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Louisiana Generating L.L.C. v. Illinois Union Insurance Co.

ELR Citation: 43 ELR 20120
Nos. 12-30651, (5th Cir., 05/15/2013)

The Fifth Circuit held that under New York law, an insurance company has a duty to defend a power company in an underlying lawsuit filed against it by EPA and Louisiana's environmental agency for alleged CAA and state law violations. The insurer argued that the forms of relief covered by the policy—including relief for property damage and remediation costs—are unavailable to EPA as a matter of law because the CAA only allows EPA to seek prospective relief and does not allow the Agency to seek compensatory damages. But reading all of the provisions of the policy together and giving them their plain meaning, the underlying EPA suit includes allegations and prayers for relief that could potentially result in covered remediation costs. "Remediation costs" are defined very broadly to include expenses incurred to redress pollution in compliance with environmental law, including, inter alia, costs associated with investigating, mitigating, or abating pollution. As such, EPA's requests for mitigation, offsetting, and remediation suggest a reasonable possibility of coverage under the policy. The court also rejected the insurer's argument that injunctive relief is excluded from coverage under the policy. Under the insurer's interpretation, the policy would provide little coverage for some of the major types of environmental law liability that a reasonable policyholder would expect; thus, it must be rejected under New York law. The fact that the remediation of past pollution sought by EPA may result only in orders for injunctive relief does not disturb the court's conclusion that EPA's claims in the underlying suit could result in covered remediation costs.