COA notes Indiana law would have changed outcome of environmental dispute

Using California law, the Indiana Court of Appeals ruled that an insurance company does not have to pay for an environmental cleanup, but the court noted it did not agree with the position of the Golden State and it would have ruled differently if Indiana law had been applicable.

The Court of Appeals reversed the order of the trial court granting summary judgment in favor of Technicolor USA, Inc. and remanded with instructions to grant summary judgment in favor of Employers Surplus Lines Insurance Co.

Judge John Baker dissented.

At issue in Northern Assurance Co. of American, Successor in Interest to Certain Liabilities of Employers Surplus Lines Ins. Co. v. Thomson, Inc., k/n/a Technicolor, USA, Inc., Technicolor Inc/Technicolor Limited, 4904-1208-PL-400, was whether Indiana or California law applied.

Technicolor was seeking coverage for environmental cleanup at three sites, two of which were located in California. Its connection to Indiana comes through Thomson, Inc., a corporation with ties to Indiana that acquired Technicolor assets in 2000.

Eventually, the film company brought suit against ESLIC, claiming that under Indiana law some of the environmental spills happened during the time that ESLIC’s policies were in place.

ESLIC argued that California law should apply when interpreting its policies and that under California law there was no coverage.

In a previous environmental dispute, the COA issued a summary judgment in favor of the insurer. The appeals court ruled in Thomson Inc. v. Continental Cas. Co. 982 N.E.2d 4, 6 (Ind. Ct. App. 2012), that under California law, the umbrella policy “damages” were limited to those that came from courtroom litigation and did not provide coverage for environmental contamination.

On the basis of the previous decision, the COA agreed with ESLIC. The court pointed out that most of the polluted sites are in California and all of the ESLIC policies were mailed to Technicolor’s California address.

Still the majority highlighted its opposition to the California law.

“We note here that we do not agree with the position California law takes on this matter,” Judge Paul Mathias wrote. “In fact, we agree with the arguments Technicolor made at oral argument that it is a waste of resources to require an insured to fight an administrative order in court in order to receive coverage under an insurance policy. Indeed, this court has formally come to this conclusion when applying Indiana law.”

In his dissent, Baker agrees with the majority to apply California law but disputes how the law is being interpreted. He argued that in light of the Golden State’s leadership on environmental issues and the opinions from its courts, California would likely apply its law to have insurance companies pay for cleanup.

“…I believe that if the California Supreme Court was presented with this case at this time, it would no longer permit ill-advised precedent from giving its environmental law the full and complete effect it was intended to have,” Baker wrote.