening, or a series of happenings arising out of one event, taking place during the term of this policy." 801 N.E.2d at 733 (emphasis added). Under such a definition, if an insured proves "that subjectively unexpected and unintended leaks were occurring from subsurface containment structures and causing contamination of the groundwater during the relevant policy periods, such leaks would constitute an event within the meaning of the policy language." Id. at 736 (emphasis added). Under such a standard, an insured faces a much greater burden to establish a covered occurrence of property damage within the policy period. The standard also arguably rules out any coverage for property damage arising from events that took place before or after the policy period.

In Dana, Allstate, an excess insurer, argued that it was responsible for only those property damages incurred by the insured, Dana, during the particular policy period itself. The court disagreed and held that under the policy terms, "once an accident or event resulting in Dana's liability-an occurrence-takes place within the policy period, Allstate must indemnify Dana for 'all sums' Dana must pay as a result of that occurrence, subject to the policy limits." Dana, 759 N.E.2d at 1058. Therefore, "whether or not the damage effects of an occurrence continue beyond the end of the policy period, if coverage is triggered by an occurrence, it is triggered for 'all sums' related to that occurrence." Id. Thus, assuming exhaustion of underlying coverage, an excess insurer under a policy including such language may be liable for damages related to the occurrence that took place after the policy period, depending on other terms within the policy.

The Indiana Supreme Court in Dana based its opinion on the policy terms and definitions at issue in the policies and on the arguments presented by the parties in that case. Therefore, where a policy contains terms and definitions different from those found in the Dana policies and limits its coverage to only property damages that actually occurred during the policy period, the insurer should not be liable for damages that occurred either before or after the policy period. See Irving Materials, Inc. v. Ohio Cas. Ins. Co., 2008 U.S. Dist. LEXIS 18692 (S.D. 2008). In contrast to the policies in Dana, the Irving case dealt with a policy where the excess insurer agreed to pay "those sums" in excess of the primary insurer's policy limits for property damage "that takes place during the policy period ... ." 2008 U.S. Dist. LEXIS 18692 at 16. The Irving court held that a policy containing the qualification language "that occurs during the policy period" in the coverage grant distinguished the Irving policies and required a holding different from the holding in Dana. Id. at 18. Irving limited the holding in Dana to those policies that do not expressly limit liability coverage to property damage occurring within a specified policy period. Id. Therefore, a practitioner must always determine whether Dana can actually apply to the case. Whether the potential coverage arises only with respect to property damage that actually took place within the policy period, or from an event that took place within the policy period, or that took place continuously over several policy periods, practitioners represent ing excess or umbrella carriers must consider at what point coverage may be triggered by the exhaustion of underlying coverage. Key language for evaluating this issue usually falls under the "Limits of Liability" section of the policy. For example, some excess insurance policies use the following language in their Limit of Liability Section: "The Company shall only be liable for the Ultimate Net Loss in excess of ... the limits of the underlying insurances as set out in the attached SCHEDULE OF UNDERLYING POLICIES in respect of each Occurrence covered by said underlying insurances." See Dana, 759 N.E.2d at 1062. Such language arguably limits the exhaustion analysis to those policies specifically identified in the schedule of underlying policies attached to said policy. However, many excess and umbrella policies use much more expansive language.

For example, the Northern District of California recently discussed the following language from a Limit of Liability section in an excess policy: "[the insurer] will be liable only for that portion of damages in excess of the Insured's Retained Limit which is defined as the greater of either: ... the total of the applicable limits of the underlying policies listed in the Schedule of Underlying Insurance and the applicable limits of any other underlying insurance providing coverage to the Insured ... ." Pacific Coast Bldg. Prods., Inc. v. AIU Ins. Co., 2006 U.S. Dist. LEXIS 82028 at *12 (N.D. Cal. 2006), aff'd, Pacific Coast Bldg. Prods., Inc. v. AIU Ins. Co., 300 Fed. Appx. 546 (9th Cir. 2008) 2008 U.S. App. LEXIS 26717 (9th Cir. 2008) (not for publication) (emphasis added). The Ninth Circuit affirmed the district court's holding that "the clear and explicit language of the [excess policy] requires that 'any other underlying insurance' first be exhausted before ... an excess carrier would drop down to provide coverage to the insured. This language compels application of the horizontal exhaustion rule." 300 Fed. Appx. at 548, 2008 U.S. App. LEXIS 26717 at **2.

More recently, Judge Barker addressed the issue of exhaustion of underlying coverage in Trinity Homes LLC v. Ohio Casualty Insurance Co., 2009 U.S. Dist. LEXIS 88697 (S.D. Ind. 2009) involving similar language in an umbrella policy and reached the same conclusion. In Trinity, the policy language at issue defined underlying insurance as "the policies of insurance listed in the Schedule of Underlying Policies and the insurance available to the insured under all other insurance policies applicable to the 'occurrence.' 'Underlying insurance' also includes any type of self-insurance or alternative method by which the insured arranged for funding of legal liabilities that affords coverage that this policy covers." Trinity, at *36. In considering the exhaustion issue, Judge Barker cited Dana and held as follows: "Where the insured has both primary and excess insurance, the excess insurer's liability only arises once all 'underlying insurance,' as that term is defined in the insurance contract, is unavailable. * * * Because the ... Policy clearly defines this term to include 'all other insurance policies,' all of the relevant policies must be unavailable before Cincinnati's liability will be triggered." Id. at *37-*38. Therefore, Judge Barker concluded that the policy required horizontal exhaustion.

Judge Barker next considered what constituted exhaustion of an underlying policy. In Trinity, the plaintiffs settled with many of their primary insurers for less than policy limits and entered into settlement agreements that "stated that payment by the underlying insurers of the agreed amount(s) 'exhausted' the policies." Id. at *38. The insured then argued that the underlying policies had been exhausted based on that language in the settlement agreements. Judge Barker forcefully rejected the insured's argument. "Plaintiffs cannot circumvent that clear intention embodied in the contract simply by branding each settlement with an underlying insurer an 'exhaustion' of the policy, when, in fact, it patently is nothing more than a reduction of the coverage under that policy." Id. at 40. Judge Barker concluded that the plaintiffs had failed to meet their burden of proving exhaustion of underlying coverage in order to trigger coverage under the umbrella policy.

Assuming an excess policy may ultimately be triggered, excess coverage may be limited based on other portions of the policy. For example, certain excess policies include a condition to coverage entitled "Prior Insurance and Non-Cumulation of Liability." This condition usually states something similar to "that if any losses also covered in whole or part under any other excess policy issued to the insured prior to the inception date hereof, the company's limited liability as stated in the declaration shall be reduced by any amounts due to the insured on account of such loss under such prior insurance." The authors have found no Indiana authority on this provision. However, the United States District Court for the District of Oregon has held that this provision is enforceable. See California Ins. Co. v. Stimson Lumber Co., 2004 Dist. LEXIS 10098 at 32 (D. Or. 2004) (applying prior insurance and noncumulation of liability condition to reduce coverage limits for an excess insurer), aff'd in part, rev'd and remanded in part on other grounds; California Ins. Co. v. Stimson Lumber Co., 325 Fed. Appx. 496 (9th Cir. 2009) 2009 U.S. App. LEXIS 8031 (9th Cir. 2009) (unpublished). Thus, under Stimson Lumber, even if an insured proved the existence of a continuing occurrence of property damage and a legal basis for an all-sums allocation, an excess insurer in a later year could apply such a condition to reduce its potential exposure from an attempted "spike" of coverage.

Assuming an excess policy gets triggered under its terms, a contribution action may be the next logical step.

See Federated Rural Elec. Ins. Exch.v. National Farmers Union Prop. & Cas. Co., 805 N.E.2d 456 (Ind. Ct. App. 2004), vacated and dismissed, 816 N.E.2d 1157 (Ind. 2004).

These are just a few of the arguments available to excess insurers dealing with cases involving long term environmental contamination with significant remediation costs. Attorneys representing excess insurers should carefully scrutinize all applicable policy language to determine whether these arguments may apply.

Mr. Boyers is a partner and Mr. Trainor is an associate in the Indianapolis firm of Wooden & McLaughlin. Mr. Boyers is a member of the DTCI. The opinions expressed in this article are those of the authors.

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  1. Am I the only one who sees that the City is essentially giving away the MSA site AND giving millions to build new buildings on the site when this site would be the perfect place for the Justice Complex? Across from City-County, check; keeping it centrally located, check, etc. It's my understanding that the GM site must be purchased by the City from Motors Liquidation Company. STOP WASTING WHAT WE ALREADY HAVE AND OUR TAX DOLLARS! The Ballard Administration has not been known for it's common sense...never voted for him and never will!

  2. This guy sounds like the classic molester/manipulator.

  3. Louis D. Brandeis was born in 1856. At 9 years of age it would have been 1865. The Brandeis family did not own slaves. My source Louis D. Brandeis: A Life, by Melvin L. Urofsky.

  4. My name is Matthew Lucas Major, I recently went through a jury trial in Bloomington , In. It was the week of Feb 19-21. Although I have been incarcerated since August 5, 2014. The reason I 'am writing to you sir is on the 21 of February the jury came in with a very excessive and wrongful verdict of guilty on 6 child molesting charges against my daughter who was 9 at the time I was accused. I also had 2 other Felonies one of Intimidation and 1 of Sexual Vicarious Gratification. Judge Marc Kellam on the second day of trial gave me a not guilty on those 2 felonies. The jury was sent out during that time and when brought back Judge Kellam told them to not concern themselves with the 2 Felonies that he ruled on them. They were told to not let evidence they had already heard influence there verdicts. I never in my life touched any child sexually and definitely not with my own daughter. When I was arrested Detective Shawn Karr told me I would be convicted guilty just on my daughters word even without evidence. That's just what happened. my public defender did me so wrong he never once proved to the court and jury all the lies the child told, and Jeremy Noel my public defender could of proven the lies easily. The stories in Serenity's depositions and Forensic interview changed and were not consistent as Prosecutor Darcie Fawcett claimed they were. Yet my attorney never mentioned that. The facts that the child accused me of full penetration in her vagina and rectum was proven lies. Doctor Roberta Hibbard of Riley hospital in Indianapolis confirmed Serenity's hymen intact, no scars, no tearing, no signs of rape to her. Yet my attorney didn't use that knowledge . the DNA was all in my favor. I tell you I will spend my entire life in prison going through rape and beatings etc. even Judge Kellam abused his authority by telling the jurors to listen and believe what the prosecutors side in evidence like my daughters testimony. In one interview with the detectives my daughter got flustered with her mom and said on camera " I'm saying what you told me to mom"!! Yet Mr. Noel said nor did anything to even resemble a defense attorney. Judge Kellam allowed edited version of a taped conversation between the child and her mother. Also Judge Kellam allowed the Prosecutor too bring in to my case a knife found under my seat, the knife wasn't part of my case. She was allowed by my attorney and the judge to put a huge picture of it on the screen and huge picture of my naked privates in a full courtroom and open court. Ms. Fawcett says to jury see how easy Mr. Major could reach the knife and cut his Childs throat. Even though I had no weapons charge against these cases. This gave the jurors prejudice thought against me thinking I threatened her with that knife and how scared she would of been knowing i could get it and kill her. On my sentencing court March 19, 2014 my public defender told Judge Kellam he wish to resign from being my attorney and wished for the court to give me outside council to file a error to trial or appeal. We were denied. Now after openly knowing my public defender don't want to represent me he has to. Well when as parents we make our kids clean a room when they really don't wish to, well the child will but don't mean she will do a good job, that's where I'm at with Mr. Noel. please dont ignore mine and my families pleas for your help . we have all the legal proof you could need to prove Im innocent. Please dont make my spend years in prison innocent when you can fix this wrong. Im not saying Im a perfect man or that I was a perfect dad to my 2 children none of us are. Ive made some bad choices in life and I paid for them. But I didnt ever touch or rape my daughter . I love my children with all my heart. And now through needing attention and a ex-wife who told my granny several times she wish she could put me in prison to get me out of their lives. Well my ex finally accomplished her goal. Sad part is she is destroying our daughter with all this horrific lies and things she taught my daughter to say. My daughter will need therapist to ever hope for a chance of a normal life after what she had done to her by her mom and their side of the family. My daughter told everyone even on stand she had a dream months before i supposedly molested her in this dream I was molesting her and when I finally did it matched her dream perfectly. She admitted to watching movies about little girls being molested and watching U-Tube videos about child molesting all before it happened supposedly to her. Doesn't that sound very unusual that a non molested 9 yr old would need to know so much about being molested? The only reason I could think a 9 year old would need so much information is to be prepared to know what to say and be able to say how it felt what took place etc.. So when questioned by authorities she would be prepared. And there again sir if a parent is pre grooming a 9 year old child she would need intimate details . Like telling her daughter about a couple moles on my private area. The child admitted to sneaking my cell and looking many many times at nudes of me and my girlfriend even one where my penis was entering my girlfriends vagina. In that picture my moles are obvious. Yet when prosecutor showed everyone in court my privates and pictures of the moles she said the only way the child would know about them is if she saw them for herself. My attorney once again said nothing about the pictures my child saw. Or could a ex-wife be able to describe my moles to help her case against getting rid of me? I beg you help me. This is my very existence. Ive lost everything , a good job, a wonderful girlfriend, my freedom, but worse thing Ive lost is my children. They were my reason to get up every morning and strive to be better. The wonderful bond I had with my Serenity is gone. After this I would be afraid to even hug her for fear of what next can they do to me. I'm not afraid to tell you I sit here in this cell and try to hold back my tears. Everyone knows you cant show weakness in prison. My life has already been threatened here at Wabash Valley Prison. After only 3 days of arrival. I was tricked into signing a waiver now Im in G Block General Population with 6 child molesting felony charges. Mrs. Hart as a 18 year old I almost died hooked to machines in hospital almost 1 month and now I know that fear was childish compared to this . I cant help but put emotions in this, after all Mrs. Hart Im human and God help Me I never been more afraid in my life. I didnt hurt my little girl I didnt touch her sexually. As much as it shreds me and fills my mind what Im facing I worry more about my mom and granny because of their great love for me mam they are suffering so deeply. I aint done this things but my loved ones suffering right along beside me and If you take my case you will be in essence freeing them also. I sent momma this letter and asked her to email it to you. I'm scared I have been done so unjustly by our legal system and I need you to fix this and give me freedom. I ask you please don't just ignore my pleas. Here in America its nice to be able to trust our legal justice system, well they destroyed my and my loved ones trust in our justice system . And I'm trusting in You !!! My entire family is suffering this nightmare with me. My 77 year old granny had a stroke and isn't doing so well. My single mother that raised 3 kids alone is dying from Lupus and since my arrest has stayed so sick and weary. Our lives torn to peices by a government I was taught I could trust in. my momma has tried so many innocent project and wrongfully accused and cant get anywhere. please please help me. A quote from the late Nelson Mandela: To be free is not merely to cast off ones chains, But to live in a way that respects and enhances The Freedom Of Others. I have Faith in you and your clinic to cast my chains off and give me freedom I do deserve as a wrongfully accused Man, son, brother, father, friend. Matthew Major DOC# 246179 Cause # : 53c02-1308-FA-000779 God Bless you. Please contact me with your decision so I know you made a life changing decision for me , just please at least write me so I know you care enough about your citizens to respond to cries for your help. You can speak openly with my mother Charlotte Spain (828) 476-0406: 71 Lakeview Dr. Canton, NC 28716 Thank You Matthew Major I know yall get thousands of request and inmates claiming innocence, and each person who are innocent deserve to have organizations like yours willing to fight for them and I give yall so much Thanks and I thank God everyday yall are out there caring enough to help free the innocents. Since discovering firsthand how easily lives and families can be destroyed by Poor Defense attorneys not doing their job . And Prosecutors allowed to do as they please in court

  5. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

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