Jury Could Decide Whether Insurer Must Pay $5 million for PCB Contamination

By Joe Forward, Legal Writer, State Bar of Wisconsin

Sept. 25, 2012 – A jury could decide whether a corporation or its insurer must pay $5 million for releasing toxic chemicals into the Fox River through 1971, under a state appeals court decision.

NCR Corporation, which owned paper mills along the Fox River, became partially responsible for polychlorinated biphenyl (PCB) pollution during a 16-year period through 1971 under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

NCR is under federal court orders to continue remediation efforts that began in 2009. In state court, NCR filed coverage actions against 25 insurers on more than 80 insurance policies issued between 1953 and 1985, including a $5 million policy issued by Transport Insurance Co. in 1983.

Most insurers settled, but Transport argued that NCR is not covered under the 1983 policy, which only covered accidents or events causing personal injury or property damage that was “neither expected nor intended from the standpoint of the insured.”

NCR should have expected that discharged PCBs would eventually cause damage when the policy was issued in the mid-1980s, Transport argued. The circuit court granted summary judgment to NCR, concluding that pollution damage was neither expected nor intended.

In NCR Corp. v. Transport Ins. Co., 2011AP192 (Sept. 25, 2012), a three-judge panel for the District III Wisconsin Court of Appeals affirmed in part and reversed in part.

It agreed with the circuit court’s conclusion that NCR’s expectation of environmental damage must be evaluated at the time of the act causing damage (not the date of policy inception), in this case the discharge of PCBs through 1971.

However, the panel reversed on summary judgment, concluding that a jury must decide whether NCR expected environmental damage to occur when it discharged PCBs.

In the early 1970s, the appeals panel explained, there was some information that PCBs could cause environmental damage, but no state or federal laws regulated PCB discharges. It noted that NCR, at some point, should have expected that PCBs would cause environmental damage if discharged, but that point is unclear. Thus, material facts are still in dispute.

“Therefore, it is appropriate for a jury to determine what NCR actually knew or expected and when it gained that knowledge or expectation,” wrote Judge Michael Hoover.

The panel also rejected Transport’s argument that Ohio law, not Wisconsin law, should apply under a choice-of-law analysis, in part because NCR is headquartered in Ohio. Unlike Wisconsin law, Ohio law would preclude coverage for NCR’s liability, Transport asserted. However, ruling that Wisconsin law applies, the panel largely relied on the location of the conduct and injury.