Duke Energy, insurers mull settlement of $600M coal-ash liability suit

Charlotte Business Journal

By John Downey

Duke Energy and some two dozen insurance companies are negotiating a possibility of what could be a $600 million lawsuit over coal-ash liability and won a four-month stay of the case on Wednesday to give them time to see if the case can be worked out.

Lead attorneys for Duke and the insurers made clear that a settlement is by no means certain. But after about 17 months of depositions and other discovery, the two sides have decided it makes sense to see if they can reach some kind of agreement without going to trial.

The two sides told Judge Louis Bledsoe in the N.C. Business Court hearing that the settlement proposal came up suddenly. Mark Plumer, representing Duke Energy Carolinas and Duke Energy Progress in the case, told Bledsoe that Duke has hired an expert in case settlements to represent the utilities in the negotiations.

That lawyer, Richard Shore of Gilbert LLP, was in the courtroom in Charlotte Wednesday. Gilbert is based in Washington D.C. and advertises among its specialties insurance recovery and complex dispute resolution. Its web site describes Shore as an expert in “complex, multi-party settlement negotiations” and says he “has been retained as an expert witness on insurance matters and has testified in support of numerous insurance settlements.”

Plumer is a lawyer with the Washington firm of Pillsbury Winthrop Shaw Pittman.

Bruce Engel, of Chicago-based Freeborn & Peters, acting as lead for the insurers, told Bledsoe that his clients agreed to the stay for the purpose of negotiations.

The two sides were at pains in a motion filed Friday to say “each party has agreed to make a good faith effort during the stay period to reach a settlement” and that both “agree that it makes sense to devote their energies to trying to settle this case instead of continuing to litigate.”

Bledsoe agreed to the stay. But he recognized that a settlement is to a sure thing. And he noted that he wants the case to remain on track for trial in August 2020, should the negotiations not produce a settlement agreement.

The two sides will have from Feb. 1 to June 2 to attempt to work out a deal. They proposed a tight schedule for discovery. summary judgment proceedings and other issues to keep to the August 2020 goal.

Duke sued the insurers in March 2017, contending that the insurance companies refused to pay claims owed to Duke Energy Carolinas and Duke Energy Progress. The Charlotte-based utility giant wants the insurers to cover what could be more than $1 billion in damages that Duke owes or could owe as a result of environmental problems at coal-ash ponds at 16 current and former coal plants in the Carolinas.

The insurers sold Duke Energy and Progress Energy policies from 1971 to 1986, Duke says. While they are no longer in force, Duke says the insurers are still liable for environmental damage that occurred while the polices were in effect.

It is not clear exactly how much Duke could recover from the insurance companies if the court declares the claims are legitimate. The companies contend they have no liability because Duke did not properly maintain its ash operations.

Duke Progress contended in a rate-case hearing that it could ultimately be owed as much as $300 million by the insurers. Duke Carolinas, which had larger coal operations, would likely have claims of a similar amount, if not greater. But no specific financial claims have been disclosed in the lawsuit yet.

Duke’s handling of coal-ash waste from its plants became a front burn issue for North Carolina after the February 2014 storm drain collapse at the shuttered Dan River Steam Station that spilled up to 39,000 tons of ash into the river. The company pleaded guilty to a number of misdemeanor violations of federal environmental law involving problems at Dan River and its other N.C. plants the following year. It has also faced a number of fines for state environmental violations related to coal ash.

Gilbert LLP is a Washington-based law firm specializing in litigation and strategic risk management, insurance recovery and complex dispute resolution.