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Colonial Pipeline, Insurer Settle Suit Over Explosion Costs (1)

June 27, 2022, 3:14 PMUpdated: June 28, 2022, 6:41 PM

Colonial Pipeline Co. and its insurer, AIG Specialty Insurance Co., reached an agreement in the pipeline’s legal effort to recover the costs of a 2016 gas leak and pipeline explosion that killed one person and injured others, according to a filing in a federal court in Georgia.

The agreement will resolve the case in its entirety, and it will be finalized and fully executed within 30 days, the companies told the US District Court for the Northern District of Georgia. The settlement notice filed June 24 comes after the court partly granted the pipeline company’s motion for summary judgment.

No details on the terms of the settlement have been released.

Colonial Pipeline sued AIG after the insurer refused to cover the costs of damages and a settlement with Alabama over the explosion. The pipeline company said in its complaint that it suffered more than $25 million in covered losses, and it paid the Alabama Department of Environmental Management $3.3 million for the release of petroleum product.

The insurance company’s policy clearly shows Colonial Pipeline reached the $10 million self-insured retention, meaning AIG was responsible for covered loss in excess of that amount, the court said in March. However, the policy doesn’t cover the settlement Colonial Pipeline paid to resolve the state’s lawsuit, according to Judge Michael L. Brown.

ADEM sued Colonial over the leak in March 2018, “well after the AIG policy had expired,” Brown wrote. The policy covers possible claims, but the state’s lawsuit falls within an exception to the definition of a possible claim, according to the ruling. The exception says a possible claim can’t include a pollution condition that results in a claim, Brown wrote, and the gas leak amounted to a pollution condition that resulted in a claim during the policy period.

“Colonial believes that the settlement is in the interest of all parties and is pleased to have this matter resolved,” a company spokesperson said in a statement Tuesday.

Hunton Andrews Kurth LLP represents Colonial Pipeline.

Hinkhouse Williams Walsh LLP and Weinberg, Wheeler, Hudgins, Gunn & Dial LLC represent AIG.

The case is Colonial Pipeline Co. v. AIG Specialty Ins. Co., N.D. Ga., No. 1:19-cv-00762, notice of settlement 6/24/22.

(Updates June 27 story to add comment from Colonial Pipeline in seventh paragraph. )

To contact the reporter on this story: Maya Earls in Washington at mearls@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Brian Flood at bflood@bloomberglaw.com