The Fox River Cleanup Snares Insurers, Passaic River PRPs Should Take Note

On June 8, 2010, in Westport Insurance Co. v. Appleton Papers, Inc., the Wisconsin Court of Appeals for the First District held that two insurers, namely Munich Re Ag and Westport Insurance Co., are liable each for $5 million dollars to compensate Appleton Papers, Inc. (Appleton) for cleaning up the sediment contamination in the Fox River. The Fox River is undergoing a cleanup pursuant to oversight by the United States Environmental Protection Agency.

Appleton acquired assets of National Cash Register Inc. (NCR) during the l950’s and later, NCR manufactured carbonless paper using PCBs (polychlorinated biphynols). The Fox River became polluted with PCBs, a suspected carcinogenic substance. Appleton had sued nine insurers but settled with seven. The remaining two filed the appeal decided by the Wisconsin Court of Appeals in a 2 to 1 decision. Among the issues raised on appeal was whether the insurers were responsible for “after-acquired liability,” namely liability that Appleton acquired along with NCR assets after the policy periods in question expired. The insurers also asserted that Appleton had made voluntary payments not covered by the policies and that notice to the insurers was late, excusing coverage.

While the case was decided under Wisconsin state law, it bears significance to USEPA led river cleanups here in New Jersey. At present the USEPA has entered into a consent decree with 73 potentially responsible parties to conduct a remedial investigation and feasibility study of the Lower Passaic River, a seventeen mile stretch of the estuarine portion of the Passaic River. Presumably parties potentially responsible for sediment contamination in the Passaic will be scrutinizing both their old insurance policies for possible coverage and this decision for legal authority.