Quote of the Day - Every time you spend money, you're casting a vote for the kind of world you want.
Thanks to this opinion about the long-running pollution coverage dispute between Lockheed Corporation and Lloyd's of London, you may not have to consult the Rutter Group's insurance treatise on policy interpretation for some time; most of the basics are included in the court's decision. While the ruling itself is no comfort to policyholders, we can all take solace in one thing: Lockheed's policies were manuscripted, so there's very little application to everyday pollution insurance coverage, and the opinion contains no real shockers as far as coverage is concerned. A manuscripted policy is not a standard form of insurance coverage available to the buying public - it's one that is crafted directly between the insurer and the insured. A "unique, one-of-a-kind policy."
Then why blog about it? For anyone concerned with insurance coverage (and that's virtually anyone who's had a lawsuit filed against them - and as you'll see below, it's equally as important to those that haven't) and understanding policy coverage, it's an excellent primer. Plus, it give us a window into the past and how policy terms were interpreted back in the 1950s when the policies were first written for Lockheed.
It's also a great signpost for litigating these types of claims against insurance companies, and with the increased enforcement actions by various governmental entities, it's a must read.
Perhaps most important, though, is the message squarely communicated in this opinion that the courts, insureds and insurers are sending to the executive branch of the government charged with enforcing state and federal laws. The government has this habit of issuing administrative orders in an attempt to trigger cleanup, and in turn, insurance companies regularly deny claims for administrative enforcement. Courts have consistently interpreted insurance policies not to provide coverage for these kind of administrative enforcement attempts. The insurance companies have no complaint - they get to keep more premiums.
Why do courts regularly uphold the insurance companies' denial of the claim? To constitute a "claim," many policies contain language that require a lawsuit to be filed instead of an administrative order. Frankly, there's very little difference between the two, with the exception of adding court oversight to the process, which is primarily the insurance companies' objection: without a lawsuit, their insured and the administrative agency can use the insurance companies' money to conduct a massive cleanup without any outside supervision. When an agency sues in Court, both parties have to answer to the judge, not themselves, so the insurance companies believe they won't spend as much.
The problem, however, arises from the denial of coverage itself. Without insurance, there's very little money available to conduct a cleanup, so the agency is frustrated in its efforts to remove pollution from the environment. At the same time, the agencies apparently don't want to give up the oversight of the effort to the court, so they're in a Catch-22.
While the act of an administrative agency filing a lawsuit against a company is a big step and causes both parties some consternation, there's one thing that is missing from the equation when the agency decides not to sue: money.