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A PRP Cannot Recover From Other PRPs For Response Costs Paid By Insurer

By Gail Wurtzler

In Friedland v. TIC - The Industrial Co., et al., Case No. 1:04-cv-01263-REB-KLM, slip opinion issued on January 18, 2008, the United States District Court for the District of Colorado joins two other federal district courts in refusing to allow a CERCLA potentially responsible party to collect response costs from other potentially responsible parties when those costs were paid by an environmental or other insurance policy. The other two courts are: the United States District Court for the District of Kansas (Raytheon Aircraft Co. v. United States, 2007 WL 4300221 at *4 (Dec. 8, 2007) ) and the United States District Court for the Eastern District of Texas (Vine Street, LLC v. Keeling ex. rel. Estate of Keeling, 460 F. Supp.2d 728, 765 (2006)).

Mr. Friedland had defended a CERCLA response costs action brought by the United States that ultimately ended with a consent decree pursuant to which he agreed to pay more than $20 million in response costs. While that case was pending, he and others sued, first, a contractor and its guarantor under a contractual indemnity provision, and second, he sued under his employer’s liability insurance policy, several insurance companies. Both of those cases settled, and Mr. Friedland recovered more than the $20 million of response costs he agreed to pay.

Notwithstanding the recoveries from the indemnitor and the insurers, Mr. Friedland sought contribution under CERCLA section 113 from two other potentially responsible parties at the site. Mr. Friedland argues that the prior recoveries should be allocated between response costs and legal defense costs, and that given such allocation, he still was owed response costs by the two defendants. 

The court disagreed on two grounds. First, the settlement agreements with the indemnitor and insurers did not allocate the settlement amount between response costs and defense costs. In the absence of an express allocation in the settlement agreements, the court refused to make such an allocation and permitted the defendants full credit for the settlement amount. Slip op. at 5-6. Second, the court rejected Mr. Friedland’s argument that the collateral source rule prohibited crediting defendants with any insurance proceeds. The court noted that the collateral source rule has never been applied in the context of a CERCLA action and that it is unlikely that a rule derived from tort law would be. Slip op. at 6-7.

Full post as published by Environmental Toxic Torts Blog on February 20, 2008 (boomark / email).