Indianapolis makes new commitment to brownfields redevelopment thanks to insurance recovery

Major Tool and Machinery
Major Tool and Machine expanded its Indianapolis factory onto the former site of Ertel Manufacturing, once a brownfield. The site was remediated through a combination of grants, tax increment financing and federal programs. Photo via Facebook.

When Ertel Manufacturing closed down in 2002, it left behind land contaminated with half a dozen different toxic substances. After spending millions of dollars to clean up and remediate the site, the City of Indianapolis has won legal victory over the company that insured Ertel Manufacturing—and the City is putting that money back into remediation efforts.

The City of Indianapolis recently won a $6 million insurance settlement over the Ertel Manufacturing site, which was abandoned after the company filed for bankruptcy in 2002. The victory is one of “insurance recovery” (or “insurance archeology”), where insurers are held liable for the cleanup costs of polluting businesses that held comprehensive general liability (CGL) policies. It is most often used in instances where the business is now bankrupt or is not financially viable and the CGL policies were written between 1945 and 1985.

This is a significant victory for Indianapolis, which has been aggressive about acquiring and cleaning up brownfield sites. In the case of the Ertel site, the City acquired the site through tax foreclosure, cleaned it up and then sold it to an adjacent business, Major Tool and Machine. Major Tool and Machine was able to expand, first by about 200 jobs and later added 300 more for a total of 500 new jobs in the area.

Of the settlement funds, $800,000 will be reinvested into brownfields redevelopment. $200,000 will be used as cost-share on a $1 million Brownfields Revolving Loan Fund from the U.S. Environmental Protection Agency. The remaining $600,000 will be used for programmatic support for the City’s Brownfields Redevelopment Progam, including staffing and site assessments, as well as legal fees connected to on-going insurance recovery actions at sites where the City has or will be investing in cleanup.

Indiana law is favorable to insurance recovery. The state’s Environmental Legal Action statute specifically authorizes the inclusion of attorney’s fees and site assessment costs as well as cleanup costs in cleanup cost recovery actions. Court decisions at the Indiana Supreme Court level have upheld insurance recovery actions relative to CGL policies, and have narrowly interpreted the “pollution exclusion” terms that often limit insurance recovery actions.

Indianapolis is also using insurance recovery for cleanup costs at the Titan Industries site, which the City acquired in 2006. Three to five additional sites are being considered for insurance recovery.

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