Client:

Tennessee Valley Authority

Issue:  

In December 2008, Tennessee Valley Authority (TVA) suffered losses in excess of $1 billion from the largest fly ash spill in U.S. history. In the course of one hour, an 84-acre ash impoundment collapsed and released 5.4 million cubic yards of fly ash into the Emory River, wiping out entire ecosystems, destroying a local neighborhood, and clogging large portions of the river. Fly ash is a waste product from burning coal in a boiler to produce electricity.

The calamitous accident was the subject of congressional hearings, federal and state investigations, and media reports in “60 Minutes,” Rolling Stone, The New York Times and USA Today. State and federal environmental agencies issued sweeping enforcement orders and within months TVA faced lawsuits from hundreds of nearby residents and businesses.

Challenge:  

We needed to secure both first-party and third-party coverage from 14 different insurers, all of whom denied coverage. Hired soon after the spill, the Perkins Coie team was deeply involved in the spill response. We prepared TVA’s claims, presented them to its insurers, and worked with TVA’s broker and in-house counsel to negotiate settlements with 11 of the insurers. We also consulted on the defense of the underlying lawsuits and served as a focal point of coordination between the remediation team, the litigators, and TVA’s insurers.

Ultimately, three excess liability Bermuda insurers denied coverage; two of the three rescinded their policies based upon alleged misrepresentations. On TVA’s behalf, Perkins Coie initiated three simultaneous arbitrations against these recalcitrant insurers. Two of these actions went to trial in London, England.

Solution:   

First, TVA reached a highly favorable (near limits) settlement with Arch Bermuda, one of the three Bermuda excess liability insurers. Next, after a month-long arbitration, Perkins Coie won full limits, attorney’s fees and interest in excess of $170 million from another Bermuda excess liability insurer. This win is reported to be the largest judgment ever secured against a Bermuda insurer at trial. In December 2014, TVA obtained an award of $50 million—full policy limits—after a four-week trial - against the last remaining insurer. We overcame the insurer’s 17 defenses, which included challenges to the legitimacy and scope of federal and state clean-up orders and representations made in TVA’s insurance application. In December 2015, Perkins Coie completed the matter by winning nearly $20 million in interest and costs from this last insurer. In total, we secured over $335 million in coverage for TVA from 14 insurers, all of which had denied coverage.