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Shell Oil Co. v. United States

ELR Citation: 45 ELR 20211
Nos. 06-141, (Fed. Cl., 10/30/2015)

The Federal Claims Court held that the U.S. government may not engage in discovery about oil companies' insurance policies in an underlying case concerning cleanup costs stemming from the production of high-octane aviation gas (avgas) during World War II. The Federal Circuit previously held that the U.S. government must reimburse the oil companies for CERCLA costs they incurred cleaning up the contamination, and it remanded the case on the issue of damages. The government then asserted an insurance offset defense and sought discovery on the companies' insurance policies and insurance coverage settlements. But the request is too late. The insurance offset defense is an affirmative defense that could and should have been asserted no later than February 25, 2008, when the government filed its answer on the companies' breach of contract claims. The government was aware of the insurance policies and coverage litigation as early as 1992 and certainly by 1997. At this juncture, the oil companies would be substantially prejudiced by having to engage in a whole new area of discovery more than 20 years after their CERCLA claim and nearly 10 years after their breach of contract claim.