Insurers Dodge $500 Million Fox River Cleanup Tab–For Now

By | June 20, 2005

A coalition of carriers that insured Wisconsin’s paper manufacturers have, for now, successfully defeated a legislative effort that would have forced them to pick up the estimated $500 million tab to clean up the polluted Fox River. The insurers, along with several agent and business groups, waged an agressive public-relations and paid media campaign arguing that the proposed “all-sums” legislation was unfair, unconstitutional and unwise.

Over several decades, paper companies (most famously, Atlanta-based Georgia-Pacific) released more than 67,000 pounds of toxic chemicals into Wisconsin’s Fox River. Now seven paper mills are on the hook, thanks to Superfund’s “polluter pays” rules, to pay for the already ongoing clean up.

Their ability to collect insurance is limited, however, by a few inconveniences. First, many of the insurers that covered the paper companies are no longer in business. Second, those that are still around would only be liable for the pollution that took place during the policy period, which can be difficult to determine. Third, insurers have repeatedly argued in litigation that their general liability insurance policies did not cover pollution.

A group of state legislators who represesent the Fox River area and the appoximately 100,000 workers employed by the paper manufacturers introduced Assembly Bill 222, known as the Fair Claims bill, that would have forced insurers to pay “all-sums” up to the policy’s limits due to a covered risk regardless of whether or not it occurred during the policy period.

In spite of a strong push by the papaer companies and Fox River-area politicians, the bill wasn’t able to garner enough support in the legislature. Just as the session was nearing an end this spring, a last-ditch effort was made to have the Joint Finance Committee insert the substance of the Fair Claims bill to the state budget measure.

This gave birth to the Coalition for Contract Fairness, which waged a six-figure direct-mail and radio advertising campaign to prevent what it called special-interest legislation.

“On its face, the legislation is unconstituional interference with contract,” said Eric Englund, president of the Wisconsin Insurance Alliance. “If a contract says you owe $5 million but you have $100 million in liability limits, [the bill says] you should pay $100 million. … It is well within the province of legislators to prospectively tell insurers how to behave in the future, but to go back into contracts and either modify or take sides when there is a dispute in contract terms is unprecedented here in Wisconsin.”

Insurer lobbyists have said that despite the bill’s failure in this session, they do not expect the paper companies–with a half billion at stake–to give up so easily.

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Insurance Journal West June 20, 2005
June 20, 2005
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