Evanston Insurance is asking a federal court to clarify if it must defend a major environmental consultant in Houston’s toxic tort litigation before all primary policy limits are spent.
Evanston Insurance Company has launched a declaratory judgment action in the United States District Court for the Southern District of Texas, Houston Division, targeting Pastor, Behling & Wheeler LLC (PB&W), a Texas-based environmental consulting firm. At the heart of the case is a high-stakes question: When must an excess insurer step in to defend a client facing a barrage of lawsuits over alleged environmental contamination?
The litigation, which has drawn in approximately 26 lawsuits under the banner of the Houston Wood Preserving Works multi-district litigation, is no ordinary dispute. Plaintiffs claim that PB&W, hired by Union Pacific Railroad Company in 2006, misrepresented and concealed the true hazards of contamination at a Houston wood-preserving site to the Texas Commission on Environmental Quality. The allegations, as stated in the complaint, concern creosote and other chemicals that allegedly leached into the environment over several decades.
PB&W is not a small player. According to the complaint, it is a Texas limited liability company with its principal place of business in Round Rock, Texas, and is a subsidiary of Golder Associates, Inc., which is itself owned by Golder Associates Corporation, Inc., and ultimately by WSP Global, Inc. – a Canadian corporation with its principal place of business in Quebec, Canada, and publicly traded on the Toronto Stock Exchange.
Insurance coverage, not environmental science, is the battleground here. PB&W’s primary professional liability coverage comes from Admiral Insurance Company, under policy number FEI-ECC-13765-04, effective March 18, 2017, to March 18, 2018. That policy provides a $1 million Damages Limit for Each Claim and a $1 million Claims Expense Limit for Each Claim, subject to a $2 million General Aggregate Limit for Damages (Other than Products-Completed Operations) and a $2 million Claims Expense Aggregate Limit. Admiral is currently defending PB&W under this policy, and defense expenses paid by Admiral have been eroding the claims expense limit, which is nearly exhausted. Admiral has not paid any damages to date, and the damages limit is anticipated to be intact upon exhaustion of the claims expense aggregate limit.
Enter Evanston, which issued to PB&W commercial excess liability policy number MKLV7EFX100036, effective May 25, 2018, to May 26, 2018. This excess policy provides a $9 million Each Occurrence Limit and a $9 million Aggregate Limit, and follows form to the Admiral Primary Policy’s professional liability coverage, adopting the same terms, conditions, agreements, expense provisions, exclusions, and definitions unless otherwise stated.
PB&W has requested confirmation from Evanston that it will defend PB&W upon exhaustion of the Admiral policy’s aggregate claims expense limit, even if the damages limit remains intact. Evanston, in its complaint, argues that its excess policy requires exhaustion of both the damages limit and the claims expense limit before its duty to defend is triggered.
The Evanston Excess Policy provides that Evanston “will have a duty to defend such claims or suits when the applicable limit of insurance of the claims made ‘underlying insurance’ has been exhausted by payment of judgments or settlements and any cost or expense subject to such limit.” The complaint emphasizes that the Admiral Primary Policy defines “claims expenses” and “damages” separately, with “claim expenses” not included within the definition of “damages” and each subject to its own limit.
Evanston’s position is clear: Until Admiral’s Damages Limit for Each Claim is also exhausted – meaning actual payments for settlements, judgments, or awards—Evanston has no obligation to defend PB&W in the ongoing litigation. The insurer is asking the court for a declaration to that effect.
For insurance professionals, the case is a direct look at the complexities that can arise in layered coverage and the importance of precise policy language. The outcome will determine Evanston’s coverage obligations in relation to the exhaustion of underlying policy limits in this ongoing environmental litigation.
As of now, the case remains at the complaint stage, with all allegations as stated by Evanston and not yet adjudicated. For those in the insurance business, the dispute offers a front-row seat to the legal and financial maneuvering that can define the industry’s largest exposures.
