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A group of excess insurers has won a coverage dispute with an Indiana barge transportation company over environmental cleanup costs at a Louisiana shipyard, after an Indiana appeals court ruled that a standard watercraft exclusion barred the claim.
In Starr Indemnity & Liability Insurance Co. v. American Commercial Barge Linedecided Tuesday by the Indiana Court of Appeals, the court reversed a trial court ruling that had sided with the policyholder. The appeals court held that a watercraft limitation in the excess policies — which excluded coverage for property damage liability “arising out of” the ownership or maintenance of any watercraft — barred coverage for the barge company’s liability under federal Superfund law.
American Commercial Barge Line, based in Indiana, had been identified by the U.S. Environmental Protection Agency as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act for contamination at a Jennings, Louisiana shipyard. The liability traced back to the barge company’s predecessor, which had arranged for barges containing hazardous substances to be delivered to the site for cleaning between 1965 and 1993.
The barge line sought coverage under excess umbrella policies issued by Starr Indemnity, syndicates at Lloyd’s of London, Liberty International Underwriters, StarNet Insurance and XL Specialty Insurance.
The barge company argued that the shipyard operator’s improper storage and handling of hazardous waste, not the barges themselves, was the cause of the contamination. The lower court agreed and ruled that the insurer must pay for cleanup.
Writing for the unanimous three-judge panel, Judge Edward W. Najam Jr., noted that CERCLA applies a strict liability test, which does not depend on a finding of causation or negligence. The barge company’s “strict liability is derived from its predecessor’s act of arranging for barges containing hazardous substances to be delivered to the shipyard…
“This liability, then, clearly and unmistakably arises out of the predecessor’s ownership of the barges.”
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