U.S. Ninth Circuit Affirms Dismissal of Insurance Company's Subrogation Suit Under CERCLA


On March 15, 2013, the United States Court of Appeals, Ninth Circuit, issued an opinion affirming the U.S. District Court for the Northern District of California’s dismissal of an insurance company’s subrogation suit under CERCLA (a/k/a Superfund) for recovery of earlier payments to the policyholder for environmental response costs.

The decision indicates that insurance companies do not have an independent route to CERCLA contribution and must work with their policyholders in seeking subrogation if and when appropriate. The case is Chubb Custom Ins. Co. v. Space Systems/Loral, Inc.; Ford Motor Co.; Sun Microsystems, Inc.; Chevron Corp.; and Harman Stevenson Inc., No. 11-16272.

The 2-1 decision held that the insurance company lacked standing to bring suit under CERCLA Section 107(a) because it did not incur "costs of response" related to removal or remediation of the polluted site, and because the common law principle of subrogation does not apply to Section 107(a). Claims under Section 112(c) were also barred because the insurance company [Chubb] did not allege that the policyholder was a "claimant," or that it made a claim under the Superfund or to another potentially liable party.

John G. Nevius, a shareholder in Anderson Kill & Olick's insurance recovery group, submitted an Amicus brief on behalf of United Policyholders and participated in oral arguments in the case on November 8, 2012. Kevin T. Haroff of Marten Law represented Ford Motor Company, and Robert C. Goodman of Rogers Joseph O'Donnell represented Chevron Corporation.

Mr. Nevius commented, "The decision is important because it prevents insurance companies from, among other things, providing minimal coverage and then using CERCLA contribution principles to off-set the liability which they accepted premiums to take on. Subrogation is an equitable principle based upon tort and wrongful behavior. Potentially Responsible Parties under CERCLA may or may not have been at fault with respect to how contamination came to be. Insurance companies do not always stand directly in the shoes of their policyholder PRPs and should be required to establish an equitable basis for subrogation rather than merely rely on the fact that some money was spent and take advantage of the complexities of CERCLA."

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