The Problem: A property that was a former cattle auction facility allegedly was contaminated with a pesticide known as toxaphene from the use of a cattle dipping tank to clean cattle. A bank came into possession of the property based upon a foreclosure action. The property was transferred to a bank subsidiary, which then leased the property to a former owner and operator of the property.

The bank retained an environmental services firm insured by XL Environmental to perform an environmental site assessment update of the property. The insured reviewed and updated a Phase I Report prepared by an earlier consultant. In its report, the insured reiterated the description of the dipping tank and the potential pesticide contamination found in the initial Phase I. The insured did not recommend and no other environmental consultant performed any analysis of the subsurface soils.

Following the purchase of the property, the state’s Natural Resource Conservation Commission notified the new property owner that it required testing for pesticides to be done around the dipping vat on site. The property owner commissioned the insured to test for pesticides at the site, and the insured discovered an area of approximately 10,000 square feet of soil around the dipping tank that contained toxaphene up to a depth of nine feet. Based upon this evaluation, the property owner notified the bank he believed it should be charged with knowledge of the toxaphene and be responsible for any resulting damages. The bank then filed suit against the property owner and the insured.

The Response: XL Environmental Claims retained a law firm to defend the insured. The parties reached an agreement to settle for $100,000.

The Benefits

• Case resolved for minimal amount.
• Excellent settlement in view of the potential for liability in this matter and the substantial legal fees (estimated to be as much as $100,000) to defend the case through trial.