Source: http://www.bizjournals.com, June 13, 2017
By: John Downey

Insurance companies sued by Duke Energy to recover $1 billion-plus in coal-ash contamination costs deny the claims are covered, alleging the Charlotte-based utility company elected to dispose of ash in ways it knew threatened groundwater.

“Duke’s ash ponds were built without any provision to prevent the contaminants from escaping into groundwater. Some of the ash ponds were designed so that ash was placed in direct contact with groundwater,” the international insurers say in documents filed last week in the N.C. Business Court suit brought by Duke.

“Had Duke taken appropriate measures, it could have avoided the closure costs that it alleges in its complaint,” they go on to say. “The costs Duke seeks are Duke’s cost of doing business and are not an insurable risk.”

Duke (NYSE:DUK) plans to use insurance claims to reduce charges to its customers for what it ultimately expects will be $5.2 billion in costs to clean up its ash sites in North and South Carolina. None of the money would go to compensate Duke for the costs of cleaning up its February 2014 accident that spilled 39,000 tons of toxic ash into the Dan River, making coal ash a front-burner issue.

Former insurers

Duke contends that it has always followed state and federal guidelines, as well as best industry practices, in storing ash in ponds at its current and former coal plants. It has filed suit against 30 international insurers with which it once had liability insurance, contending they have improperly refused to pay claims for damages caused by groundwater contamination at the sites.

Duke has been self-insured since 1986. But it contends policies between 1971 and that time contain provisions that make the insurance companies liable for current damages from groundwater contamination.

“The 57 policies sued upon generally promise to indemnify Duke for all sums Duke is legally obligated to pay on account of property damage,” the company contends in a joint filing made last week. “The policies respond to occurrences that happen during the policy period even if liability does not arise until decades later,” as in the current case.

The insurers disagree.

Years to litigate

All but one have filed responses denying they owe Duke any insurance claims. One insurer, Paris-based Alianz France, has not responded by the court’s deadline. Duke has asked Judge Louis Bledsoe to enter a default order against that insurer.

Duke filed the suit in March. Late last week, the power company and the insurers who responded filed a case management report. That filing laid out the contentions for both sides and a calendar for getting the case to trial by August 2019. Just the initial discovery by all parties is projected to take 14 months.

It also noted that Duke and the insurance companies will seek confidential treatment for some information in the case.

The filing says that would “involve production of confidential, proprietary, or private information for which special protection from public disclosure … is warranted.” But the parties also “acknowledge that this Order does not confer blanket protections on all disclosures or responses to discovery and that the protection it affords extends only to the limited information or items that are entitled under the applicable legal principles to treatment as confidential.”

Possible mediation

And it lays out the steps that each side must take in protecting confidential material from disclosure as they proceed with the case.

The joint case management report also recognizes the court may want the parties to attempt to settle their differences through mediation.

“The parties agree that mediation would be more productive towards the end of the case, after summary judgment motions and prior to trial,” the report says. “Counsel each represent that they have discussed with their respective clients the cost of litigation and the potential cost savings that may be realized by early mediation.”

They propose putting mediation off until May 2019, just a few months before the case would be ready for trial under the proposed time line. The various parties are discussing whether they can agree on a mediator. Duke has already proposed three potential candidates. The insurers are working on their own list, the report says.