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In re Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation

United States District Court, S.D. New York

May 14, 2015

IN RE: METHYL TERTIARY BUTYL ETHER (

Robin Greenwald, Esq., Robert Gordon, Esq., William A. Walsh, Esq., Weitz & Luxenberg, P.C., New York, NY, Liaison Counsel for Plaintiffs.

Peter John Sacripanti, Esq., James A. Pardo, Esq., Lisa A. Gerson, Esq., Stephen J. Riccardulli, Esq., McDermott Will & Emery LLP, New York, NY, Liaison Counsel for Defendants.

Stephen A. Corr, Esq., John A. Corr, Esq., Stark & Stark, Yardley, PA,

Dennis G. Pantazis, Esq., Wiggins, Childs, Pantazis, Fisher, & Goldfarb, LLC, Birmingham, AL, Counsel for the Commonwealth.

Mark S. Lillie, P.C., Kirkland & Ellis LLP, Chicago, IL, Counsel for Insurance Defendants.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge.

I. INTRODUCTION

This is a consolidated multi-district litigation ("MDL") relating to contamination - actual or threatened - of groundwater from various defendants' use of the gasoline additive methyl tertiary butyl ether ("MTBE") and/or tertiary butyl alcohol, a product formed by the breakdown of MTBE in water. On December 23, 2014, certain defendants (collectively, "Insurance Defendants") moved to dismiss Counts VII through IX of the Commonwealth's Complaint.[1]For the reasons stated below, Insurance Defendants' motion to dismiss is GRANTED in part, and DENIED in part.

II. BACKGROUND

A. The Insurance Defendants

The Commonwealth alleges that the Insurance Defendants have wrongfully obtained a double-recovery for claims stemming from "environmental remediation costs" associated with releases from Insurance Defendants' underground storage tanks ("USTs").[2] The Insurance Defendants have received payments from the Underground Storage Tank Indemnification Fund ("the Fund") - a program enacted by the Commonwealth in 1994 to provide "primary coverage" for such remediation costs.[3] In addition, the Insurance Defendants have received payments from a number of insurance policies issued by other insurers.[4] Specifically, the Commonwealth alleges, "upon information and belief, " that the Insurance Defendants - unbeknownst to the Commonwealth - "made claims against their various insurance policies seeking to recover the very same [environmental] remediation costs for which they received payments from the [Fund]."[5] The Insurance Defendants neither disclosed these payments to the Fund, nor reimbursed the Fund from funds received from commercial, captive, and mutual insurers.[6]

The Commonwealth seeks reimbursement for the Insurance Defendants' alleged double-recovery. The Commonwealth's primary legal theory is that the Insurance Defendants' conduct caused the Commonwealth to lose subrogation rights explicitly provided to it by the Underground Storage Tank Indemnification Fund Act ("USTIF Act"). The USTIF Act provides that once the Fund reimburses the Fund applicants for remediation costs, the Commonwealth steps into their shoes and inherits their legal rights against their insurance carriers.[7] The Commonwealth complains that, by taking actions against their insurers without notifying the Commonwealth, the Insurance Defendants denied the Commonwealth its opportunity to exercise its subrogation rights.[8]

B. The Commonwealth's Claims

The Commonwealth asserts three claims to "seek recovery of amounts [the Insurance] Defendants received from their insurers for remediation costs that were also ...


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