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‘Insurance archeologist’ digs up pollution coverage trail

Posted On: Jan. 27, 2017 11:47 AM CST

An opinion by an “insurance archeology” expert is persuasive in establishing that a Travelers Cos. Inc. unit may have been a chemical company’s long-ago insurer, despite only “scanty evidence” available to prove coverage, says a ruling.

U.S. District Judge Kevin McNulty in Newark, New Jersey, largely denied a motion by Travelers to dismiss litigation filed by Clifton, New Jersey-based E.M. Sergeant Pulp & Chemical in his Jan. 19 ruling in E.M. Sergeant Pulp & Chemical Co. Inc. and Sergeant Chemical Co. v. the Travelers Indemnity Co. Inc. and Columbia Insurance Co.
EMS, a distributor of heavy industrial inorganic chemicals and raw materials, owned a piece of real estate in Newark from 1942 to 1984. 

It leased the property for much of that time to Sergeant, which is now defunct.

In 2009, EMS was named as a third-party defendant in a lawsuit for property damage caused by environmental pollution at the site. 

Following an historical search, EMS filed claims with Travelers and Columbia, a Berkshire Hathaway Inc. unit, alleging they had issued policies to EMS and Sergeant in various years from 1943 to 1964. Travelers denied coverage, and EMS filed a complaint against Travelers. Columbia is not involved in the litigation.

Evidence in the case included ledger pages that contained scattered references to Travelers, said the ruling. In his decision, Judge McNulty also pointed to the opinion expressed by Henry R. Booth — who has 30 years of experience in “insurance archaeology,” reconstructing and auditing insurance coverage — that Travelers had provided coverage.

Mr. Booth’s opinion “when added to the secondary evidence of coverage, suffices to create a triable issue,” said the ruling. “It is true that the Travelers coverage suggested by the ledger pages dates from 1948-50 and 1963-65, and there are no relevant ledger entries between 1950 and 1963. Mr. Booth has furnished an opinion, however, that the Travelers coverage was continuous through that period.”

Judge McNulty did side with Travelers on one issue. While EMS contended the policies had limits of $25,000 throughout the entire period of 1948-1964, Judge McNulty said the limit was at most $5,000 per accident/$25,000 aggregate, “or possibly less.”

He granted Travelers’ motion for summary judgment to the extent that the policy limits cannot exceed $5,000 per accident/$25,000 aggregate, but otherwise denied the insurer’s motion to dismiss the case. 

Jennifer E. White, an associate with Hunton & Williams L.L.P. in Washington, said the ruling is significant because the court “balances the evidentiary burdens against the reality of long-term claims, and the reality is that papers and people are often missing by the time the claim is made.”

In this case, she said, the policyholder “still has a long way to go” to obtain coverage, “but the ruling is a positive and necessary first step.”

Ms. White said the issue of missing policies still present themselves in Superfund cases.