Simon Gildener reviews the recent reinsurance coverage case of Wasa v Lexington1 and considers what lessons may be learned by reassureds seeking to enhance their prospects of a successful reinsurance recovery.
Background
Alcoa is a very large producer of aluminium. Between 1942 and 1986, Alcoa’s waste management and pollution containment procedures had been defective. These deficiencies caused environmental damage at a number of its industrial sites across the United States. In the early 1990s, the US Environmental Protection Agency forced Alcoa to take remedial action.
Alcoa was insured by Lexington (and a number of other insurers) for a three year period between 1977 and 1980. It was during this period that much of the environmental damage had manifested itself. Alcoa tried to recover all of the clean-up costs from Lexington. Lexington argued that it should not be responsible for everything. The cause of the damage was a continuing state of affairs, and Lexington was on risk only
