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City v. Insurers

March 2012

Sedgwick obtained a favorable appellate ruling on behalf of our insurer clients in the Indiana Court of Appeals. A city sought insurance coverage from both its liability insurers for the costs of complying with the regulatory requirements of the Clean Water Act relating to the emission of pollutants from the city’s combined sewer outflows. In 2009, federal and state environmental agencies filed suit against the city, which resulted in a consent decree. The costs associated with complying with the consent decree were estimated to be about $200 million. The city filed suit against its liability insurance carriers seeking coverage for the environmental agency action.  The city alleged that its liability insurance policies provided coverage for the city's cost of remedial measures required by the government to correct past harm caused by combined sewer overflows and to prevent further harm.  The city sought an award of its past and future defense costs and its past and future indemnity costs, up to policy limits. The trial court granted the insurers' motion for summary judgment, finding that the city's claims did not involve "damages" and/or "ultimate net loss" defined as "sums" on account of property damage caused by an "occurrence."  The city appealed.  On March 23, 2012, the Court of Appeals of Indiana affirmed the trial court's grant of summary judgment to our clients.