Travelers vs. Maplehurst II – Liability for Pre-Notice Environmental Remediation Costs and Expenses

Dean FoodsThe Indiana Court of Appeals gives us this opinion related to an insurer’s obligation  for pre-notice remediation costs.

In 1997, Maplehurst Farms sold its property to Dean Foods.  Dean then discovered environmental contamination on the property as a result of underground storage tanks dating from the 1950s. Travelers vs. Maplehurst II

Maplehurst submitted a corrective action plan to IDEM in September 2002. Later in 2002, Maplehurst and Dean entered into a settlement agreement. The agreement acknowledged the existence of the corrective action plan.

Maplehurst then attempted to recover for cleanup costs from three of its insurers. Travelers denied Maplehurst’s claim and refused to provide a defense. Travelers had been notified of the issues in mid-2003. In 2004, IDEM issued a revised corrective action plan.

The denial of coverage made it to the Court of Appeals in 2011, in which the judges held that Travelers does not have to pay pre-notice costs and expenses. However, the Court of Appeals held that the Travelers was liable for the costs and expenses that Maplehurst incurred after it notified Travelers of the claim.  The trial court entered judgment against Travelers for more than $512,000.  Travelers vs. Maplehurst I

This case involved a determination as to when Maplehurst incurred the costs and expenses at issue. Judge Barnes wrote that “Maplehurst clearly obligated itself to remediate the property when it entered into the Dean Settlement, not when IDEM approved the final CAP. The final CAP merely described how Maplehurst would be required to remediate the property; Maplehurst agreed in the Dean Settlement to remediate to IDEM’s standards long before Travelers was notified of the claim.”.

“Although some of the remediation occurred after notice to Travelers, all of the post-notice costs at issue flowed from the Dean Settlement. As Travelers points out, an award of such costs would allow an insured to settle a claim, notify the insurer, and obligate the insurer to cover the settlement. Such a result would violate the policy provision that prevents an insured from voluntarily assuming any obligation without the insurer’s consent.”

The court concluded that the trial court erred when it interpreted Maplehurst I to require Travelers to pay costs that were incurred as a result of the Dean Settlement. The trial court was reversed.

Posted in Hazardous Waste, IDEM, Indiana Cases, Insurance Coverage | Leave a comment

Failure to Name Lienholder Is Not Cause for Dismissal of Inverse Condemnation Case

Storm DrainIn 2007, the Town of Yorktown and the Delaware County Drainage Board decided to improve storm drainage. The affected area included Snyder’s real estate. She did not agree to an easement or right-of-way. The local units of government proceeded with the project across her property anyway.  In her lawsuit, Snyder asserted claims of trespass and inverse condemnation. Snyder vs. Yorktown.

Snyder asserts that the project has caused damage to her property due to storm water, debris and pollutant run off flowing into the new drain and her property.

Snyder said she was unable to determine which entity was responsible for the project for four years. She finally figured it out in 2011 and then filed a tort claim notice. The trial court dismissed the trespass claim and the Indiana Court of Appeals affirmed.

The trial court also dismissed the inverse condemnation claim. The governmental units had argued that because she failed to notify/include her mortgagee of her claim, it should be dismissed. The Court of Appeals held that notification of a mortgagee is not grounds for dismissal. The Indiana Supreme Court has previously held that the failure to name all interested parties is not a jurisdictional defect in a condemnation action. It can be remedied by permitting the mortgagee to intervene.

The case was remanded for further proceedings.

Posted in Indiana Cases, Planning and Zoning, Real Estate

ERB Approves Proposed Rule regarding Off-Site Manure Ponds

Manure PondIndiana’s Environmental Rules Board unanimously approved draft rules related to off-site manure ponds and lagoons on Wednesday, October 15. These are Indiana’s initial set of rules governing stand-alone off-site ponds and lagoons built to hold manure trucked in from livestock farms. The rules would apply to earthen ponds, lagoons, tanks and other structures designed to store at least 1 million gallons of manure. 327 IAC 19 Proposed Rule.

Indiana has regulated manure storage at livestock farms since 1971. The new rules, if adopted in final form, are the first for “satellite” manure ponds, lagoons, tanks and other structures located off-site of livestock farms that serve as holding basins for manure trucked in from such farms.

Kim Ferraro, the Hoosier Environmental Council’s water and agriculture policy director, said the proposed rules for lagoons don’t provide sufficient buffer zones around sinkholes and other areas with porous limestone geology where surface and groundwater often mix. She said that poses a threat to private wells. “It’s quite frankly an unconscionable disregard of the environment and the health of people who live in rural communities and rely on well water for their drinking water,” Ferraro said.

Citizens Action Coalition maintained that the draft rules are “grossly inadequate” compared with what’s needed to protect Indiana’s public health and its water supplies.  Earthen manure lagoons can fail or leak during heavy rain events and taint the groundwater that rural residents rely on for private wells to provide their drinking water. CAC argued that the rules detailing the construction, management and operation standards for the manure lagoons will spur an influx of manure from livestock farms in other states.

The Indiana Pork Advocacy Coalition disputed that contention, saying the rules would actually make it more difficult to bring manure into Indiana from other states, in part because the storage basins would require state approval. It maintains that such lagoons give livestock farmers a chance to sell some of their manure to crop farmers, who apply the liquid waste to their land as an alternative to commercial fertilizer.

Bruce Palin, assistant commissioner of the Indiana Department of Environmental Management’s office of land quality, said Indiana currently has three off-site manure lagoons, one of which is part of a livestock farm operation but is not located on that farm.

Posted in Agriculture, Clean Water, Hazardous Waste, IDEM

Emmy Award-Winning Filmmaker to Speak at Annual Environmental Forum

The Hoosier Environmental Council has announced Gaslandthat Josh Fox, director of the Academy Award-nominated film Gasland, will headline the 7th annual “Greening the Statehouse” conference on Saturday, October 25, 2014 from 8:30-11:30 a.m. at the IMAX in the Indiana State Museum.

Gasland is a 2010 documentary written and directed by Fox. Nominated for an Academy Award for Best Documentary in 2011, the film focuses on communities in the United States affected by natural gas drilling and, specifically, a method of horizontal drilling into shale formations known as hydraulic fracturing.  

In 2008, Fox received a letter from a natural gas company interested in leasing his family’s land in the Delaware River Basin for drilling. Disturbed by the letter, he embarked on an odyssey to glean as much information as possible about significantly expanded natural gas drilling in the US — with movie camera in hand. Fox has won numerous awards for Gasland, including the Emmy Award for Outstanding Direction for Nonfiction Programming, the Sundance Film Festival Special Jury Prize, and a Sarasota Film Festival Special Jury Prize. 

“Josh Fox’s films tell, at one level, the story of growing, nationwide concern about groundwater contamination risks and air pollution arising from the recent natural gas boom, says Jesse Kharbanda, executive director of the Hoosier Environmental Council.  “But the films tell, at a deeper level, a story that is extremely relevant to Indiana – that when elected officials zealously seek to weaken or resist sensible environmental protections, they are putting their citizens’ health and livelihoods in danger.   This deeper story must be kept in mind as we anticipate disturbing plans to harm environmental protections during the 2015 session of the Indiana General Assembly.” 

The film generated significant controversy, particularly within the oil and gas industry. The New York Times took a critical look at the assertions made in the film and measured them against the oil and gas industry’s rebuttal. You can find the review here.

Registration for Greening the Statehouse is $30 general admission and $15 for students. To register, visit the Hoosier Environmental Council website.

Posted in Clean Water

Elkhart’s Lusher Street Superfund Site Requires Aditional Remedial Action

Lusher StreetThe Elkhart Truth reports that the EPA has determined that about 70 properties on the city’s near-west side should be connected to city water because of groundwater contamination. The Environmental Protection Agency is also suggesting 200 homes inside the Lusher Superfund site need to have vapor removal systems installed to reduce dangerous vapors related to the contamination that can seep through basement walls and foundations.  The cost is estimated at $2.8 million.  You can find the story here.

EPA: $1M in Grants for Lake Michigan Water Quality

The EPA also announced $1 million in grants to fund two green infrastructure projects on Chicago’s North Side with the aim of improving water quality in Lake Michigan. The city plans to use a $812,000 grant to install bioswales and permeable pavement in a parking area at Montrose Beach on the North Side. The aim of that project is to annually filter more than four million gallons of stormwater in order to reduce the amount of stormwater contamination that currently leaches into the lake. In addition to that project, the city plans to use a $188,000 grant to install infrastructure along Leland Avenue in the Uptown area. The street runs through the north side neighborhood to the lakefront. The aim of the endeavor is to prevent almost 900,000 gallons of untreated stormwater from entering the city’s sewer system each year and prevent basement flooding in area structures. The Chicago Tribune has the story here.

Posted in Clean Water, EPA, Hazardous Waste, Real Estate

IDEM’s Tom Easterly Says the Obama Climate Change Plan is Bad for Indiana

The Northwest Indiana TimesTom Easterly reports that IDEM’s Tom Easterly believes that the Obama Administration climate change plan is bad for Indiana. An interesting position from the official charged with enforcement of Indiana’s environmental code. You can find the story here.

Easterly was appointed by former Gov. Mitch Daniels – who is no fan of EPA policies. Gov. Mike Pence – who holds similar views to Daniels – kept Easterly as IDEM’s chief official.

Posted in Clean Air, Climate Change, IDEM

Seventh Circuit Finds that Title Company Complied with Escrow Instructions

real estate developmentFrom the Seventh Circuit we have Edelman vs. Belco Title & Escrow, finding that a title company complied with its escrow instructions and had no liability to an investor in the real estate project.  

Plaintiffs invested $3 million in a multi‐use real‐estate project in Caseyville, Illinois called Forest Lakes. Their agreement with the developers promised a first‐priority mortgage, but they received only a junior mortgage. Meridian Bank had previously acquired a $20M mortgage on Forest Lakes in 2005. The plaintiffs lost their entire investment when the bank foreclosed in 2009. They sued Belco – the title company – which had done the title work for the Forest Lakes transactions, including the Meridian mortgage. None of the plaintiffs’ $3 million were ever escrowed with Belco, but went directly to the developer. Belco had no contact with the plaintiffs, before, during, or after the closing.

The development failed. Plaintiffs alleged Illinois state‐law claims of breach of fiduciary duty against Belco, claiming that as the “closing agent” for the transaction, Belco owed a duty to disclose that they were not receiving the first‐priority mortgage. The trial court granted summary judgment for Belco, finding that Belco was the plaintiffs’ agent for the purposes of the escrow and closing. Under Illinois law the title company owed only the very limited duty “to act only according to the terms of the escrow instructions.” Belco complied with the terms of the escrow agreement in that the funds were disbursed according to the agreement. The Seventh Circuit affirmed.

Posted in Federal Cases, Real Estate

DC Circuit Court of Appeals: EPA Cannot Create an Affirmative Defense through the Rulemaking Process

Cement PlantFrom the DC Court of Appeals, we have NRDC vs. EPA. The NRDC challenged the EPA’s 2013 cement emission standards rule as well as the EPA’s decision to create an affirmative defense for private civil suits in which plaintiffs sue sources of pollution and seek penalties for violations of emission standards. See Cementing Emission Standards.

In a previous decision, the Court considered EPA’s first attempt to create emission standards for the cement industry, and found the agency’s action arbitrary and capricious. See Portland Cement Association v. EPA, 665 F.3d 177 (D.C. Cir. 2011). Following the ruling, EPA went back to the drawing board and developed the emission standards at issue here, the 2013 Rule. Several environmental organizations, including the Natural Resources Defense Council and the Sierra Club, petitioned for review of the 2013 Rule, arguing primarily that certain aspects of the Rule contravene the Clean Air Act. They also challenged EPA’s decision to create an affirmative defense for private civil suits in which plaintiffs sue sources of pollution and seek penalties for violations of emission standards. EPA’s affirmative defense would be available to defendants in cases where an “unavoidable” malfunction had resulted in impermissible levels of emissions. The Court conclude that the emissions-related provisions of EPA’s 2013 Rule are permissible but that the affirmative defense for private civil suits exceeds EPA’s statutory authority. The court granted the petition in part and vacated the portion of the Rule pertaining to the affirmative defense. All other aspects of the petition were denied.

Posted in Clean Air, EPA, Federal Cases

Preservationists Can Intervene based on Allegation of Failure to Comply with Statutory Requirements for Use of Old School

Old Utica SchoolFrom the Indiana Court of Appeals, we have Old Utica School Preservation, Inc. vs. Utica Township, decided on April 21, 2014. In this case, the Greater Clark County Schools Corporation conveyed the former Utica Elementary School in Jeffersonville to Utica Township. The quitclaim deed contained language stating that the School “shall be used by Utica Township solely1 for park and recreation purposes,” which was written to comply with IC §20-4-5-8 now IC §20-23-6-9.

After Utica Township took ownership of the School, it was open to the public to use and was available for basketball and community gatherings. Utica Township attempted to maintain the School for park and recreation purposes, but it did not have sufficient funds to continue to do so, and the School fell into a state of disrepair. To try to protect the School from further damage, the building was boarded up, but this did not prevent further vandalism and damage. Utica Township was paying approximately $20,000 per year to insure, secure, and maintain the School.

Jacobs Well, Inc., an Indiana non-profit, later leased the School from Utica Township. It invested approximately $300,000 in renovations on the School. The lease required Jacobs Well, Inc. to allow Utica Township access to the gym and cafeteria for the purposes of having community events in the School with fifteen days’ notice.  Jacobs Well, Inc. made a commitment to Utica Township that it would open the building for recreational activities and community functions. Greater Clark Schools was aware of the manner in which Jacobs Well, Inc. intended to use the School, had no objection to such uses, and had not made any effort to reclaim or enforce any interest it has in the property.

Morrison and the Sandefurs own land adjacent to the School. Old Utica School Preservation, Inc. is also a non-profit corporation with the stated purpose “to preserve the school’s historic nature and to find ways in which to use the old school for the benefit of the public.” They filed a complaint for declaratory judgment and injunctive relief, contending that Jacobs Well was planning to use the School for purposes other than park and recreation purposes, namely for a residence and “temporary housing or a halfway house for criminal offenders.”  Jacobs Well countered with a motion for summary judgment, contending that the plaintiffs did not have standing to bring the complaint against Jacobs Well.  Finding that they did not have standing, the trial court granted the motion for summary judgment and dismissed the complaint. The citizens group then filed a motion to correct error, which was denied by the trial court.

The Court of Appeals reversed. “… We conclude that the Citizens, and others residents of the township, have an interest in the proper administration of the School for park and recreation purposes.” The matter was remanded for proceedings on the claim.

Posted in Indiana Cases, Planning and Zoning, Real Estate

Neighboring Industrial Property Owners Are Granted Authority to Intervene in Remediation Action

ErtelFrom the Indiana Court of Appeals, we have Moran Electric Service, Inc.and Threaded Rod Company, Inc. vs. IDEM, City of Indianapolis, and Ertel Manufacturing.  Ertel, Moran, and Threaded Rod are the former or current owners of adjacent industrial properties located in Indianapolis.  The properties are contaminated with hazardous chemicals. There is some dispute as to whether the contaminants on the  Moran, and Threaded Rod sites originated on those sites or flowed from the Ertel site. IDEM has demanded that the properties be remediated.

In 2008, the City brought a civil action against Ertel to compel Ertel to reimburse the City for its clean-up costs. In 2009, the trial court entered summary judgment for the City and found that Ertel was liable to the City for cleanup costs.  In 2010, IDEM brought a civil action against Ertel asserting claims under IC §13-25-4 and seeking a declaration that Ertel would be responsible to IDEM for past and future costs associated with the cleanup of the hazardous substances at or flowing from the site. In July 2011, IDEM, the City, Ertel, and various insurance companies entered into an Administrative Agreed Order and a Settlement and Release Agreement.

As part of the two agreements, the insurance companies paid $1,000,000 to IDEM. The funds were placed in two escrow accounts—the first escrow account of $140,000 to reimburse IDEM for its past costs and a second escrow account of $860,000 for IDEM’s future costs. With regard to the second escrow account, IDEM agreed not to use the “funds for any purpose other than for Response Actions at or in connection with the Site.” Any funds remaining after IDEM issued the NFA Letter would be surrendered to the City.

In October 2011, the trial court approved the Ertel Settlement Agreement. In November 2012, IDEM issued the NFA Letter regarding the Ertel site. At that time, $846,000 remained in the second escrow account. In 2013, Moran filed a petition with the Indiana Office of Environmental Adjudication (“OEA”) seeking administrative review of the NFA Letter. Moran argued that, in issuing the NFA Letter regarding the Ertel site, IDEM disregarded off-site migration of the contaminants that had occurred and was continuing to occur. Threaded Rod then filed a petition to intervene in Moran’s objection to IDEM’s issuance of the NFA Letter.

In January 2013, Threaded Rod filed a petition to intervene in the civil action between IDEM and Ertel and requested a temporary restraining order. Threaded Rod argued that the contamination on the Ertel site had migrated to the Threaded Rod site, that the $846,000 was intended to be used to clean up the Ertel site and other sites impacted by the contamination on the Ertel site, and that the funds should be preserved to address concerns on the neighboring properties. According to Threaded Rod, IDEM had abdicated its responsibility to clean up contaminants emanating from the Ertel site in violation of the trial court’s October 2011 order. Moran filed a separate motion to intervene and joined in Threaded Rod’s other motions. The City also filed a petition to intervene, which the trial court granted.

The trial court denied Appellants’ requests for a temporary restraining order. IDEM argued that Appellants were not entitled to intervene in the action and that the trial court lacked subject matter jurisdiction because the exclusive jurisdiction to review IDEM’s actions rested with the administrative process pursuant to the Administrative Orders. The trial court found that it lacked subject matter jurisdiction and then ordered IDEM to release the funds in the second escrow account to the City.

The Court of Appeals concluded that the representation of Moran’s and Threaded Rod’s interests by the existing parties was inadequate. It also stated that the trial court abused its discretion by denying their motions to intervene and it erred when it determined that it did not have subject matter jurisdiction.

“The current parties of the two civil actions are IDEM, the City, Ertel, and various insurance companies. Ertel, having been released from liability, has no incentive to represent Appellants’ interests. IDEM’s and the City’s interests in issuing the NFA Letter and distributing the remaining escrowed funds to the City, also appear to conflict with Appellants’ interests in using the remaining escrowed funds to remediate Appellants’ properties,” the Court wrote.

Posted in Hazardous Waste, IDEM, Indiana Cases, Insurance Coverage

DC Circuit Provides Obama Administration with Major Victory in White Stallion Energy Center v. EPA

White Stallion Energy CenterFrom the DC Court of Appeals, we have White Stalliion Energy vs. EPA — a major victory for the Obama Administration in its effort to impose regulations under the Clean Air Act — requiring oil and gas fired power plants to reduce their emissions of mercury and other hazardous air pollutants.

A cost-benefit analysis under Section 112(n)(1)(A) of the Clean Air Act are as follows: monetized benefits of $37 billion to $90 billion, plus non-monetized benefits above and beyond those amounts. The costs are also significant – approximately $9.6 billion per year. See 77 Fed. Reg. 9306 tbl.2Among the issues before the court was whether the statute requires EPA to consider these costs. The oil and gas industry believes that these cost must be considered. EPA argued that Section 112(n)(1)(A) – which permits it to promulgate regulations that are “appropriate and necessary” to address hazards to public health posed by oil and gas fired power plants does not require the agency to take costs into account.

The three-judge appeals panel was split, with Judge Brett Kavanaugh writing a dissenting opinion criticizing the EPA for not considering what he said was the estimated $9.6 billion a year cost of the regulation.

“To be sure, EPA could conclude that the benefits outweigh the costs. But the problem here is that EPA did not even consider the costs,” Kavanaugh wrote. He agreed with the majority in other aspects of the ruling.

The court majority rejected the representative industries’ argument that the rule was not “appropriate and necessary.” The majority held it was appropriate for cost considerations to be excluded from the EPA’s analysis. The law, the court said in an unsigned opinion, “neither requires EPA to consider costs nor prohibits EPA from doing so.”

Posted in Clean Air, EPA, Federal Cases

Environmental Law & Policy Center Files Suit in Cook Circuit Court (Ill.) to Enjoin $1.3B Illiana Tollway


ct-met-xxxx-quick-take-illiana-gfxThe Environmental Law & Policy Center filed the suit in Cook County, Illinois Circuit Court on behalf of the Sierra Club and Openlands to stop the proposed $1.3 billion Illiana Tollway linking northern Illinois and northwestern Indiana. It claims that the Illinois Department of Transportation does not have authority to develop the trucking corridor primarily designed for commercial transport. Essentially, the claim is that the project would destroy important farmland and wildlife habitat.

The proposed highway would be 47 miles in length and would link Interstate 55 in Will County, Illinois and Interstate 65 in Lake County, Indiana.

It also argues that the Chicago Metropolitan Agency for Planning’s policy committee erred when it voted in October to include the tollway in its long-term development plan for the region. Even though the policy committee included it in the long term plan, the agency’s board voted against the project. The lawsuit argues that board approval is necessary under Illinois law and IDOT cannot legally circumvent statutory requirement.

Illinois Gov. Pat Quinn and Indiana Gov. Mike Pence claim the tollway would help transport goods by truck, reduce congestion and create thousands of jobs. State officials state that private investors will be sought to pay most of the cost for construction, operation and maintenance with tolls repaying state debt. it is estimated that it could take up to 18 years for the tolls to start generating a profit.

The lawsuit against IDOT, the Board of the Chicago Metropolitan Agency for Planning (CMAP) and the MPO Policy Committee alleges that an October 2013 vote by the MPO Policy Committee to approve amending the GO TO 2040 Plan to include the proposed Illiana Tollway as a financially constrained project was in fact illegal.  State law required that the inclusion of the Illiana Tollway first be approved by the CMAP Board—which rejected the amendment in a 10-4 vote just one week earlier. The lawsuit seeks a court order declaring that the proposed Illiana Tollway hasn’t received the necessary approval to proceed.

Posted in Agriculture, Planning and Zoning