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Laura Foggan Weighs in on Successor Coverage Claims for Environmental Exposure

Business Insurance
February 21, 2011

Wiley Rein Insurance Practice partner Laura Foggan discussed why successor companies should not rely on a predecessor's insurance to address environmental liability exposures in a Business Insurance article. Experts advise that a risk management evaluation and environment insurance can be two useful tools in avoiding pollution liability during a merger. A company making an acquisition can be held liable for cleanup even if it did not cause contamination on a property. “Whether an acquiring company can use the previous owner’s liability coverage for protection against environmental exposures is a hotly contested issue,” Ms. Foggan said. “When disputes do arise, the courts are tending to uphold nonassignment clauses in insurers’ policy terms—meaning that coverage protecting the seller cannot be transferred to the buyer, which means acquiring companies should not anticipate that this type of coverage would be available,” she noted. “We’ll still see some more litigation, and possibly that’s because more attention should be given by companies acquiring property that may have environmental liability to the whole question of risk management and purchase of appropriate coverage,” Ms. Foggan concluded.