Another Landmark Insurance Case for Policyholders

On January 16, 2004, the Indiana Court of Appeals resolved more important issues in favor of Indiana policyholders. In PSI Energy Inc. v. The Home Insurance Company, et al., Cause No. 32 A01-0204-CV-146, PSI sought coverage under its comprehensive general liability ("CGL") insurance policies for environmental liabilities at six manufactured gas plants, the last of which ceased operations in 1950. Environmental agencies have alleged that tar, a valuable by-product from the manufactured gas process, contaminated soil and ground water at each of the sites. PSI alleged in its action against the insurers that damage from the contamination had continued throughout the period from 1950 through 1985 and that the policies issued during that period must pay for the costs of cleanup.

Lost Policies

Several of the insurers argued that because PSI had been unable to produce copies of their policies, PSI could not meet its burden of proving that coverage existed for these claims. The trial court had agreed with the insurers. But the Court of Appeals reversed. It held that PSI did not have to prove the policy language verbatim, but only the substance of the policies. The Court held that PSI could present the broad range of other evidence it had assembled to prove the policies, including its history of premium payments, employee testimony, and expert testimony concerning the likely terms in such policies. The Court held that expert testimony, even where the expert could not testify with absolute certainty as to the likely terms in the lost policies, is admissible, when supported by the kind of other evidence that PSI had assembled.

Expected or Intended Damage

The Court held that the concept of "fortuity" ó meaning that the damage giving rise to a liability cannot be expected or intended by the policyholder ó is inherent in all CGL policies. But, the Court held that a policyholder can prove this point based on a subjective, rather than objective, basis. This means that mere negligence or even recklessness on the part of the policyholder will not result in a denial of coverage. The issue is to be decided, based on what the policyholder actually subjectively believed.

Trigger

The Court followed the Indiana Supreme Court decision in Allstate Insurance Company v. Dana Corporation, 759 N.E.2d 1049 (Ind. 2001) and held that where damage occurs over a multi-year period, each policy within that period is triggered and obligated to pay "all sums." This...