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Sandza Prevail in Reinsurance Arbitration over Stringfellow Toxic Dump

December 7, 2016

Elizabeth Sandza (Partner-Washington, DC) won a second reinsurance arbitration in their effort to collect $10 million in reinsurance on behalf of a large insurer for its loss payment and expenses related to the infamous Stringfellow toxic dump site in Riverside, California. The insurer covered the State of California from 1972 to 1975, during which time the state was the regulator of the dump site. However, in a 1998 breakthrough decision, the U.S. District Court for California “deemed” the state to have been the owner-operator of the site under CERCLA and held it 100 percent liable, thereby releasing the potentially responsible parties, which included some of the biggest names in the aerospace industry. The reinsurance disputes involved timing issues, allocation issues, declaratory judgment expenses and a treaty exclusion for pollution that had an exception for main operations and incidental perils at the time of underwriting. Because the Stringfellow site eventually caused in excess of $700 million in damage, some reinsurers argued that the peril was not incidental.

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