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

Heading: Federal and State Liabilities

Text: EMC and SWS faced several accusations of liability as a result of the explosion, contamination, and cleanup efforts in this case. The IEPA, in September 2005, issued notice to EMC that it violated the law when it removed the petroleum residue from the EMC 423. Disposal of the residue, it alleged, threatened further contamination of the canal. In response, EMC retained counsel and an environmental consultant, as well as engaged in additional cleanup work. EMC allegedly incurred $10,215 in consulting fees, $18,400 in attorney’s fees, $9,440 in disposal costs, and $72,320 in labor and machinery costs as a result of these efforts. The IEPA also sued EMC in Illinois state court under the Illinois Environmental Protection Act, 415 ILCS 5/42(d)- (e). The agency claimed that 2,000 to 2,500 gallons of petroleum remained at the bottom of the canal as a Nos. 11-1266 & 11-1346 13 result of the explosion. It also contended that, during the salvage and transportation of the barge, an unnamed EMC tugboat discharged thirty gallons of diesel fuel into the canal, leaving an oil sheen on the canal’s surface. It requested an injunction against further violations by EMC; civil penalties; all costs expended by the state in the suit, including expert witness, consultant, and attorney’s fees; and any other equitable relief the court deemed appropriate. The IEPA’s request for an injunction served as a vehicle by which it hoped to compel further cleaning by EMC. EMC requested that GAIC represent it against the IEPA. GAIC agreed to represent EMC, understanding that the litigation could result in an order for additional cleaning at the spill site. GAIC claims that its representation was subject to the terms of EMC’s insurance policy— in particular, the policy’s limitations and exclusions regarding actions by state governmental agencies. When GAIC agreed to represent EMC, however, the letter it sent contained no reservation of rights and no specific reference to the policy’s limitations and exclusions. It stated only that its defense would be subject to the insurance policy’s terms and conditions. GAIC, at an unspecified date and for unspecified reasons, stopped paying for EMC’s defense. EMC continued to defend the suit with both its original attorney and inhouse counsel. It incurred $32,154.75 in not-yet-reimbursed attorney’s fees and expenses for the original counsel. It also expended $694.29 in not-yet-reimbursed litigation expenses. Although it originally claimed its costs for its own in-house counsel, EMC 14 Nos. 11-1266 & 11-1346 withdrew this reimbursement request during the proceedings below.
In June 2008, the federal government pursued in rem claims against the Lisa E and the EMC 423, suing under OPA90, the FWPCA, and the Rivers and Harbors Act. United States v. Egan Marine Corp., No. 08 C 3160, slip op. at 1-17 (N.D. Ill. Oct. 13, 2011). Under OPA90, it claimed $1,500,000 in removal costs expended by the Oil Spill Liability Trust Fund and in compensation paid to GAIC and EMC. It also requested $25,000 in civil penalties for each day of the spill cleanup. The government’s complaint names the Lisa E as the EMC 423’s only source of propulsion, and it identifies the owners and operators of both vessels as the responsible parties under OPA90. This lawsuit, still ongoing, is not directly relevant to this appeal. EMC, however, supports its claim that the explosion implicated its $5,000,000 policy on the Lisa E by relying, in part, on the federal government’s conclusion in its suit that the Lisa E was a party responsible for the explosion and cleaning costs. GAIC continues to dispute that it owes coverage under the Lisa E’s policy.