Insurer Will Pay $42.5 Million To Cleanup MI, NJ & TN Sites

Jan 9: American International Specialty Lines Insurance Company Inc. (AISLIC) has agreed to pay $42.5 million to clean up contamination at four industrial facilities in a suit in which the Department of Justice intervened on behalf of the Environmental Protection Agency and other agencies. The four sites, formerly owned by Fruit of the Loom, are located in Michigan, New Jersey, and Tennessee. Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance said, "Insurers should take note that they may be liable for the cost of cleaning up their bankrupt clients' environmental messes.EPA will keep pursuing companies who pollute the environment."

Fruit of the Loom filed for bankruptcy in 1999 and the court set up two trusts to receive and distribute the company's remaining assets, including its environmental insurance policies. The trusts subsequently tried to collect environmental cleanup costs from AISLIC, a member company of AIG Insurance, under the insurance policy which covered response costs and natural resource damages under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). AISLIC denied coverage and then brought a suit seeking to confirm that it was not obligated to pay the trusts for these costs.

The settlement resolves a lawsuit that began in 2005 over environmental insurance coverage between AISLIC and the two bankruptcy trusts, and concludes litigation in which the Department of Justice intervened on behalf of EPA, the Department of Interior, the Nuclear Regulatory Commission (NRC), and the National Oceanic and Atmospheric Administration (NOAA). The states of New Jersey, Tennessee, Illinois and Michigan have also joined the settlement.

Under the settlement agreement, AISLIC will make an initial $30 million payment plus interest from May 15, 2007 and ten annual payments of $1.25 million to the Fruit of the Loom trusts. The three largest sites -- the St. Louis, MI, the Bergen County, NJ, and the Toone, TN, sites -- will each receive more than $12.5 million for environmental cleanup and restoration activities. The Breckenridge, MI, site will receive $2.1 million for cleanup. The proposed settlement agreement is subject to a 30-day public comment period. Following public comment, if appropriate, the United States would file a motion for entry with the court, seeking final court approval of the settlement agreement.

Access a release from EPA (click here). Access a fact sheet and link to the 139-page settlement agreement (click here). [*Remed]