// Add the new slick-theme.css if you want the default styling
January 2nd, 2018
environmental
INSURER BOUND BY INSURED’S PROMISE TO PARTICIPATE IN ENVIRONMENTAL CLEANUP

The United States District Court for the Southern District of Indiana has ruled that an insurer must bear the costs of a remediation agreement entered into voluntarily by the policyholder without the insurer’s knowledge or consent.  Southern Pilot Ins. Co. v. Matthews Auto Repair, Inc., 2017 BL 425647; No. 17-cv-01027 (S.D. Ind., November 29, 2017).  In 2016, an environmental investigation revealed toxic waste on Matthews Auto’s property.  Subsequently, Matthews Auto entered into a voluntary remediation agreement with the Indiana Department of Environmental Management ( “IDEM”) without notifying its insurer.

Matthews Auto claimed the agreement was covered by the insurance policy.  The insurer filed a Second Amended Complaint for Declaratory Judgment asserting Matthews Auto breached the insurance policy by entering into the remediation agreement with IDEM without first obtaining the insurer’s consent.  The insurer argued Matthews Auto assumed both liability and the obligation to remediate the property to IDEM’s standard, which is a violation of the Voluntary Payment Provision and results in a loss of coverage. 

The District Court rejected this argument, finding the remediation agreement was merely a “plan” between Matthews Auto and IDEM.  This “plan” did not establish that Matthews Auto was in fact liable for the contamination on the Property, nor did it set forth an amount of money Matthews Auto would pay IDEM to settle a legal dispute.  Matthews Auto could also withdraw from the remediation agreement without penalty.  Based upon these factors, the District Court held the insurer failed to establish Matthews Auto violated the policy’s Voluntary Payment Provision.

SHARE THIS ARTICLE:
NEWSLETTER
VISIT US