In a ruling that follows more than 10 years of litigation between a wood recycling plant and its neighbors, a federal appeals court affirmed a lower court and held an insurer is not obligated to provide coverage to the plant’s owner because of policy exclusions.
Neighbors in Elkhart, Indiana, had charged that VIM Recycling Inc.’s waste disposal practices exposed them to dust and odors in violation of federal environmental law, according to Thursday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Carmine Greene, et al. v. Westfield Insurance Co.
The litigation, which involved three separate court cases, eventually led to a default judgment against VIM. “What began as a case about environmental pollution has evolved into a joint garnishment action against VIM’s insurer, Westfield Insurance, to satisfy some of that $50.56 million judgment,” the ruling said.
VIM had acquired general commercial liability policies with Westfield Insurance, a unit of Westfield Center, Ohio-based Ohio Farmers Insurance Co., that ran from January 2004 through January 2008 and obligated the insurer to pay up to $2 million of any judgment against VIM for property damage or bodily injury, according to the ruling.
The coverage required VIM to notify Westfield of claims “as soon as practicable” and that the insurer receive written notice of a claim or suit.
The policy also stated it did not cover losses if the insured knew prior to the policy period of property damage or bodily injury.
Plaintiffs in the case filed suit against Westfield in U.S. District Court in South Bend, Indiana. The court ruled in the insurer’s favor and was affirmed by a three-judge appeals court panel.
“The extent of Westfield’s obligations can be easily resolved (as nonexistent) if VIM — specifically, VIM’s owner Kenneth Will — knew about the neighbor’s injuries before the first policy went into effect on January 1, 2004,” the ruling said.
“Evaluating Will’s knowledge is straightforward. Both the complaint and the undisputed facts at summary judgment supply many examples,” it said.
“Considered collectively, the record supplies overwhelming evidence that VIM – and Kenneth Will in particular — knew about the fugitive dust and resulting injuries before first Westfield policy went into effect. Any damages for those injuries, then, were both known claims and expected injuries,” said the ruling, which stated also that Westfield only heard about the case indirectly from its own lawyer.
The ruling said in affirming the lower court decision that the policy exclusions applied and that Westfield had “no obligation to pay any part of the $50.56 million default judgment the neighbors secured before bringing the insurer into the litigation.”
Westfield attorney John J. Haggerty, a partner with Fox Rothschild LLP in Warrington, Pennsylvania, said in a statement the insurer “is delighted with the ruling, as the Seventh Circuit’s opinion thoughtfully and thoroughly vindicates Westfield and validates its proper handling of this matter from start to finish.”
Plaintiff attorneys did not respond to a request for comment.
In January a federal appeals affirmed a lower court and held Westfield was obligated to defend a contractor in arbitration over a construction project under a provision in its commercial general liability policy.
This article was first published in Business Insurance.