Notice of Potential Liability for Environmental Damage Too Late, Appeals Court Says 

By 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.

In Ansul 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 policy.

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 Mangerson wrote.

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 concluded.