July 5, 2020

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July 03, 2020

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Insurers Prevail Before Nebraska Supreme Court in Environmental Coverage Dispute

In a case of first impression under Nebraska law, on February 5, 2010, the Nebraska Supreme Court held that a pro-rata, time-on-the-risk allocation methodology is appropriate for environmental contamination spanning many years while also holding that contamination at multiple environmental subsites constitutes a single occurrence. A copy of the Nebraska Supreme Court's opinion is available by clicking here.

Dutton-Lainson Co. v. The Continental Insurance Co. involved coverage for environmental contamination in Hastings, Nebraska that spanned approximately forty years. The insured, Dutton-Lainson Company (Dutton) sought to hold two insurers, The Continental Insurance Company (Continental) and Northern Insurance Company (Northern), jointly and severally liable for nearly five million dollars in damages (plus nearly an additional $5 million in interest, future costs, and attorneys fees). After a bench trial, Judge Peter Bataillon of the District Court for Douglas County, Nebraska awarded Dutton only a fraction of its claimed damages -- entering judgment in the approximate amounts of $475,000 against Continental and $75,000 against Northern.

Dutton appealed the trial court's ruling and the intermediate appellate court was bypassed. On a direct appeal, the Nebraska Supreme Court affirmed. In so doing, the court rejected Dutton's joint and several liability theory and found that the insurers were obligated to pay a pro-rata, time-on-the-risk share of Dutton's damages (including defense and indemnity costs) based upon the number of months that the insurers provided coverage over the forty year period of contamination. The court also found that, even though contamination occurred at four different sites, the underlying cause of the damage was the same and, as a result, the claim arose from a single occurrence. The court also rejected Dutton's challenges to the damage award, including Dutton's request for millions of dollars in prejudgment interest. The court also rejected the insurers' various cross-appeals. Ultimately, the Nebraska Supreme Court found that the insurers did have a duty to defend and indemnify Dutton, but the court's rulings on pro rata allocation, number of occurrences, and the damages issues substantially limited the insurers' coverage obligations as well as established significant positive precedent on these previously unresolved issues in Nebraska.

Eileen King Bower, David F. Cutter and Stephanie L. Haas of Troutman Sanders LLP's Chicago Office served as lead counsel for Continental during trial and on appeal. They were assisted by local Nebraska counsel Robert S. Keith of Engles, Ketcham, Olson & Keith, P.C.
 

©2020 Troutman Sanders LLPNational Law Review, Volume , Number 52

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About this Author

David Cutter, litigation attorney, Troutman Sanders
Lawyer

David F. Cutter is an experienced litigator who focuses his practice on complex commercial disputes. David’s experience spans the range of the litigation process, including pre-suit claim investigation, analysis, and alternative dispute resolution; trial-level work involving temporary and permanent injunctive relief, extensive fact and expert discovery, dispositive motion practice and trial; and securing favorable appellate rulings. Recently, David has had lead roles in obtaining...

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Eileen Bower, Insurance lawyer, Troutman Sanders

Eileen has extensive experience representing insurers in high-exposure, complex insurance coverage disputes arising under various liability policies. She has litigated many “long-tail” environmental and asbestos insurance coverage matters. In that capacity, she has served as lead litigation and trial counsel in several significant matters. She has also argued summary judgment motions in various state and federal trial courts and has acted as lead appellate counsel. Eileen served as national coordinating counsel for a major insurer’s sexual abuse claims. She is often called upon to develop and implement a resolution strategy in difficult, multi-party actions and has consistently achieved highly favorable settlements for her clients.

Eileen regularly counsels clients with respect to underlying claims involving complex insurance coverage issues, including the nature and extent of the duty to defend; “targeted tender”; trigger of coverage; allocation; potential bad faith claims; responding to settlement demands; policyholder and other insurer insolvencies; late notice; and breach of cooperation.
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