WASHINGTON--An American International Group Inc. subsidiary has agreed to pay $42.5 million in a settlement to clean up several contaminated manufacturing and dump sites formerly owned by Fruit of the Loom Inc., federal officials announced Wednesday.
The sites are in Michigan, New Jersey and Tennessee.
The settlement requires American International Specialty Lines Insurance Co. to make an initial $30 million payment plus interest from May 15, 2007, and 10 annual payments of $1.25 million to two Fruit of the Loom trusts, which were set up to receive and distribute the company's remaining assets, including its environmental insurance policies, after the company filed for bankruptcy protection in 1999.
The settlement comes after NWI-I Inc., one of the Fruit of the Loom conglomerates that later was purchased by Berkshire Hathaway Inc., tried to collect the $100 million limit of its pollution liability policy obtained through AISLIC to cover its cleanup costs at former manufacturing sites.
In 2005, AISLIC filed suit in federal court in Chicago against NWI, charging the conglomerate breached the terms of its policy when it agreed to transfer its coverage rights to the bankruptcy trusts (BI, Nov. 21, 2005).
The Department of Justice intervened with a suit on behalf of the Environmental Protection Agency, the Department of the Interior, the Nuclear Regulatory Commission and the National Oceanic and Atmospheric Administration.
"Insurers should take note that they may be liable for the cost of cleaning up their bankrupt clients' environmental messes," said Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance, in a statement. "EPA will keep pursuing companies who pollute the environment."
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