Insurer Alleges Pollution Policy Void Because of Policyholder’s Failure to Disclose

AIG Specialty Insurance Co. (“AIG”) recently asserted in a New Jersey Federal District Court Complaint that it owes no coverage to Thermo Fisher Scientific Inc. (“Thermo Fisher”) for cleanup costs associated with contaminated groundwater at a facility owned by Thermo Fisher in Fair Lawn, New Jersey. The crux of AIG’s claim is the fact that Thermo Fisher failed to disclose to AIG that the company had been monitoring groundwater pollution at its site for nearly three decades.

AIG alleges the existence of two consent orders relating to groundwater contamination at the site and, more specifically, the presence of PFAS, so-called “forever chemicals” detected in a wellfield affected by the site. Both of these consent orders were in existence when Thermo Fisher sought a pollution liability policy with AIG. AIG asserts that Thermo Fisher either knew or should have known about the groundwater pollution conditions at its facility and the claims against the facility by the United States Environmental Protection Agency (“EPA”) prior to seeking the pollution liability policy at issue, facts that should have been disclosed in the application.

AIG alleges that Thermo Fisher’s failure to disclose these consent orders and the fact that the Thermo Fisher plant was part of a Superfund site is sufficient to trigger a number of exclusions in the pollution liability policy. These exclusions, if in fact triggered, would exempt AIG from covering cleanup costs requested by Thermo Fisher during the policy period. AIG is also seeking to have the entire insurance policy voided by the court. AIG claims that the groundwater pollution stems from both Thermo Fisher and an adjacent tool manufacturer, whom the EPA has already required to pay for the installation of the new water treatment system and continuing monitoring. AIG’s allegation that Thermo Fisher contributed to pollution at issue further strengthens AIG’s argument that Thermo Fisher knew of the exact contamination at the property which they neglected to disclose.

This case could have significant ramifications for both insurers and landowners in New Jersey. But, even at this juncture, the case stands as a warning that landowners should provide fulsome disclosure of environmental conditions at a site immediately upon learning of same if you want any shot at obtaining pollution legal liability coverage. Gibbons will continue to monitor this case as it progresses through the courts and provide updates.