London Insurers Win Seattle Pollution Trial

July 8, 2003

Lloyd’s Underwriters and other London Market Insurers announced that a Seattle jury had found in their favor after a three week trial in their dispute with Puget Sound Energy, Inc. (“PSE”), a large gas and electric utility servicing western Washington.

According to the bulletin, PSE sued to compel the London-based insurers to pay for the costs PSE claimed that it had incurred in cleaning up three contaminated Washington sites owned and operated by PSE over many decades. They had provided excess third party liability insurance coverage between 1939 and 1943 and from 1951 to 1965.

The case has been in litigation for many years, as the London insurers denied PSE’s claims, citing the following reasons:

(1) PSE was improperly trying to recover the costs that it had incurred to prepare the sites for sale and redevelopment. It was also seeking recovery of the costs of cleaning up its own contaminated property. The London liability policies only covered damage to third party property.

(2) There was no reliable evidence that the contamination at the sites was the result of an accident or occurrence, as required by the London policies, but rather was the result of PSE’s usual business practices and method of operations; and

(3) There was no evidence that any damage to the property of others took place during any of the London policy periods.

The jury held that the insurers had no obligation to reimburse PSE for the over $3 million in costs that it had been seeking for two of the sites. At a third site, the jury awarded only a fraction of the sum PSE had originally sought to recover.

Simon Wright, Head of Asbestos, Pollution and Health Hazard Claims for Equitas’ (the Lloyd’s runoff vehicle for liabilities prior to 1992), commented: “This is an important ruling. The jury reaffirmed the fundamental fact that the policies in dispute only cover third party liabilities. In our view it remains absolutely clear that the damages at issue in this litigation do not arise from any accident or occurrence during the London policy periods, but are a direct consequence of PSE’s usual business practices and operations over many decades and its disregard for the environmental consequences of its behaviour.”

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