Cause of action

September 27, 2013

United States: Allocating Insurance For Environmental Contamination Claims

Source:, September 25, 2013
By: Mark C. Rouvalis and Kenton Villano, The McLane Law Firm

Environmental claims brought by governments or private parties against owners or operators of property inevitably raise the question of whether insurance coverage is available to pay for all or some of the costs associated with such liabilities. In many cases the answer is yes, but properly assessing coverage prospects in cases of environmental damages claims can be a daunting prospect. This type of insurance claim often involves interpreting numerous historical policies, different layers of coverage, time periods that may span decades, uncertain facts, and competing court decisions interpreting similar policy language. Allocating responsibility among insurers is a task so complex, it has been labeled, in one case, as “both scientifically and administratively impossible.” Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 351 (2009). Yet, it is an issue that policyholders are wise to pursue, with competent counsel, in light of the large potential liabilities such cases present, and the prospect of significant recovery from insurers.

A recent First Circuit decision in Boston Gas Co. v. Century Indem. Co., 708 F.3d 254 (2013), applying Massachusetts law, presents an opportunity to compare the approach of the New Hampshire Supreme Court and the Massachusetts Supreme Judicial Court in addressing the complexities presented by so-called long-tail environmental claims. Making this comparison also will demonstrate some of the difficulties insureds and their insurers confront in this area of the law.…

June 24, 2013

A company can be held liable as an owner under CERCLA even though it does not own the property where the contamination is located

Source:, June 17, 2013
By: Gerard M. Giordano, Cole Schotz Meisel Forman & Leonard PA

In EPEC Polymers, Inc. v. NL Industries Inc., Civ. Action No. 12-3842 (D.N.J. May 24, 2013), defendant NL Industries Inc. owned property on one side of the Raritan River, where it produced and discharged waste to the river. Plaintiff EPEC Polymers, Inc. owned property on the opposite side of the river. The U.S. Army Corps of Engineer had dredged the river and the dredging spoils had been placed on EPEC’s property. These dredged spoils contained, in part, NL’s waste. EPEC spent over $2 million investigating the contamination on its property.

EPEC sued NL under several statutory and common law theories of recovery seeking to recoup its cleanup costs from NL. One of EPEC’s claim was that under CERCLA’s owner/operator liability section, NL was liable. That provision imposes liability on any person who owned or operated the facility at the time of the disposal of a hazardous substance.

NL argued that it cannot be held liable as an owner/operator because it did not own the site at which the cleanup is being conducted. Specifically, NL stated that its property “is not the facility at which hazardous waste came to be located or where EPEC allegedly has incurred ‘response costs’ for which it now seeks recovery under CERCLA.” Therefore, NL reasoned that it could not be held liable as an owner or operator of the facility under CERCLA’s owner/operator liability provision.

The Court rejected this argument and broadly interpreted the definition of facility holding that NL’s property is the “facility” for the purposes of owner/operator liability. Thus, NL can be held liable as an owner/operator under CERCLA even though it did not own or operate the property at which the contamination is being remedied. The Court also held that NL can be liable as an arranger under CERCLA’s liability provisions for having arranged for the dumping of its hazardous waste into the river.


June 12, 2013

New Florida statute allows limitation of design professional liability

Source:, June 6, 2013
By: Jennifer W. Fletcher, Michael G. Kerman, Kent W. Collier , Jennifer S. Lowndes and Laura J. Stipanowich, Sutherland Asbill & Brennan LLP

Over the past fourteen years, third parties have been able to maintain a direct negligence cause of action against an individual design professional, such as an architect or engineer, arising out a construction project, despite the contractual arrangements being with the design professional’s employer.1 A new Florida statute will soon change this law.

In other words, if a general contractor contracted with an architectural firm to perform design work, and an architect employed by the architectural firm was negligent in the design, then the owner (the contractor’s client) could maintain its defect claims against the contractor, the architect (assuming no economic loss issues), and the individual architect personally. Or, in the case of a design/build firm, the action could be maintained individually against the architect employed by the design/build firm.…

February 28, 2013

Sudden and accidental pollution in Massachusets — not always fatal to coverage

Source:, February 22, 2013
By: Robert S. Sanoff, Foley Hoag LLP

In some jurisdictions, an environmental claim under a liability policy with a “sudden and accidental” pollution exclusion has the same prospect of success as a due process claim under the strict scrutiny standard — strict in theory, fatal in practice. In Massachusetts, however, sudden and accidental pollution exclusions have sometimes been less fatal, as evidenced by the recent decision in Narragansett Electric Company v. American Home Assurance Company. In that case, a New York court found Massachusetts law to require an insurer to defend an environmental claim even though the policy contained a sudden and accidental pollution exclusion. The claim had been brought by the Commonwealth of Massachusetts in 1987 when hazardous wastes were discovered during excavation of a property for residential development. The Commonwealth brought the claim against a utility company that was the successor to a manufactured gas operation that had purposely disposed of waste at the site over many decades. Upon being sued by the Commonwealth, the successor company sought coverage under its then current liability policy, which contained a sudden and accidental pollution exclusion.

The insurer denied coverage on the ground that the Commonwealth’s claims involved quintessentially non-sudden and non-accidental pollution. The court, however, concluded otherwise, adverting to Massachusetts cases that had found there could be coverage even where there had been intentionally deposited hazardous substances, provided that the release resulted from sudden and accidental events outside the ordinary business operations at the site. Closely examining the allegations in the underlying complaint, the court found that “the residential excavation did not occur as part of the site’s ordinary operations or [the manufactured gas company’s] routine business practices.” Of special significance, the court noted that the underlying complaint alleged that when one of the waste products, ferric ferrocyanide, “comes into contact with air, sunlight and/or and acidic environment, toxic hydrogen cyanide gases are formed.” In light of the allegation that excavation at the site had suddenly and accidentally dislodged the long buried manufactured gas waste and caused a chemical reaction that released a newly formed hazardous substance, the court concluded the pollution exclusion did not extinguish the insurer’s duty to defend.…

June 27, 2012

Don’t Lose the Coverage You Paid For; Late Reporting Can Cost You Coverage

Source: XL Group Insurance, Construction Insider
By: Cathy Cleary, Esq., AIC, RPLU, CRIS, Executive Underwriter, Environmental

They say a fine wine gets better with age–a claim however does not. Most insurance policies require the insured contractor to provide their insurance carrier with notice of a claim made against that carrier “immediately”,” promptly” or “as soon as practicable.” Many policies also contain some sort of provision allowing for the reporting of a circumstance when no demand or formal claim has been made against the contractor. In most cases, reporting a circumstance to the insurance carrier will preserve coverage under the policy term in effect should that circumstance later develop into a claim.

Reporting claims early is a win-win.

Insurance carriers do their best work for the insured when a claim is reported in a timely manner. The sooner an insurance carrier is aware of an incident that might involve coverage, the quicker the insurer can investigate while evidence is fresh, mitigate the loss, prepare the contractor’s defense and negotiate a favorable settlement amount on the contractor’s behalf. With time, witnesses disappear, move away or become uncooperative; their memories become less reliable. Evidence may disappear or be destroyed and emails and documents may become difficult to locate. A quick response by the insurer may keep the injured party from becoming angry and frustrated, make the party more willing to negotiate a settlement rather than hire counsel and file costly litigation.…

March 30, 2011

Condo board going after municipality for damages

Source:, March 29, 2011
By: Shirley Lin

Days after a petition was launched by Penhorwood owners demanding action from the municipality, the condo board has released details about the ongoing lawsuit indicating why it feels the city is responsible.

An affidavit from October 2008 by condo board member Al Penner, the main liaison for the owners, was uploaded Monday following the statement of claim against the 24 defendants in the four and a half-year ongoing lawsuit. The condo board is seeking $5 million in general damages and or restitutions and $500,000 in punitive damages.

In the statement of claim, the Regional Municipality of Wood Buffalo and Alberta Permit Pro, which issues construction permits on behalf of RMWB, is being sued as one. The developers include Alberta Ltd., Prairie Communities Corp., and Dome Britannia Properties within whom Gary Nissen, Evan Welbourn, and builder David Marshall held positions in.…

August 16, 2010

Mold Found in Two Warehouses

Acknowledgement to XL Environmental

A claim was made by a tenant of and against an XL insured real estate holding company. The claim was for the presence of microbial (mold) growth in two warehouses on an insured property.

XL’s environmental claims counsel retained an analytical forensics firm on the insured’s behalf to investigate the buildings and prepare a remediation plan. The claims counsel also retained a third-party remediation contractor to investigate the source of water intrusion. It was ultimately determined that the water infiltration was the result of an aging roof.

The root cause of the microbial growth and corrective action necessary was investigated, approved and monitored by XL. Mold abatement and replacement of insulation was approved and a contractor was hired to perform same.

XL paid $2,000,000 under the insured’s Pollution and Remediation Legal Liability Policy to resolve the claim on our insured’s behalf.…

August 13, 2010

Alleged Negligent Laboratory Analysis

Acknowledgement to XL Environmental

An XL insured laboratory contracted with a general contractor (GC) to provide analysis of mold spores taken from a hospital mold remediation and reconstruction project. Following a failed remediation project, the hospital sued the GC alleging various errors in the GC’s project services. The GC filed a third-party action against our insured for $4,500,000, alleging that failures on the project resulted from the insured’s acts, errors or omissions in its laboratory analysis of the mold spores.

XL’s environmental claims counsel retained local defense counsel to defend the insured in the litigation. XL’s environmental claims counsel and defense counsel worked closely with the insured to investigate the allegations. A determination was made that the insured had used an incorrect procedure for the analysis of the mold spores. However, defense counsel was able to successfully argue that the insured’s alleged negligence did not result in any substantial damages to the GC or hospital.

At a subsequent mediation, the claim was settled against our insured for a fraction of the claimed damages. XL paid $350,000 under the insured’s Professional and Contractor’s Pollution Legal Liability Policy to resolve the claim on the insured’s behalf.…

August 10, 2010

Defective Pipe Causes Mold at Senior Living Community

Acknowledgement to XL Environmental

An XL insured general contractor was hired to construct a senior living community that included two residential towers, plus a care center and parking garage. Upon project completion, excessive moisture and mold growth were discovered in the care center. The moisture and mold problems were severe enough that occupants of the care center had to be relocated. The situation was remediated and the care center was reconstructed under a multi-million dollar change order. Water infiltration was initially believed to have come from a defective pipe penetration created by the mechanical contractor. The owner filed suit alleging over $50 million in damages related to project delay, project defects, and mold.

XL worked closely with the insured and its various insurance carriers to assess the allegations, policies and coverages available. The allegations and damage amounts changed and escalated throughout the claim handling process, reaching $100 million. XL worked with and defended the insured throughout the process. It was ultimately determined that all of the policies except XL’s Environmental policy contained mold exclusions.

Our insured general contractor was ultimately liable for the actions of their subcontractors which included liability for the mold portion of the claim. XL made a timely policy limit payment of $5 million for mold damages, in conjunction with payment by the insured’s general liability carriers for construction defect claims, resulting in a total settlement of over $50 million.…