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May 8, 2013   State’s High Court Allows Key Insurance Ruling to Stand
By Plews Shadley Racher & Braun LLP

The Indiana Supreme Court has refused to grant transfer on a case that was successfully argued in the Indiana Court of Appeals by Plews Shadley Racher & Braun LLP (PSRB).  The case involves insurance coverage for environmental claims arising from the abandonment of foundry sand from the Daimler Chrysler foundry in Indianapolis.  

PSRB client FLM, LLC had leased a piece of Indianapolis property to International Recycling Inc. (IRI).  IRI entered into a contract with Chrysler to collect, transport and dispose of the foundry sand generated at its Indianapolis facility.  However, in 2002, Chrysler stopped paying IRI and the company could not afford to remove the sand from FLM’s property.  More than 100,000 tons of foundry sand was abandoned on the property.  Some of the sand then migrated onto nearby properties, allegedly causing clogged pipes and water accumulation.  The Indiana Department of Environmental Management (IDEM) ordered the removal of the foundry sand.   The City of Indianapolis followed suit.   FLM then sought to have the removal covered by IRI’s insurance policies with The Cincinnati Insurance Company. 

The decision includes several important rulings.   The Court of Appeals upheld FLM’s argument that personal injury coverage in the policy applies to cover an environmental cleanup, and that the policy’s “contractual liability” exclusions do not bar coverage.  “Personal injury” coverage is a separate coverage found in almost all liability policies that is in addition to bodily injury and property damage coverage.  The contractual liability exclusion did not apply, the Court held, since IRI would have been liable even absent the tenant’s indemnity “agreement” in the lease with FLM.   A concurrence by Judge Bradford found that the abandonment of the sand by the tenant constituted an “occurrence” covered by the policy’s property damage coverage, because although the abandonment was intentional (and compelled by the tenant’s financial woes), the damage resulting was not.  The denial of the transfer request leaves the Court of Appeal’s ruling intact. 

George M. Plews, Jeffrey D. Claflin and Jonathan P. Emenhiser represented FLM in this case.  If you have questions about this or other insurance coverage issues, feel free to contact George, Jeff or Jonathan.    

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