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.