IBM recently filed a declaratory judgment action against multiple insurers seeking coverage for environmental remediation costs. The complaint contains lessons for policyholders facing long-tail environmental exposure claims.
Factual Background
Beginning in the 1980s, IBM became subject to directives to remediate contamination at various plant sites and/or third-party disposal sites. To date, IBM has incurred $900 million in remediation costs, and it estimates that it will incur an additional $300 million in remediation costs.
One of the alleged contamination sites was located in the Village of Endicott, New York. In 2024, the Village of Endicott filed a lawsuit against IBM for contamination of groundwater from various hazardous substances, including 1,4-D and various chemicals collectively referred to as PFAS. IBM sought to access its insurance policies from 1961 to 1970 to pay for remediation costs and to defend the Village of Endicott lawsuit.
Legal Arguments
IBM argued that its 1961–1970 policies were triggered based on alleged exposure allegations in the Village of Endicott lawsuit. These triggered policies fell into three groups: (1) policies with exhausted limits, (2) policies with insolvent insurers, and (3) available policies. The policies with exhausted limits include primary and umbrella policies, and IBM sought to access its excess policies. Specifically, IBM sought to access its 5th and 6th layer excess policies.
In IBM's tower, even though the umbrella policies were exhausted, the excess policies followed the form of the umbrella policies. The exhausted umbrella policies determine whether there is coverage under the excess policies. The umbrella policies - and by extension, the excess policies - did not include pollution exclusions. They also included a non-cumulation clause, which would allow recovery under multiple policy periods.
IBM noticed every insurer of each new remediation claim.
Policyholder Takeaways
- For long-tail exposure claims, it may be most advantageous for policyholders to access older insurance policies. These policies may contain more lenient exclusions or no relevant exclusions at all. In this case, IBM's older policies did not include a pollution exclusion, which is unheard of in more recent years. The older policies also contained a non-cumulation clause.
- Policyholders should be aware that older policies may also be exhausted through the payment of other claims. In long-tail exposure cases, if some policy periods are exhausted, the policyholder may be able to access other triggered policies during the alleged exposure dates.
- Policyholders should carefully examine their insurance towers to determine available coverage. Excess policies commonly follow the form of an umbrella policy. Insureds need to read each excess policy to determine which policy the excess policy follows.
- Policyholders should not hesitate to notify all relevant insurers of environmental claims. Failure to notice can result in the loss of coverage. Even if coverage seems unlikely, or the insured is aware of an exclusion, the claim should still be noticed.
The case is International Business Machines Corp. v. Munich Reinsurance America, Inc. F/K/A American Re-Insurance Company, et al., Northern District of New York, Case No. 3:25-cv-466 (BKS/ML).
