Insurer to Pay $42 M Cleanup Cost for Bankrupt ClientInsurer to Pay $42 M Cleanup Cost for Bankrupt Client
American International Specialty Lines Insurance Co. Inc. (AISLIC)
agreed to pay $42.5 million to clean up contamination at four
industrial facilities, EPA announced. The four sites, formerly owned by
Fruit of the Loom, are located in Michigan, New Jersey and Tennessee.
"Insurers should take note that they may be liable for the cost of
cleaning up their bankrupt clients' environmental messes," said Granta
Nakayama, assistant administrator for EPA's Office of Enforcement and
Compliance Assurance. "EPA will keep pursuing companies who pollute the
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 that covered
response costs and natural resource damages under the Comprehensive
Environmental Response, Compensation, and Liability Act. AISLIC denied
coverage and then brought a suit seeking to confirm that it was not
obligated to pay the trusts for these costs.
This 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 U.S. Department of Justice
intervened on behalf of EPA, the Department of Interior, the Nuclear
Regulatory Commission and the National Oceanic and Atmospheric
Administration. The states of New Jersey, Tennessee, Illinois and
Michigan also have joined the settlement.
Under the settlement agreement, AISLIC will make an initial $30
million payment plus interest from May 15, 2007, and 10 annual payments
of $1.25 million to the Fruit of the Loom trusts.
More information on the AISLIC bankruptcy settlement can be found at http://www.epa.gov/compliance/resources/cases/cleanup/cercla/aislic.html.