Notice of Potential Liability for Environmental Damage Too Late,
Appeals Court Says
By org jforward wisbar Joe Forward, Legal Writer, State
Bar of Wisconsin
Nov. 27, 2012 – A corporation ordered to remediate arsenic
discharges that occurred around Marinette from the
late 1950s to the early 1970s isn’t
covered by excess insurance.
Inc. v. Certain Underwriters at Lloyd’s & London Market
Ins., 2011AP2596 (Nov. 27, 2012), the District III
Wisconsin Court of Appeals ruled that Marinette-based Ansul Inc., a
subsidiary of Tyco International, did not timely notify its insurance
underwriter of potential liabilities that would trigger claims under all
nine of its excess insurance policies.
For a 20-year period starting in 1957, Ansul produced agricultural
herbicides. Arsenic salt was a byproduct that Ansul both discharged into
the Menominee River and stored in unlined waste piles on land. In 1971,
Wisconsin Department of Natural Resources got involved.
Acknowledging its role in arsenic salt discharges to land and water,
Ansul began budgeting for clean-up costs in 1979. Ansul’s excess
insurance policies had “attachment points” defining the
liability amount that would trigger excess coverage under each insurance
For instance, one policy providing coverage attached at $16 million,
meaning the excess policy did not trigger until liability reached the
$16 million threshold.
However, those policies also included provisions relating to
“notice” and “cooperation,” requiring Ansul to
notify the insurer of potential liability “likely to involve the
policy” and to cooperate with the insurer to defend any claims or
lawsuits against Ansul.
By 1986, Ansul had spent $11 million on remediation, and established a
$5 million reserve to continue the effort, now joined by the federal
Environmental Protection Agency (EPA). In 1991, it estimated future
costs associated with clean-up between $8 million to $15 million.
Ansul notified underwriter Lloyd’s & London Market Insurance
of potential liability in 1997, when it filed a declaratory action in
New Hampshire. In 2004, Ansul filed suit for excess insurance coverage
in Wisconsin. The circuit court agreed that Ansul did not timely notify
Lloyd’s of potential liability and granted summary judgment to
Lloyd’s on the coverage issue.
A three-judge appeals panel recently upheld that decision.
Ansul conceded that notice was not timely as to eight excess insurance
policies, but not the one triggered at the $16 million threshold.
However, the appeals panel noted that as of 1991, Ansul had spent $11
million and estimated spending $8 million to $15 million more.
“Thus, by 1991 at the latest, Ansul should have known its
liability for the contamination at the Menominee River site was likely
to reach the $16 million dollar attachment point for the policy,”
wrote Judge Mark Mangerson. “Nonetheless, it waited six years to
notify Lloyd’s of the claim, well after its other insurers had
been notified. This constitutes unreasonable delay.”
The panel noted that Ansul did not rebut the presumption of prejudice
that must be overcome when untimely notice exceeds a year. “Timely
notice is critical because an insurer needs an opportunity to
investigate possible claims against the policy or its insured while the
witnesses are available and their memories are fresh,” Judge
Ansul also breached the “cooperation” provision by not
providing Lloyd’s with an opportunity to cooperate in the defense
of claims likely to involve the excess policies, the panel