AIG unit to pay $42.5m for environmental cleanup

The American International Specialty Lines Insurance Company Inc. (AISLIC) has agreed to pay $42.5m to clean up contamination at four industrial facilities said federal officials.

The four sites, formerly owned by Fruit of the Loom, are located in Michigan, New Jersey, and Tennessee.

Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance: "Insurers should take note that they may be liable for the cost of cleaning up their bankrupt clients' environmental messes. EPA will keep pursuing companies who pollute the environment."

"This settlement will help clean up contaminated sites in Michigan, New Jersey, and Tennessee," said Ronald J. Tenpas, assistant attorney general for the Justice Department's Environment and Natural Resources Division. "This action demonstrates the Justice Department's commitment to pursuing those who pollute or those who inherit their clean-up obligations, whether through insurance arrangements or other agreements."

“Insurers should take note that they may be liable for the cost of cleaning up their bankrupt clients' environmental messes. EPA will keep pursuing companies who pollute the environment.

Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance

Fruit of the Loom filed for bankruptcy in 1999 and the court set up two trusts to receive and distribute the company's remaining assets, including its environmental insurance policies. The trusts subsequently tried to collect environmental cleanup costs from AISLIC, a member company of AIG Insurance. AISLIC denied coverage and then brought a suit seeking to confirm that it was not obligated to pay the trusts for these costs.

This settlement resolves a lawsuit that began in 2005 over environmental insurance coverage between AISLIC and the two bankruptcy trusts.

Under the settlement agreement, AISLIC will make an initial $30m payment plus interest from May 15, 2007 and ten annual payments of $1.25m to the Fruit of the Loom trusts. Most of the money will be used to clean up contamination at the following hazardous waste sites.