Supreme Court Declines to Hear Chubb's Appeal on CERCLA Subrogation Suit

New York, NY (January 15, 2014) -- The U.S. Supreme Court declined on January 13 to review a Ninth Circuit opinion affirming the U.S. District Court for the Northern District of California’s dismissal of an insurance company’s subrogation suit under CERCLA (aka Superfund) for recovery of earlier payments to the policyholder for environmental response costs.  

The Ninth Circuit case is Chubb Custom Ins. Co. v. Space Systems/Loral, Inc.; Ford Motor Co.; Sun Microsystems, Inc.; Chevron Corp.; and Harman Stevenson Inc., No. 11-16272 (the Supreme Court Docket No. 13-412).  

Anderson Kill shareholders John G. Nevius and Alexander D. Hardiman, and Anderson Kill attorney Peter A. Halprin, submitted an amicus brief on behalf of United Policyholders, and Mr. Nevius participated in oral arguments before the Ninth Circuit on November 8, 2012.  

Mr. Halprin commented on the Supreme Court’s decline to review, "This is very good news for policyholders. The fact that the Ninth Circuit decision is the final word on this subject will prevent insurance companies from using CERCLA contribution principles to offset their liability." 

The 2-1 Ninth Circuit panel decision, issued on March 15, 2013, held that the insurance company lacked standing to bring suit under CERCLA Section 107(a) because it did not incur “costs of response” related to removal or remediation of the polluted site, and because the common law principle of subrogation does not apply to Section 107(a).  Claims under Section 112(c) were also barred because the insurance company [Chubb] did not allege that the policyholder was a “claimant,” or that it made a claim under the Superfund or to another potentially liable party.

Chubb sought panel rehearing and rehearing en banc but its petitions for relief were denied on July 3, 2013.  In September 2013, Chubb petitioned the Supreme Court of the United States for certiorari.  This petition was denied yesterday.

The amicus brief submitted by Anderson Kill  focused in part on the insurance industry's argument that "the lower Court's decision undermines the economic underpinnings of the insurance industry and that affirming the lower Court's decision 'will have a detrimental effect on the availability of insurance used (directly or indirectly) to fund remediation.'"

In an argument later echoed in the Ninth Circuit decision, the brief countered, "On the contrary, the market for environmental insurance is robust and will not change as a result of this Court's decision. In fact, the insurance industry continues to post record profits and the number of companies selling "environmental" insurance continues to grow exponentially...[as William Pritchard Jr. notes in  Pollution Solution], '2010 saw a rapid expansion of the environmental insurance market in the face of daunting conditions.'" (Amicus at 12-13).

The Ninth Circuit decision, written by Judge Milan D. Smith, Jr., similarly asserted:

Furthermore, there is no evidence that insurance companies rely on the availability of CERCLA remedies in issuing environmental policies. Nor is there evidence that insurers depend on CERCLA recoveries to stay in business. ...Here, Chubb assumed the risk that it would have to pay on the Policy and received premium payments (totaling nearly $200,000) to compensate it for assuming that risk. Additionally, at present, despite the apparent paucity of cases in which insurers have successfully brought a subrogation claim under section 107(a), the market for environmental insurance companies appears to be robust and growing. See William Pritchard Jr., Pollution Solution, American Agent & Broker (Feb. 2011). Decision at 37.

The decision's assertion that Chubb "assumed the risk that it would have to pay on the Policy" independent of any possibility of CERCLA remedies is also congruent with the United Policyholder argument that "policyholder Taube-Koret Campus Fund for Jewish Life paid premiums to Chubb to cover exactly the type of loss suffered as a result of the requirement to remediate contaminated property.  As is the nature of insurance, Chubb assumed the risk that it would have to pay on the policy, and received premium payments to compensate it for assuming that risk.” (Amicus at 11.)

About Anderson Kill

Anderson Kill practices law in the areas of Insurance Recovery, Commercial Litigation, Environmental Law, Estate, Trusts and Tax Services, Corporate and Securities, Antitrust, Banking and Lending, Bankruptcy and Restructuring, Real Estate and Construction, Foreign Investment Recovery, Public Law, Government Affairs, Employment and Labor Law, Captive Insurance, Intellectual Property, Corporate Tax, Hospitality, and Health Reform. Recognized nationwide by Chambers USA for Client Service and Commercial Awareness, and best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes - with no ties to insurance companies and has no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Ventura, CA,  Stamford, CT, Washington, DC, Newark, NJ, and Philadelphia, PA.

For more information about LexisNexis products and solutions, connect with us through our corporate site