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IN THE CIRCUIT COURT OF KANAWHA COUNTY, WEST VIRGIN 64---\
2016 OCT 28 PM 4: 41
WEST VIRGINIA-AMERICAN WATER COMPANY,
a West Virginia corporation,

CATHY S. GAISON. CLERK
KANAWHA COUNTY CIRCUIT COURT

Plaintiff,
Civil Action NoXD —C---7--

v.
STARR INDEMNITY AND LIABILITY COMPANY,
a Texas corporation,
Defendant.

COMPLAINT AGAINST STARR INDEMNITY AND LIABILITY COMPANY
For its Complaint against Starr Indemnity and Liability Company, West VirginiaAmerican Water Company states as follows:
1.

This is an action for breach of contract and declaratory judgment brought by West

Virginia-American Water Company, Inc. ("WVAW") against its insurance carrier, Starr
Indemnity and Liability Company ("Starr"). As set forth below, Starr has breached its
obligations under the excess liability insurance policy (Policy Number SISIXNR01063214) that
it issued to WVAW by failing to provide coverage for the claims against the latter arising from
the Freedom Industries chemical spill which occurred in Charleston, West Virginia on January 9,
2014 (the "Spill").
2.

WVAW is a West Virginia corporation with its principal place of business in

Charleston, West Virginia. WVAW operates the Kanawha Valley Water Treatment Plant
("KVTP") which is located in Charleston, West Virginia and provides water to nine West
Virginia counties.

1

 3.

Starr is a Texas insurance company with its principal place of business in New

York, New York. Starr is registered to do business in West Virginia.
4.

Starr is subject to personal jurisdiction in West Virginia by virtue of issuing

policies to policyholders in West Virginia and because the acts and breach of contract which
form the basis of this complaint occurred in West Virginia.
5.

Venue is proper in this County because the acts and breach of contract which

form the basis of this complaint occurred in this County.
6.

Starr's Policy was one policy in a "tower" of insurance policies which provided

insurance at successive levels to WVAW.
7.

Starr's policy and XL Insurance Company ("XL"), Policy No.

1E000153221114A, shares limits of $50,000,000, in excess of an underlying policy issued by
AXA Insurance Company ("AXA") Policy No. XS000900(14), which has limits of liability of
$25,000,000. The AXA policy, in turn, sits above a policy issued by Travelers Property Casualty
Company of America ("Travelers"), with limits of liability of $1,000,000. The same basic terms,
definitions, exclusions and conditions in the AXA policy, as the Lead Underlying Policy, were
incorporated into the provisions of the Starr Policy.
8.

The policy issued by XL Group Limited, which shared the liability limits with

Starr, contains an arbitration provision.
9.

The policy issued by Starr does not contain an arbitration provision.

10.

Civil actions were filed against WVAW in state and federal courts in West

Virginia, in which the plaintiffs claimed that WVAW was liable in tort and contract for damages
caused by a chemical spill which occurred on January 9, 2014.

2

 11.

The federal actions include an action styled "Crystal Good v. West Virginia-

American Water Company, et al, Civil Action No.: 2:14-01374, pending in the United States
District Court for the Southern District of West Virginia. Other actions are also pending against
WVAW in federal court.
12.

Dozens of actions were filed against WVAW in West Virginia state courts. Those

actions are consolidated into a Consolidated Class Action Complaint which is pending before the
Mass Litigation Panel, styled "In Re: Water Contamination Litigation Civil Action No. 16-C6000." The plaintiffs in the mass litigation panel seek certification of classes of plaintiffs for
both liability and damage issues.
13.

Four actions are pending against WVAW and others in the Circuit Court of

Kanawha County, West Virginia, seeking declaratory judgment as to coverage afforded for
WVAW for claims arising from the January 2014 chemical spill.
14.

In the Crystal Good action, on October 8, 2015, the court granted plaintiffs'

motion and certified an issues class under Rule 23(c )(4) of the Federal Rules of Civil Procedure
as to issues of fault and comparative fault, consisting of the following classes, which
encompassed approximately 250,000 people and 7,000 businesses:
a. All persons residing in dwellings supplied tap water by KVTP on January 9,
2014;
b. All persons or entities who owned businesses operating in real property that was
supplied tap water by KVTP on January 9, 2014; and
c. All persons who were regularly employed as hourly wage-earners for businesses
that operated in real property supplied tap water by KVTP on January 9, 2014.
Crystal Good v. American Water Works, Inc, 310 F.R.D. 274, 300 (S.D.W.Va. 2015).

3

 15.

The Crystal Good action proceeded through discovery and was scheduled for trial

on October 25, 2016, with a mandatory settlement conference set for October 24, 2016.
16.

WVAW provided information regarding the progress of the civil actions in

federal and state court to its insurance carriers, including Starr.
17.

The insurers for WVAW had access to all pleadings, orders and other papers filed

in the federal and state actions as they were accessible electronically.
18.

Over the course of the state and federal litigation, Starr and the other insurers

were provided information on the damages claimed by the state and federal plaintiffs that
demonstrated that the potential damages claimed exceeded their respective policy limits.
19.

All of the insurers for WVAW participated in mediations involving plaintiffs in

both the federal and state actions, during which settlement negotiations occurred. Starr was
present during the mediations. Starr declined to make any settlement offers during or
immediately after either mediation.
20.

By order of the court in the Crystal Good action, a settlement conference began

on October 24, 2016 ("the settlement conference") and continued for several days. In attendance
and negotiating to settle all of the claims against WVAW in all of the federal and state actions
were class counsel appointed by the court in the Crystal Good action and lead counsel appointed
by the West Virginia Mass Litigation Panel. Certain representatives of the insurers for WVAW
attended, including counsel for Starr. Settlement negotiations occurred between WVAW and the
plaintiffs in the federal and state litigation.
21.

Before the settlement conference, Travelers and AXA examined the plaintiffs'

claims and assessed the risk to their insureds and tendered their policy limits in aid of reaching a
settlement of the claims of the plaintiffs in the federal and state actions.

4

 22.

The plaintiffs in the federal and state actions issued demands seeking settlement

within the total insurance available to WVAW During the settlement conference, the plaintiffs in
the federal and state actions made additional demands for settlement which were less than the
total amount of coverage available to WVAW.
23.

In breach of its Policy, Starr refused to contribute its limits, or an amount

anywhere close to its limits, to the settlement. This refusal not only deprived WVAW of the
insurance coverage that it was owed by Starr, but also made it more difficult for the WVAW to
obtain coverage from certain on its higher layer excess carriers. Although certain of the higher
layer excess carriers did offer to contribute a reasonable amount in light of the claims and these
insurers' policies respective attachment points and limits, others did not.
24.

Although Starr refused to contribute its limits, WVAW was able to reach a

tentative settlement with the plaintiffs in the federal and state court actions (the "Settlement").
However, to do so, WVAW was required to pay money itself that Starr was required under its
Policy to pay to indemnify WVAW for the plaintiffs' claims.
25.

Starr's refusal to indemnify WVAW breached the Policy. .

Count I
(Breach of Contract)
26.

WVAW restates and realleges the allegations set forth in paragraphs 1 through 25

as if fully set forth here.
27.

Starr was obligated by its insurance contract to pay on behalf of WVAW the total

sum that latter became legally obligated to pay as damages, up to the limits of the Starr policy,
by reason of settlement or judgments.
28.

Starr owed WVAW a duty of good faith and fair dealing.

5

 29.

Starr owed to WVAW a duty to engage in reasonable settlement negotiations.

30.

Starr owed to WVAW statutory and regulatory duties under West Virginia law.

31.

In failing to contribute to settlement, in failing to negotiate in good faith and in

failing to engage in reasonable settlement negotiations, Starr breached the duties above.

Count II
(Declaratory Judgment)
32.

WVAW restates and realleges the allegations set forth in paragraphs 1 through 31

as if fully set forth here.
33.

Consideration paid or to be paid by WVAW pursuant to the Settlement is within

the coverage afforded by the Starr Policy subject only to applicable limits.
34.

All conditions precedent to recovery under the Starr Policy have been satisfied,

waived or are otherwise inapplicable.
35.

Accordingly, Starr has a duty to indemnify WVAW, subject only to applicable

limits, for consideration paid or to be paid to settle claims arising out of the Elk River Incident
pursuant to the Settlement.
36.

Upon information and belief, Starr disputes one or more of the contentions set

forth in the preceding paragraphs.
37.

Accordingly, an actual controversy currently exists between WVAW and Starr

with respect to WVAW's rights under the Starr Policy.
38.

A judicial declaration, pursuant to Rule 57 of the Rules of Civil Procedure and the

Uniform Declaratory Judgment Act, Section 55-13-1 of the West Virginia Code, is necessary to
resolve the controversy between the parties.
WHEREFORE, WVAW demands the following:

6

 1.

A declaration that Starr has a duty to indemnify WVAW, subject only applicable

policy limits, for consideration paid or to be paid to settle claims arising out of the Spill pursuant
to the Settlement.
2.

Damages for Starr's breach of contract in the amount of the Starr and XL policy

limits that WVAW was itself forced to pay towards a global settlement.
3.

Damages in the form of additional sums toward settlement that WVAW would

not have had to pay if Starr had reasonably negotiated and paid its insurance limit, as
required under the terms of its policy and in light of the claims made against WVAW in the
federal and state court actions.
4.

Damages in the form of additional legal and other expenses, including

consequential damages, that WVAW was forced to incur in a protracted negotiation with the
plaintiffs and with other carriers, and the legal and other expenses required to bring this
litigation.
5.

Such further relief as the Court may deem be appropriate.

WEST VIRGINIA-AMERICAN WATER
COMPANY

Tlfomas J. Hurney, Jr. (WV ff o No. 1833)
Jonathan L. Anderson (WV Bar No. 9628)
JACKSON KELLY PLLC
500 Lee Street, East, Suite 1600 (25301)
P. 0. Box 553
Charleston, West Virginia 25322
(304) 340-1000
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