AIG cleared of cleanup costs

A federal judge dismissed a lawsuit over who should pay for a cleanup of property in Brookfield, which is slated for a natural gas compressor station needed for a pipeline servicing Connecticut and New York.

The dispute dates back to August 2000, when plaintiffs Alan Fischer and a Bridgeport-based entity called DAB Three L.L.C. purchased 65 acres of land at 60 High Meadow Rd. in Brookfield and flipped it the same day to Iroquois Gas Transmission System L.P., which is based in Shelton. As part of the deal, Fischer and DAB Three pledged to clean up the onetime gravel pit of waste and debris, and secured a pollution liability policy the same day from American Specialty Lines Insurance Co., an affiliate of American International Group Inc.

At the time it seemed like a profitable transaction, according to court documents, but soon after undertaking the cleanup the plaintiffs discovered buried debris including household waste, appliances, plastics and vehicle parts. DAB Three and Fischer sent a letter in June 2001 to AIG making a claim under the pollution policy, which AIG denied that August.

New York City-based AIG cited multiple reasons for denying the claim, including:

• the policyholders did not submit a “claim” as defined by the policy during the effective dates of the contract;
• the debris did not constitute a “pollution condition” under the policy;
• the policy”™s contractual liability exclusion provision precluded coverage; and
• the plaintiffs did not incur cleanup costs as defined by the policy, because they were not required to clean up the site under environmental laws, but only by the agreement.

DAB Three and Fischer disputed the last notion, arguing that the town of Brookfield had issued notices based on municipal regulations that required them to remediate the site. After reviewing a 1996 notice issued by the town, however, U.S. District Judge Mark Kravitz disagreed, saying the town notice merely ordered the previous owners to stop any illegal dumping at the site.

“To put it simply, (the) plaintiffs never submitted a claim for cleanup costs under the policy,” the judge wrote in his ruling. “Their claim was based entirely on their contractual obligation to Iroquois, which is not cognizable under the policy.”

In their lawsuit, Fischer and DAB Three accused AIG brokers of misrepresenting the scope of the coverage of the insurance they were purchasing, and of “overly narrow readings of policies to evade providing coverage.”

The judge disagreed, however, saying a contract is a contract.

“Plaintiffs argue that the 1996 Brookfield notices might have indicated that the owners of the site may have a legal obligation to clean up the site in the future,” Kravitz wrote. “The court is extremely skeptical of plaintiff”™s argument for a number of reasons ”“ most importantly because reading the policy as a whole, it is clear that it intended to cover only those situations where the insured is required to clean up a site based on environmental laws. If the court were to give the ”˜may have”™ term the significance that plaintiffs suggest, it would risk expanding the scope of the policy beyond rationality. Furthermore, there is no indication that Brookfield had the power to require, or did in fact require, any cleanup activities on the site.”

Iroquois still plans to use the site for its compressor station. There are several compressors along the pipeline”™s path from the New York-Canada border, along the west flank of the Adirondack Mountains, down the Hudson Valley, through Fairfield County and under the Sound to Long Island. Gas is siphoned for use at several points on the journey, notably to run the Athens Generating 1,080-megawatt facility in Greene County, N.Y., necessitating compressor stations to keep up the pressure.