Air Pollution at Louisiana Big Cajun II Facility Prompts Duty to Defend

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Louisiana Generating LLC v. Illinois Union Ins. Co.
United States Court of Appeals for the Fifth Circuit, May 15, 2013

Louisiana Generating LLC (LAGen) sought defense coverage from Illinois Union Ins. Co. (Illinois) in a suit brought against it by the EPA and the Louisiana Department of Environmental Quality for Clean Air Act and state environmental law violations. LAGen owns a coal-fired electric steam generating plant known as the Big Cajun II in Louisiana. In 2009, NRG, LAGen’s parent company, purchased a custom Premises Pollution Liability Insurance Policy (the policy) from Illinois to cover multiple facilities including the Big Cajun II.

In February 2009, the EPA filed the underlying suit over modifications made to the Big Cajun II facility which caused net emissions increases in violation of the Clean Air Act. LAGen also failed to acquire a PSD permit, and failed to employ the best available control technology to limit emissions. The Louisiana Dep’t of Environmental Quality intervened and asserted identical allegations and claims.

The EPA and department put forth several prayers for relief asking the court to require LAGen to take actions to remedy and mitigate the harm to the public it caused, to pay civil remedies, and to surrender emissions credits. Illinois argued that none of the prayers for relief are covered and LAGen argued that some of the prayers were covered and therefore Illinois was required to provide it a defense. The district court bifurcated the trial between the duty to defend and duty to indemnify. The district court granted summary judgment to LAGen with regard to the duty to defend and this appeal ensued.

The policy states that it provides coverage for “Claims, remediation costs, and associated legal defense expenses . . . as a result of a pollution condition” at a covered location.” The court found that based on the policy provisions and prayers for relief, the complaint in the underlying suit could potentially result in claims for covered remediation costs. The court reasoned that remediation costs were defined broadly and unquestionably covered and that some of the prayers for relief in the EPA complaint which require LAGen to mitigate, offset and remediate past pollution suggest a reasonably possibility of coverage under the policy. Therefore the court upheld the district court ruling and ordered that Illinois was required to provide LAGen a defense.