Aerojet Loses Suit Over Cleanup Costs
In a development of serious concern to some of the nation’s largest companies, Aerojet-General Corp. has lost a sprawling lawsuit in which it sought to force its insurance carriers to pay environmental cleanup costs estimated at more than $150 million.
Aerojet does not contest that wastes from its rocket-engine manufacturing and testing operations contaminated ground water at a site near its Sacramento headquarters during the 1950s, ‘60s and ‘70s. The site was one of the first federal “Superfund” cleanup projects.
The lawsuit was the culmination of a lengthy effort to seek restitution for the cleanup costs from the 43 insurers that had sold the company liability coverage.
Jurors--who heard the case in a former high school whose rooms were converted to accommodate 30 to 40 lawyers at a time--delivered their verdict to San Mateo Superior Court Judge John J. Bible on Monday.
Aerojet, a subsidiary of Ohio-based GenCorp Inc., called the verdict “unfortunate” and announced Tuesday that it would quickly appeal the decision. It also said it has already been reimbursed $43 million, in part, from an insurer and, in part, through provisions of its federal government contracts.
Defense attorneys were surprised at the speed of the verdict, arrived at in less than four hours after an eight-month trial.
“It will be a rare corporation that will be able to come into court and successfully contend that they didn’t know what they were doing,” predicted one of the lead defense attorneys, Richard L. Seabolt, a partner at Hancock, Rothert & Bunshoft in San Francisco. Seabolt represents a group of underwriters from Lloyds of London.
The case pivoted on whether Aerojet intended or should have expected as a part of its routine business operations to pollute the site’s ground water--or whether the pollution was accidental.
Such questions have been the focus of much argument in recent years between insurers and their corporate clients in the assignment of liability for extremely expensive cleanup projects.
In an earlier setback to insurers, the California Supreme Court ruled in 1990 that under many business liability policies, businesses could recover cleanup costs.
But the Aerojet case is the second big suit in California recently won by the insurers. A similar case, in which Shell Oil Co. lost to its insurers, is under review by a state appellate court in San Francisco.
The insurers presented testimony from former Aerojet workers to portray pollution--much of it from the solvent trichloroethylene, or TCE--as standard policy. One witness, Roger Wayne Simmons, testified: “There was never an attempt to keep TCE from getting into the drain; it’s my understanding that’s what the drain was for.”
Aerojet lawyers sought unsuccessfully to counter such claims.
“The evidence was clear that procedures existed, that chemical waste was to be collected and should not be put on the ground,” said Scott DeVries, a partner of Lasky, Haas, Cohler & Munter, the San Francisco law firm that defended Aerojet. “The conduct of a few workers on a graveyard shift do not constitute corporate procedure or practice.”
