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Regulation of Marijuana under AUMA

Proposition 64, also known as the Adult Use of Marijuana Act (AUMA), was passed into law by the California electorate in November 2016.  This article provides a basic overview of the regulation of marijuana under AUMA, which includes compliance with environmental laws.

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Court holds that insurer has duty to defend in Rev 973 case

Paladin Law Group and one its clients had a victory recently: the U.S. District Court for the Central District of California held that Wilshire Insurance Company has a duty to defend its insured in a lawsuit entitled, Rev 973, LLC v. Mouren-Laurens et al., CV 98-10690-DSF (Ex), alleging liability against thousands of potentially responsible parties for environmental contamination.  Wilshire had argued that there could be no potential for coverage and thus no duty to defend its insured because the claims asserted against him do not allege an “accident” as required by the policies and are excluded from coverage by the qualified pollution and the handling of property exclusions contained in the policies.  The court rejected these arguments.

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California's Reaction to the Drought — Statewide Groundwater Management and $7.5 Billion in Water Funding

In the midst of a multi-year drought, California recently passed two major pieces of legislation which are aimed at having significant impacts to water management statewide.  The first statewide groundwater management legislation in California’s history was enacted as part of the Sustainable Groundwater Management Act.  Then, on the November ballot California voters approved Proposition 1, a $7.5 billion general obligation bond to fund investments in water programs and projects statewide, including programs for water conservation, water recycling, groundwater cleanup, and water storage.  Together, the two pieces of legislation are set to have impacts statewide.

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Bona Fide Prospective Tenants – An Expanded Reading of CERCLA’s Brownfields Amendments

CERCLA has long been the tool of choice for federal regulators to use as a means of forcing cleanup of contaminated properties and is rightly feared by commercial property owners due to the strict, joint and several liability that comes with it.  Although CERCLA was enacted in 1980, the protections afforded to a bona fide prospective purchaser of a contaminated site is a relatively new development created by the Brownfields Amendments.  Newer still is the concept that a tenant can benefit from these protections.

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Ninth Circuit Requires Scrutiny in Approving CERCLA Settlements Under Consent Decrees With State Agencies

The Ninth Circuit recently overturned a district court ruling that had granted approval of consent decrees between the Arizona Department of Environmental Quality and a number of PRPs under CERCLA. The Ninth Circuit held that the district court failed to “independently scrutinize the parties’ agreements” and compounded the error by “deferring completely to the state agency’s judgment that the proposed agreements were fair, reasonable, and consistent with federal law.” The result leaves district courts with a more affirmative duty to dig into the facts before approving a settlement and leaves parties with the responsibility of providing more evidence in the record for the trial court to work with.  Ultimately, the decision will “make it more difficult for states to play the role that Congress envisioned for them in remediating the numerous polluted sites that blight our nation.”

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The Limits of Subrogation under CERCLA – Ninth Circuit Ruling Remains the Precedent

On January 13, 2014, the Supreme Court denied cert on the Ninth Circuit ruling in Chubb Custom Insurance Co. v. Space Systems/Loral, Inc.  This denial leaves the Ninth Circuit’s ruling on subrogation claims under CERCLA as the guiding light on the issue of subrogation and CERCLA’s “tripartite” system of recovering environmental remediation costs.

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AB 440 Fills Redevelopment Void and Breathes New Life to Municipal Prosecution of Environmental Claims

Beginning January 1, 2014, local agencies will have a new, user friendly, and powerful tool to address environmental contamination in areas of urban blight.  Indeed, the Legislature’s purpose in enacting AB 440 is intended to be the “policy successor” to the Polanco Redevelopment Act and will be interpreted and implemented consistent with case law interpreting it.

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San Diego Water Board Issues Updated Permit for Municipal Storm Sewer Systems

You may have heard the buzz recently about new storm water rules and wondered what it was all about.  This article will help you analyze the impact these new rules may have on your business.

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Insurer May Not Sue Independent Counsel for Reimbursement of Unreasonable Defense Costs

A recent decision by the California Court of Appeal held that once an insurer breaches its duty to defend, the insurer may not sue independent counsel hired by the insured for reimbursement fees and costs which were allegedly unreasonable or otherwise outside the scope of the insurer's contractual defense obligations.

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California Supreme Court offers pass to foreign dissolved corporations

The California Supreme Court recently handed down a decision that could make it difficult for plaintiffs, including public agencies, to pursue environmental contamination claims against foreign corporations.  In Greb v. Diamond Intl. Corp. (Feb. 21, 2013) S183365, the California Supreme Court ruled that California’s corporate survival statute (California Corporation Code § 2010) does not apply to foreign corporations.  If this ruling is extended to environmental claims, it could allow foreign dissolved corporations (and the insurers that cover them) to escape liability for the pollution they caused.  Such a result would eviscerate the "polluter pays" intent embedded in environmental laws.

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The “All-Sums-With-Stacking Rule” – California Supreme Court’s “Uber-Policy” Benefits Policyholders on Long-Tail Environmental Claims

On August 9, 2012, the California Supreme Court issued a decision that allows policyholders to recover under multiple liability insurance policies for the same occurrence.  The long-awaited decision in State of California v. Continental Insurance Company, concluded that the “continuous injury trigger” and “all sums rule” for the duty to defend also apply to an insurer’s duty to indemnify.

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Seventh Circuit holds that potentially responsible party cannot avoid joint and several liability under CERCLA because harm it and other companies caused is not “divisible”

In a highly-anticipated decision and a significant contribution to jurisprudence under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the U.S. Court of Appeals for the Seventh Circuit, in United States v. NCR Corp., __ F.3d __, No. 12-2069, 2012 WL 3140191 (7th Cir. Aug. 3, 2012), clarified the apportionment defense to joint and several liability under CERCLA.

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U.S. Supreme Court rules that property owners have right to pre-enforcement judicial review of Environmental Protection Agency compliance orders under Clean Water Act

Rejecting decades of precedent from lower courts, the U.S. Supreme Court in Sackett v. Environmental Protection Agency unanimously ruled on March 21, 2012 that property owners who received a compliance order from the U.S. Environmental Protection Agency (EPA) alleging violations of the Clean Water Act (CWA) may bring a civil action under the Administrative Procedure Act (APA) to challenge the order.

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Cap-and-Trade: First auction cancelled with new legal challenge

The California cap-and-trade and attendant carbon market became effective January 1 2012 and was scheduled to have its first auction in August 2012.  There has been much talk of a legal challenge.  And now we have one.  On March 28, 2012, two environmental groups, the Citizens Climate Lobby and Our Children's Earth Foundation filed suit in San Francisco Superior Court challenging the use of greenhouse gas emission offsets by entities regulated under cap-and-trade to meet their compliance obligations.

 

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Post-Matosantos: Are California cities deprived of both a carrot and a stick to clean up and develop contaminated properties?

On December 29, 2011, the California Supreme Court in California Redevelopment Agency Association v. Matosantos (“Matosantos”) upheld Assembly Bill X1 26 (codified as Health and Safety Code Sections 34161-34191) and invalidated AB X1 27.  Matosantos actuates the dissolution of all California redevelopment agencies (“RDAs”) effective February 1, 2012.  Legal experts sympathetic to the RDAs’ plight still continue to play Monday morning quarterback regarding the case.  However, the reality that California’s highest court played the RDAs’ swan song must now set in, and the appointed Successor Agencies must be prepared to handle a large number of issues immediately.  Not the least important of which is how cities plan to handle contaminated sites within their borders.

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Vapor Intrusion: Resolving liability for contaminated sites just got a little scarier

Environmental lawyers are adept at pointing fingers and ultimately settling liability for contaminated sites based on certain projected costs. Vapor intrusion, which has been a part of the risk analysis for more than a decade, is now making a bigger impact. While new guidance for vapor intrusion at Superfund and Resource Conservation and Recovery Act ("RCRA") sites is expected, the bigger news is that EPA and state agencies are starting to reopen sites where no vapor intrusion analysis was considered in earlier remedial decisions.

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EPA issues new guidance for Brownfield liability protections

The EPA recently released new guidance for Bona Fide Prospective Purchasers interested in acquiring Brownfield sites.  In the guidance document, EPA explained that it does not intend to consider typical indemnity agreements created during a typical title transfer as a disqualifying “affiliation” as was previously understood.  Courts, however, may still reach different conclusions.

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EPA classifies TCE as human carcinogen

Trichloroethylene ("TCE"), a chlorinated solvent used as a degreaser, just moved up the cancer-causing ladder from "probable" carcinogen to a human carcinogen regardless of the route of exposure.  The last EPA assessment of TCE was in 1987.

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Court rules community property law not enough to expose spouse to CERCLA liability

At least one federal court in California believes that the state’s community property law does not expose the spouse of the owner/operator of a facility to CERCLA liability. Wells Fargo Bank, N.A. v. Renz, Case No. 08-2561 (N.D. Cal. 6/9/11). On summary judgment, the court rejected the plaintiff’s argument that the spouse was a "de facto" owner of the dry cleaning business that allegedly contaminated the property with tetrachloroethylene ("PCE" or "perc") simply because, under California law, she shared profits with her deceased husband.  The argument, however, may not be entirely without merit under the right set of facts.

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Bona Fide Purchasers of Contaminated Land Beware – All Appropriate Inquiry is Not Enough

The Bona Fide Prospective Purchaser provision of CERCLA gives liability protection to buyers of contaminated land. The protections afforded to BFPPs are intended to courage Brownfields redevelopment as a means to get contaminated sites cleaned up. Anyone involved in a real estate transaction on a property that may have environmental challenges knows the drill – All Appropriate Inquiry into the site must be conducted. At the very least, that means hiring an environmental consultant to prepare a Phase I Environmental Site Assessment. Depending on the findings, it could also include Phase II sampling. But there are other elements to the BFPP defense too. Those other elements recently became abundantly clear to one developer who learned the hard way.

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Property Owners Should Consider Banking on Wetlands: The Concept of Wetlands Mitigation Banking

The use of market-based instruments is rapidly becoming the next frontier in creating more effective environmental protection.  Specifically, the creation of environmental markets has emerged as a viable means of achieving environmental progress by commodifying environmental impacts and creating markets for their sale.  Wetlands mitigation banking is one such method that merges the often divergent interests of development and environmental conservation by creating financial incentives for landowners to restore, create, enhance, or preserve wetlands in order to compensate for wetlands lost to development.

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U.S. Supreme Court Rejects Global Warming Nuisance Case

The U.S. Supreme Court issued its much-anticipated opinion in American Electric Power v. Connecticut (“AEP”) on June 20, 2011.  The plaintiffs in that case—eight States, three nonprofit land trusts and the City of New York—had hoped to use federal public nuisance law as a tool to curb greenhouse gas (“GHG”) emissions from five large electric power companies.  The Supreme Court, however, unanimously held that the federal courts do not have jurisdiction to hear claims that GHG emissions constitute a public nuisance under federal common law.  According to the Court, any such claims the plaintiffs might have had were displaced by Congress’ delegation of authority under the Clean Air Act to the U.S. Environmental Protection Agency (“EPA”) to regulate GHG emissions and the EPA’s recent efforts to do just that.

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California Supreme Court all but overrules Foster-Gardner finding administrative proceeding constitutes “suit” for purposes of an insurer’s duty to defend

After 12 years of being the only state to have a "bright-line rule" that administrative proceedings are not "suits" under insurance policies, the California Supreme Court appears to has taken a giant "step in the right direction" as Justice Kennard put it in her concurring opinion in Ameron Int’l Corp. v. Insurance Co. of the State of PA (2010) 50 Cal.4th 1370. The High Court’s previous stance was a narrow interpretation of "suit" as a "court proceeding initiated by the filing of a complaint." Foster-Gardner Inc. v. National Union Fire Ins. Co. (1998) 18 Cal. 4th 857, 887. This time, the Court determined that an administrative proceeding before the U.S. Department of Interior Board of Contract Appeals constituted a "suit" triggering the insurers’ duty to defend.

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U.S. Supreme Court to Hear Global Warming Nuisance Case

The U.S. Supreme Court accepted certiorari in American Electric Power v. Connecticut, a case that could resolve whether public nuisance law can be used as a tool to combat global warming and climate change.

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Metal fabricators and finishers beware of new air toxics rule

EPA’s new air rules for small sources of air toxics, or hazardous air pollutants (HAPs), in nine categories of metal fabricating and metal finishing take effect on July 11, 2011.  Facilities that fabricate or finishe metal products should immediately determine the impact of this new rule and what measures must be taken to come into compliance with the applicable standards.

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FTC forces companies to take a hard look at “green” claims

Companies that have been promoting the “green” characteristics of their products or business operations are spending a lot of time revisiting their messaging associated with the environmental attributes of their products, services, or business practices.  And for good reason.  On October 6, 2010, the Federal Trade Commission (“FTC”) released proposed revisions to its Guides for the Use of Environmental Marketing Claims (the “Green Guides”). The proposed Guides crack down on “general” environmental claims and “seals of approval,” and address some new claims such as “made from renewable energy.”  The FTC is soliciting comments on the proposed changes by December 10, 2010. Companies using environmental claims in marketing should study the proposal closely and consider submitting comments to provide the agency with specific information on the scope and effect of the proposals.

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Report: Sins of Greenwashing

There is no question that green claims are on the rise.  One trip to your nearest big box retailer is enough to convince you that we have arrived at a green economy.  Or have we?  On the heals of the the Federal Trade Commission announcing its proposed new Green Guides, TerraChoice released its 2010 report, “Sins of Greenwashing – Home and Family Edition.” 

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Open letter to Larry Florman of Larry Florman & Company Insurance

Paladin Law Group recently completed a successful insurance archaeology and environmental litigation matter for a dry cleaner.  Information provided by the insurance broker for the dry cleaning business, Larry Florman of Larry Florman & Company Insurance, played a key role in our success.  This is an open letter thanking him.

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Will the duty to defend government claims come back to life?

Twelve years ago, the California Supreme Court followed a "bright-line, literal approach" in determining that an insurer’s duty to defend a "suit" is triggered by the filing of complaint in a civil action; anything less is a "claim" which does not trigger the duty to defend. Foster-Gardner, Inc. v. National Union Fire Insurance Co. (1998) 18 Cal.4th 857, 878-888. But the California Court of Appeals recently concluded that a pre-suit notice of a construction defect claim under California’s Calderon Act, Civ. Code § 1375 et seq., is a "suit" and thus triggers an insurer’s duty to defend. Clarendon Am. Ins. Co. v. StarNet Ins. Co. (July 2010) __ Cal.App.4th __, 10 C.D.O.S. 9499. Another insurance coverage case, Ameron Int’l Corp. v. Insurance Co. of the State of Penn. (2007) 150 Cal. App. 4th 1050, also confronted Foster-Gardner’s "bright line" rule, but unlike Clarendon, it felt compelled by Foster-Gardner to reluctantly conclude that an administrative proceeding before the U.S. Department of the Interior Board of Contract Appeals was not a "suit" and thus did not trigger the insurer’s duty to defend. Ameron was heard by the Supreme Court on September 7, 2010.

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New Regulations under RCRA for Coal Combusion Residues

A new proposed rule for coal fired plants may be one of the most significant waste management rules to be proposed in more than a decade.  Wastes generated as a result of coal combustion include fly ash, bottom ash, slag, and flue gas emission control wastes, all of which contribute to climate change.

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Product Labeling – Making Sure Green Really is Green

"Greenwashing" is an important liability concern for companies of all kinds that are promoting the eco-friendliness of their wares.  The Green Claims Regulations published by the FTC is just one place to start an analysis of whether a claim is unfair or deceptive.  This article sets forth some protocols for companies to consider in making sure their claims are defensible.

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Opportunities and Challenges Await Implementation of California’s Green Chemistry Initiative

California has long been viewed as a leader in the development of policies and regulations that create economic development opportunities while enhancing protection of human health and the environment.  The new Green Chemistry legislation - supported by industry - was signed into law last year and is a prime example of this kind of leadership.  The legislation will ultimately lead to safer and more healthful consumer products of all kinds, and will simultaneously create significant opportunity for entrepreneurs to develop alternatives to some of the most toxic chemicals now in use in industry.

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Supreme Court Cuts Polluters a Break in Cleanup Case

The United States Supreme Court ruled against the federal government and declared that Shell and units of Burlington Northern Santa Fe and Union Pacific do not have to pay for most of the $8 million cost to clean a polluted chemical site in California.  Burlington Northern & Santa Fe Railway Co. v. United States, __ S.Ct. __, 2009 WL 1174849 (S. Ct. May 4, 2009).  The court agreed that Shell was not responsible for the damage because it had only provided chemicals to the site and had encouraged proper handling.  With respect to the railroads, the court found their liability could reasonably be apportioned to just 9 percent.

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California’s framework for growth rests in rules set by AB 32

Long before the dramatic shift in Washington that came with last year's presidential election, the State of California made itself a global leader in climate change with the passage of Assembly Bill 32, the Global Warming Solutions Act of 2006. The law required a reduction in greenhouse gas emissions ("GHGs") to 1990 levels by 2020 through regulations to be implemented by the California Air Resource Board ("CARB").  While some oppose AB 32 based on the costs they think it will impose, climate change regulation is now inevitable at the federal level, and not responding to climate change will cost far more than doing so.

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Policyholders Win Critical Environmental Insurance Case in California Supreme Court

On March 9, 2009, the California Supreme Court delivered a much anticipated decision establishing that in determining coverage for environmental contamination where multiple acts or events have contributed to an indivisible amount of contamination, so long as at least one of the events causing the indivisible harm is a covered event, the insurer must provide coverage for the entire amount.  State v. Allstate Ins. Co., Case No. S149988 (Cal. Sup. Ct. March 9, 2009); (2009) 2009 WL 579415.

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Federal green stimulus? Think Transit

The world watched closely Tuesday as the new Obama Administration took office, promising to work quickly with Congress to enact a stimulus package and to reengage in international climate negotiations.  Mass transit infrastructure is critical to these goals - for three reasons.

(Download PDF of Point Carbon News or click "read more" below)

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Stacking Insurance Policies - New Landmark Case in California

On January 5, 2009, the Court of Appeal of the State of California, Fourth Appellate District filed a 76-page opinion permitting insurance policyholders to "stack" multiple years of coverage to obtain recovery for a continuous loss.  The case arises out of the notorious Stringfellows Acid Pit site where a federal court ordered the State of California to pay for the cleanup of the hazardous waste site; a cost that could be as much as $700 million.  State of California v. Continental Ins. Co. (2009) Case No. E041425 (Cal. Ct. App., 4th Dist. January 5, 2009).

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California Environmental Legislation Update 2008

At the close of the recent California legislative session, a slew of new environmental legislation passed. The bills range from placing regional or statewide targets towards reducing greenhouse gas emissions to providing guidelines for implementing cleaner and more sustainable industry. This Quarterly Review provides information and links related to newly enacted environmental bills of 2008.

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AB 32: California’s Framework for Change

Introduction The State of California made itself a global leader in climate change with the passage of Assembly Bill 32, known as the Global Warming Act of 2006.

(Download PDF or click "read more" below)

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The “Innocent Landowner” Defense Proves to be Out of Reach . . . Again

What “innocent landowner” defense? In a recent California case, a developer who unknowingly spread arsenic-contaminated dirt during the construction of a residential project almost thirty years ago was held liable under CERCLA. United States v. Honeywell 542 F. Supp. 2d 1188 (E.D. Cal. 2008).

(Download PDF or click "read more" below)

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“Sustainability” – Buzzword or Legal Duty?

It seems like everyone is talking about “sustainability.”  The past few years have been witness to a whirlwind of change in the environmental community.  With celebrities driving hybrid cars and Hollywood studios purchasing carbon credits, being green has gone mainstream.  In addition, environmental laws regarding climate change and greenhouse gas emissions have been put on the books in California and it looks like federal regulations are soon to follow.  Furthermore, the United States Supreme Court has determined that the EPA has the authority to regulate CO2 emissions.  So the question arises, is “sustainability” good business sense or is it just another legal requirement?  This article, written by two lawyers that recycle, reuse, conserve, compost, and bike to work explores both.

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Recovery of Voluntary Cleanup Costs Under CERCLA – Answers from the High Court

After years of uncertainty on a key issue for environmental lawyers and the clients they represent, the United States Supreme Court in United States v. Atlantic Research Corp., __ U.S. __, 127 S. Ct. 2331 (2007) recently held that a potentially responsible party (“PRP”) may recover costs it incurs in responding to environmental contamination from other PRPs under CERCLA section 107(a).  The decision is important as it finally provides answers to questions that were left open by the High Court’s decision in Cooper Industries v. Aviall Services, Inc., 543 U.S. 157 (2004).  Namely, can a PRP who incurs “voluntary” cleanup costs recover those costs from other PRPs under CERCLA?  The Court said that it can.

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Insurance Archaeology: Looking for Buried Treasure

Lawyers and the businesses they represent often get so involved in defending claims that the availability of historic insurance policies to help defray the costs of defense is not given the attention it deserves.  Even when a search for historic insurance policies is commenced, it is often called off too early, especially considering the value of such policies.  The search for and analysis of historic insurance policies is often called “insurance archaeology.”  Like the traditional archaeologist, the insurance archaeologist digs for evidence – much of it easily passed over by the untrained eye – and painstakingly assembles it to reconstruct a picture of the past – in this case, a business’ insurance coverage from decades ago.

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When Best Management Practices Aren’t Enough – Environmental Laws, Insurance, and the Metal Finishing Industry

So, you’ve taken over dad’s plating company and you think that as long as you maintain good environmental business practices, you’re not at risk of environmental enforcement.  WRONG.  Even if the regulators say you have the cleanest shop they’ve ever stepped into, you may be liable for spills that took place decades ago.

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Looking for Buried Treasure – 40-Year Old Insurance Policies Could Be Worth Millions

GOTCHA!  The garment cleaning industry is on the “most wanted” list for environmental violations and a favorite target among regulators and private parties seeking millions in damages.  More often than not, the industrial laundries and dry cleaners become so involved in defending such claims that the availability of historic insurance policies to help defray the costs of defense is not given the attention it deserves.  Most people assume that a general liability insurance policy they purchased 40 years ago has expired.  Not true!  Indeed, historic insurance policies never expire and could be worth millions!

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Affirmative Defense for Setoff Could Constitute “Suit” Triggering Insurer’s Duty to Defend

A California Court of Appeals recently found that an affirmative defense seeking a setoff could be the functional equivalent of a “suit” seeking damages within the standard duty-to-defend provisions in a comprehensive general liability policy (“CGL”).  The decision in CDM Investors v. Travelers (2006) 139 Cal. App. 4th 1251, refines the literal approach adopted in Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal. App. 4th 857.  A petition for review has been filed.

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Contaminated Collateral - 40 Year Old Insurance Policies Could Be Worth Millions

Most banks and financial institutions are loathe to admit it, but their portfolio of properties and loans include properties that are or may be environmentally impaired.  If the borrower defaults on the loan, the bank will face the unsettling prospect of foreclosing on the contaminated collateral or even foregoing its security.  In other cases, the bank may be a current or former owner of the property.  Whatever the scenario, there are economical steps that should be taken now to protect the value of your collateral and avoid, or at least minimize, your institution’s potential liability.  Indeed, the proactive identification of historical insurance assets could save you millions of dollars on attorneys, environmental consultants, and lost collateral.

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Back from the Dead – Suing dissolved corporations and deceased individuals

Did you know that companies that have dissolved or gone bankrupt can still have claims brought against them?  What about actions against the dearly departed?  While it may seem counter-intuitive to sue a dissolved corporation or a deceased individual (hearken back to the proverbial phrase “you can’t squeeze blood from a turnip”), claims against such entities are viable under California law.

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"Ultimate Net Loss" after Powerine - Another Victory for Policyholders

The California Supreme Court recently handed down an important victory for policyholders in Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal. App. 4th 377 (“Powerine II”).  In Powerine II, the Court held that “standard” excess/umbrella liability policies include potential coverage for environmental cleanup and response costs ordered by an administrative agency.  While the case is particularly pertinent to companies facing administrative cleanup and abatement orders, it could have significant widespread application to umbrella policyholders facing “long-tail” liability.

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The Document Retention Policy Fallacy

DO NOT throw away old insurance policies.  Now days, many accountants are advising their clients to destroy records after a certain number of years.  But this advice could cost your clients millions in lost insurance coverage.  Instead, accountants should qualify any advice with respect to destruction of records so that their clients understand to retain all evidence of historical insurance coverage.  While there may be good reasons to destroy old documents, an exception to this rule for historical insurance policies is crucial – especially when it comes to responding to environmental claims.

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