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Salt mining firm loses bid to scupper AIG, Zurich settlement

Posted On: Mar. 2, 2021 2:33 PM CST

Texas Brine

A policyholder does not have standing to object to a $1 million settlement reached by units of American International Group Inc. and Zurich Insurance Group Ltd. in connection with a huge Louisiana sinkhole, a federal appeals court ruled Monday.

The case, which is part of much larger litigation, involves the emergence of the Bayou Corne sinkhole in Assumption Parish, Louisiana, nearly ten years ago, according to Monday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Dianne Sanchez et al. v. Texas Brine Co.; American Guarantee & Liability Insurance Co. et al.

In August 2012, a salt dome operated by Houston-based Texas Brine collapsed creating a sinkhole that has expanded to about 34 acres, swallowing trees in its path and releasing methane gas, according to news reports.

Before the collapse, units of AIG and Zurich had insured Texas Brine, which had conducted decades-long salt-mining activities in the area. 

AIG and Zurich reached a $1 million settlement with a group of area landowners related to pre-sinkhole subsidence damage, the ruling said. Texas Brine, which was not a party to the settlement, objected because the settlement did not release all of plaintiffs’ claims against the company.

Texas Brine’s objection to the settlement was denied by the U.S. District Court in New Orleans, which was affirmed by a unanimous three-judge appeals court panel. 

“Texas Brine has standing to object to the settlement ... only if it has suffered plain legal prejudice because of the settlement between plaintiffs and pre-2012 insurers,” the ruling said.

The panel concluded this was not the case.  “Texas Brine has failed to show plain legal prejudice from the settlement agreement,” the ruling concludes.

“Texas Brine has not shown that it has a right to contribution nor indemnification from the pre-2012 insurers for the post-sinkhole claims.

“The settlement, therefore, did not affect any such right. Texas Brine lacks standing as a nonparty to object to the settlement,” the panel said, in dismissing the litigation.