KOM Obtains Favorable Insurance Coverage Decision From The Nebraska Supreme Court
Kupelian Ormond and Magy, P.C. recently obtained a favorable decision for its client, Northern Insurance Company of New York, from the Nebraska Supreme Court in a case involving complex insurance coverage issues and issues of first impression for that court.
The case involved an insured, Dutton-Lainson Company, which had engaged in manufacturing operations and waste disposal practices for decades that resulted in significant environmental contamination at four subsites in the Hastings, Nebraska area. Dutton sought recovery from Northern and another of its insurers for over $5 million in costs incurred in cleaning up the contamination, as well as nearly $5 million in interest and attorney’s fees. After a two week trial, the trial court determined that Dutton could only recover approximately $75,000 from Northern, and made other findings favorable to Northern. Dutton appealed the trial court’s decision, and the appeal was sent directly to the Nebraska Supreme Court.
On February 5, 2010, the Nebraska Supreme Court affirmed the trial court, holding that Northern was not responsible for paying the full amount of the millions of dollars of remediation costs incurred by Dutton, but only its pro-rata share of the costs, which totaled approximately $75,000. In making this determination, the Court rejected Dutton’s argument that each insurer was liable for the full amount of the alleged damages (i.e., a joint and several liability argument), and instead adopted a “time-on-the-risk” allocation method to determine the amount Dutton could recover under the Northern policies. Pursuant to this method, the Court agreed with Northern that it was responsible only for property damage that occurred during its policy period, and therefore Dutton could only recover from Northern a small percentage of the total remediation costs, since Northern only insured Dutton for 14 months of the 40 year time period involved.
The Nebraska Supreme Court also affirmed the trial court on a variety of other issues in Northern’s favor, including finding that Dutton provided prejudicially late notice to Northern for two of the four contaminated subsites at issue, and that Dutton’s failure to provide timely notice to Northern was not excused on the grounds that it would have been useless. Because of this prejudicially late notice, Dutton was unable to recover from Northern any of the remediation costs it incurred in cleaning up these two subsites. The Court also held that there was only one “occurrence” as defined by the Northern policies, which was the ongoing manufacturing operations of Dutton that ultimately resulted in contamination at the four subsites. Finally, the Court found that Dutton could not recover over $1 million in internal employee costs it claimed it incurred in connection with remediating the subsites, because the evidence it presented on this issue was speculative and conjectural.
Peter B. Kupelian and Carol G. Schley represented Northern in this matter, with Mr. Kupelian trying the case on behalf of Northern during the two week trial in July 2008. The Nebraska Supreme Court’s decision has been published and can be found on the Nebraska Supreme Court’s website at www.supremecourt.ne.gov/opinions/2010/february/feb5/s09-164.pdf.