Case Study: Midwest electronics recycling company CEO sued for pollution liability after company insolvency
When one Midwest electronics recycling company spiraled into liquidation after years of aggressive growth, a significant inventory of hard drives containing potentially environmentally harmful components were left in a storage facility.
Six months later, the stockpile was discovered by a state environmental agency who deemed it hazardous waste, which is a pollution liability. Because the company had already filed for Chapter 11, the agency went after the company’s former CEO, alleging damages over $1M.
When the company declared bankruptcy, their HUB broker worked with them to purchase a “tail policy” that would prolong their original D&O coverage for the next three years to address any incidents arising from the liquidation.
While the wrongful act was done prior to the liquidation, the reason the merchandise was dumped was because the company went out of business. For this reason, the claim fell under the original policy because the act was done prior to the business’ liquidation.
Typically, D&O insurance carries pollution liability exclusion, but in this case, the HUB broker was able to negotiate a favorable exception, and the D&O policy indemnified the CEO. While the insurance company paid out $100,000 in defense fees for the CEO, the settlement is still pending in court.
The company’s tail policy will continue to indemnify its directors and officers, employees and the company entity for the next two-and-a-half years should any additional issues arise.
For this company, having the right broker meant being able to indemnify their CEO, and totally avoiding a $100,000 denied claim. Lesson learned: Work with a broker that can leverage their far-reaching carrier relationships to help you achieve the best possible outcome for your claim.Contact your HUB broker today to ensure you’ve got the right coverage to indemnify your directors and officers.