Opinion ID: 617714
Heading Depth: 4
Heading Rank: 2

Heading: GAIC’s Refusals to Pay

Text: For many reasons, GAIC took issue with the indem- nification amounts requested by EMC and SWS. GAIC concluded that the explosion implicated only the EMC 423 and its corresponding $5,000,000 of coverage. It based its conclusion on the Coast Guard’s January 21, 2005 letter to EMC, in which it identified the EMC 423 as responsible for the oil spill, but did not similarly designate the Lisa E as responsible. In short, GAIC did not believe that it owed any indemnification for the Lisa E. At no time, however, did GAIC advise EMC as such or issue a reservation-of-rights letter in connection with EMC’s request for coverage. Moreover, on June 13, 2005, GAIC sent a letter to SWS, stating that it had exhausted its $5,000,000 policy limit. At this time, GAIC had not actually paid $5,000,000 to or on behalf of EMC and SWS. In justified its erroneous representation, in part, on Global Risk Solutions’ cost analysis for the companies’ spill management operations: if GAIC paid the amounts requested by EMC and SWS, then under advisement, the total amount paid and payable would exceed the $5,000,000 limit on coverage for the EMC 423. GAIC later acknowledged that more 10 Nos. 11-1266 & 11-1346 coverage existed, and it made additional payments to EMC and SWS following its June 13 letter to the contrary. As GAIC reviewed EMC and SWS’s claimed costs, it recognized that it would need to independently calculate their final payment since they declined to provide the supporting financial details it requested. It determined, largely through estimation, that it owed EMC and SWS as much as $588,317 in reimbursement. It excluded from its calculation any cost incurred after June 7, 2005, the date that the Coast Guard informed the Illinois Environmental Protection Agency (“IEPA”) that the recovery phase of cleanup was completed. See discussion infra at I.A.2.c. GAIC ultimately paid EMC and SWS $727,000, aug- menting the $588,317 owed to exhaust the $5,000,000 coverage limit on the EMC 423. It still refused payment of any kind for the Lisa E. In February 2007, GAIC and EMC submitted a joint claim for reimbursement to the federal Oil Spill Liability Trust Fund. The claim requested reimbursement for the total amount GAIC paid in connection with the cleanup, including to EMC and SWS. It did not suggest that GAIC overpaid either company. The claim also requested reimbursement for any costs incurred by EMC and SWS, prior to June 7, 2005, that GAIC had not paid. It re- quested no reimbursement for any work completed after that date. Nos. 11-1266 & 11-1346 11