Insurer has no duty for contamination at Gary airport

The city of Gary’s lawsuit seeking payment for cleaning up contaminated property near the Gary/Chicago International Airport has stalled after the Indiana Court of Appeals found the business owner’s insurer had no duty to indemnify.

At the center of the dispute are two businesses, Western Scrap, a car crushing operation, and Recycle West, which collected and baled paper for shipment to recyclers. Peter Coulopoulos, who goes by Peter Coulas, was in charge of operations at the former company and was a co-owner of the latter business.

In May 2004, the city of Gary filed a lawsuit against Coulas and Western Scrap in Lake Superior Court, alleging the defendants caused the property and its surroundings to be contaminated with hazardous substances and petroleum.

A settlement agreement reached between the parties in the summer of 2007 required Coulas to pay $200,000 a year for 10 years to fund the cleanup of the contamination. However, in November 2014, the city re-opened the case, claiming Coulas had failed to comply with the agreement. It also filed against Auto-Owners Insurance Co. and two other insurance companies as garnishee defendants, alleging that Auto-Owners was obligated to Coulas because it had issued two commercial general liability insurance policies to Recycle West in 1995 and 1996.

In City of Gary, Indiana and Gary/Chicago International Airport Authority v. Auto-Owners Insurance Company, 18A-CT-68, the Court of Appeals affirmed the trial court’s denial of the city’s motion for partial summary judgment.

Before the appellate panel, the city had asserted Auto-Owners’ duty to defend was triggered because there is the possibility that the damage was caused by operations that Coulas conducted on behalf of Recycle West.

However, the appeals court disagreed, noting the city did not name Recycle West as a defendant and makes no mention in the complaint about Recycle West or its operations. Also, the court was unconvinced by the city’s argument that since the complaint mentioned the address of Recycle West, this created the possibility that Coulas would be found liable for the conduct of the recycler.

“In short, the City’s complaint focused solely on the operations of Western Scrap, and as such, it did not allege facts that might be covered by the Auto-Owners policies, which focused solely on the operations of Recycle West,” Chief Judge Nancy Vaidik wrote for the court.

The Court of Appeals also affirmed the trial court’s decision to grant Auto-Owners’ cross-motion for summary judgment against a complaint filed by the airport. In that lawsuit, the airport alleged the contamination from 6901 Chicago Ave. migrated to its property.

Although the appellate court noted the airport’s amended complaint triggered, at least initially, Auto-Owners’ duty to defend, it nonetheless found the insurance company made a prima facie showing that Recycle West did not cause any of the contamination.