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Policyholders Win Coverage Case Against Lloyd's of London


Volume 2, No. 1, Fourth Quarter 1995

By Timothy Flanagan

Recently, a client of Robert Hughes Associates brought a successful environmental insurance coverage action against Lloyd’s of London in the Denver District Court and obtained a judgment in excess of $8 million. The case was actually three coverage actions involving the same policyholder, Public Service Company of Colorado, against its various historic insurance carriers that were consolidated. When the case was initially filed in 1992, 18 insurance companies and three insurance brokers were sued by the utility. At the end of the trial, PSCC had settled with all parties except Lloyd’s. Lloyd’s had issued excess liability policies in favor of the Colorado utility for the years 1941 through 1977. In most of those years Lloyd’s syndicates or London insurance companies underwrote all of the various layers of coverage. Beginning in 1972 it gradually reduced its exposure.

These consolidated cases involved the utility’s claim for reimbursement of a de minimis settlement with the Environmental Protection Agency for a Superfund clean-up at a municipal landfill outside Denver which was known, between 1965 and 1977, as the Lowry Site. They also involved the claim for reimbursement for remediation and clean-up costs for the premises of a Denver scrap dealer known as the Barter Salvage Yard, which had been used for recycling electrical equipment that contained PCBs, and the clean-up of a former manufactured gas plant site which operated at the turn of the century in Pueblo, Colorado.

The case was tried before a jury for three weeks. PSCC obtained verdicts against insurance companies in both the Lory and Barter cases but lost the Pueblo site case on the basis of late notice to the insurance companies. All three cases are currently on appeal to the Colorado Court of Appeals.

Public Service Company of Colorado was represented by veteran Denver trial attorney Timothy Flanagn with the firm Kutak Rock. Although all post-trial motions and appellate issues have not been resolved, Mr. Flanagan indicated that he anticipated that once prejudgment interest and taxable costs were assessed, these judgments would exceed $10 million.

Mr. Flanagan was assisted by Robert Hughes Associates, Inc., in both the preparation and presentation of this complex case. Mr. Flanagan said that he used RHA’s London office to assist in locating policy information from the 1940s and 50s. In addition, Robert Hughes testified as an expert witness on the London insurance market in general and, in particular, on the approximately 50 Lloyd’s policies at issue in this litigation.