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Importance of Limited Release in Environmental Coverage Dispute

A recent decision from the Indiana Court of Appeals illustrates the importance of using unambiguous language in release agreements with insurance companies, especially in cases involving coverage for cleanup of environmental contamination.

In United States Fidelity and Guaranty Company v. Warsaw Chemical Company, Inc., 49A04-1203-CT-97, the Court reversed a $417,953.00 judgment in favor of Warsaw Chemical Company (“Warsaw”) on its claim against United States Fidelity and Guaranty Co. (“USF&G”), the general liability insurer of Warsaw at the time it learned of environmental contamination at one of its facilities. Warsaw sought reimbursement for the remediation pursuant to its primary and excess liability policies, but USF&G denied coverage under both policies.

In 1992, Warsaw and USF&G entered into the release agreement in exchange for payment of $25,000.00 towards the remediation of the contamination. Unfortunately for Warsaw, the language of the release agreement stated that USF&G would be released and discharged “for any further claims…” Because of this, the Court of Appeals held that this broad language covered both primary and excess policies, despite the fact that the recitals in the agreement only referred to the primary liability policy.  As a result, Warsaw failed to receive reimbursement from its insurer for most of the costs incurred in cleaning up the environmental contamination.

This case shows the importance of careful review and revision prior to entering into a release agreement or any other contract, especially those involving coverage for environmental claims.

For more information on the importance of legal review of insurance policies and other contracts, contact Michael at (812) 423-3183 or MDiRienzo@KDDK.com; or contact any member of the KDDK Environmental Law Practice Team.

About the Author

Mike DiRienzo

Michael E. DiRienzo, a Partner at Kahn, Dees, Donovan & Kahn, LLP, in Evansville, Ind., has more than 10 years of experience assisting clients in the areas of bankruptcy, collection & creditors’ rights law, and complex commercial litigation involving business, environmental, construction and real estate disputes and condemnation proceedings in state and federal courts in Indiana and Illinois. Michael helps KDDK clients effectively resolve disputes and continue to build their businesses.