Wausau Ordered to Pay for Groundwater Cleanup

In prior action in the case, a jury in August 2002 found that Employers Insurance of Wausau must pay $1.9 million under a general liability policy for groundwater pollution remediation of three Tektronix Inc. sites ordered to be cleaned up by state officials.

Tektronix, based in Beaverton, Ore., is one of the world's largest manufacturers of oscilloscopes, devices used to test and monitor electronic equipment.

Wausau wrote comprehensive general liability policies for Tektronix from 1973 to 1985. In 1985, Tektronix discovered the groundwater contamination and notified Oregon government officials, who ordered a cleanup. However, Tektronix did not notify Wausau that it was making a claim until 1997.

The insurer denied coverage based on late notice, contending that the 12-year gap between discovery of the pollution and notice to the insurer was "the worst late notice case Wausau ever had seen." However, the court found that, although the notice was late, there was no "prejudice" to Wausau, and the insurer was therefore obligated under Oregon law to honor the claim.

It was unclear from the court's opinion, in the portion of the proceedings to apportion damages, exactly why Tektronix had originally failed to provide timely notice.

Tektronix attorney Robert Horkovich of the New York-based law firm Anderson Kill & Olick, P.C. told National Underwriter that Tektronix did not initially report the contamination because it did not know at the time that the claim would exceed its $1 million retention. "The extent of the contamination was unknown at the time and only became apparent later on," said Mr. Horkovich.

Wausau also contended that there was no "third-party" that would trigger coverage under its CGL policy. In the insurer's view, this was a "first-party" property damage case to which liability coverage did not apply. But coverage was found to apply, as there is an Oregon law making liability policies applicable to parties that notify the government of contamination on their premises.

Following the jury verdict, Wausau made allocation of damage arguments that were recently rejected by Judge Maurer. First, the judge refused to allocate any of the loss to a post-1985 time period, which would have made Tektronix responsible for some of the damages.

The judge also refused Wausau's request to allocate by policy limits, which would have reduced its liability because Tektronix had settled with other carriers for losses attributable to other time periods.