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Insurers don't have to pay for Land O'Lakes environmental cleanup: Court

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Insurers don't have to pay for Land O'Lakes environmental cleanup: Court

Units of Liberty Mutual Holding Co. Inc. and Travelers Cos. Inc. initially breached their duty to Land O'Lakes Inc. for failing to provide defense coverage for an environmental cleanup, but Minnesota's statute of limitation bars the agricultural cooperative from pursuing litigation on the issue, an appellate court ruled Thursday.

Midland Cooperatives Inc. owned an oil refinery in Cushing, Okla., from 1943 until 1977, according to the ruling in Land O'Lakes Inc. v. Employers Insurance Co. of Wausau et al. by the 8th U.S. Circuit Court of Appeals in St. Louis.

In 1977, the facility was sold to Hudson Oil Refinery Co., which abandoned the refinery in 1982 and went bankrupt in 1984. Arden Hills, Minn.-based Land O' Lakes acquired Midland in 1982, including the now-dormant refinery, according to the ruling.

In July 1999, the U.S. Environmental Protection Agency designated the refinery as a Superfund site under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

In January 2001, the EPA sent Land O'Lakes a special notice letter informing it that it was considered a “potentially responsible party” under CERCLA and thus potentially liable for cleanup costs at the site.

Land O'Lakes responded to the letter by asserting Hudson Oil, not Midland, caused any contamination at the refinery site, but nevertheless notified Wausau, a unit of Boston-based Liberty Mutual and Hartford, Conn.-based Travelers Indemnity Co. of the EPA's claims and sought defense and indemnification. Both insurers denied coverage.

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In 2008, the EPA sent Land O'Lakes a second special notice letter inviting it to enter negotiations regarding the continued cleanup activities at the refinery. Land O'Lakes reiterated its denial that Midland had caused any contamination at the site and again asked the insurers for defense and indemnification, which both once again denied coverage.

Land O'Lakes did initiate cleanup activities at the site. It filed breach of contract lawsuits against the insurers in 2009.

A three-judge panel of the 8th Circuit upheld a ruling by the U.S. District Court in Minneapolis that Minnesota's six-year statute of limitations began with the EPA's 2001 letter, and therefore the cooperative could not pursue its litigation.

Land O'Lakes argued that the 2001 letter was nothing more than an “invitation to participate in an investigation into whether remediation would be necessary at the refinery site. We disagree,” said the ruling.

Instead, the 2001 letter “marked the beginning of an adversarial administrative process that ultimately sought to impose liability upon Land O'Lakes for remediation costs associated with the refinery site,” said the unanimous ruling.

“We agree with the district court that the insurers breached their duty to defend in 2001” because the EPA's later “was a 'suit' for arguably-covered damages as contemplated under the pertinent (comprehensive general liability) policies” and that the EPA's 2008 letter “was not the commencement of an entirely new enforcement action. We, therefore, hold that 2009's duty-to-defend claims were barred by the Minnesota statute of limitations.”

The appellate court also upheld the lower court's ruling that the owned-property exclusion in the policies relieved the insurers from any duty to indemnify Land O'Lakes for the cleanup costs.