Underestimated Emissions Data Submitted to Regulators

Acknowledgement to XL Environmental

An environmental consultant insured by XL was contracted to provide environmental permitting services for its client, a manufacturer of wood products. The insured’s client planned to construct a batch plant facility and the insured was retained to assist in obtaining the required air permit. The permit was issued and construction of the batch plant was completed.

Approximately six years after the facility started operating, the regulatory agency alleged that the insured had underestimated methanol emissions from the batch plant, predicting 850 lbs/year, when the actual emissions were approximately 145,000 lbs/year. As a consequence of this error, the client was fined by the regulatory agency. The fine attributed to the insured’s error was $162,000. The client sued the insured, demanding payment for its costs, including attorney fees.

XL’s environmental claims counsel retained local defense counsel to represent the insured to investigate the allegations made. A determination was made that our insured would have liability to the client in the amount of $150,000.

The parties attended mediation and settled the claim for payment of $150,000 to the insured’s former client under the insured’s Professional and Contractor’s Pollution Legal Liability Policy. An early settlement at mediation was able to prevent the insured’s policy limits from being depleted by further defense costs and expenses.

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