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Colorado's Court of Appeals July 19 ruled that Union Pacific Railroad can't recover from insurers investigation costs tied to possible lead contamination at its California Gulch site in Leadville, Colo., according to an Aug. 8 release from law firm Lord, Bissell & Brook.
The former Denver and Rio Grande Western Railroad Co. — part of Southern Pacific Railroad, which merged with UP in 1995 — had investigated potential property damage at the site due to contamination and pollution, stemming from a consent decree between Rio Grande and U.S. Environmental Protection Agency. Rio Grande used slag as track ballast, and spent $6 million determining whether its slag piles were a source of Leadville's lead contamination.
EPA found that the slag piles were safe and issued a "no action," meaning Rio Grande wouldn't have to remediate the site. Rio Grande then filed suit to recover its investigative costs from insurers Certain Underwriters at Lloyd's London and London Market Companies.
After losing the initial suit, Rio Grande appealed, arguing that potential liability settlements are covered regardless of whether that potential liability ultimately is defeated.
The appeals court ruled that Rio Grande wasn't entitled to indemnification from insurers because the railroad couldn't establish actual third party damage as required by its policy, and no remedial action was necessary nor taken.