Cincinnati Insurance walked away clean after a federal judge in Indiana dismissed a suit claiming the carrier shirked its duty to defend and indemnify a developer over chemical contamination.
The dispute grew out of Thompson Thrift Development’s 2017 purchase of an Arizona apartment complex that later tested positive for perchlorethylene, or PCE, a solvent tied to drycleaning.
By 2022, soil and air testing showed elevated levels of the toxin on the property. Thompson Thrift notified the insurer, then flagged regulators and tenants as state law required.
That set off a chain reaction: a tenant demanded a unit test, which came back hot, and then asked to walk from her lease and recover moving costs.
Regulators soon ordered that unit remain vacant. The developer called it a “soft command,” yet it still complied to avoid penalties.
More tests in 2023 confirmed contamination remained.
By December, Thompson Thrift and the neighboring drycleaner had entered a voluntary cleanup program run by Arizona’s environmental agency.
Before that, the developer sued its insurer, arguing Cincinnati’s commercial general liability policies required the company to step in with defense and indemnity.
The Southern District of Indiana disagreed. Judge found the trigger never appeared. Policy language hinged on a “suit,” and while Indiana law stretches that term to cover coercive administrative actions, the environmental regulator hadn’t gone adversarial.
The agency’s notices were seen as investigative and advisory, not enforcement. No “suit,” no duty to defend.
That knocked out indemnity too. Cincinnati’s policies promised to pay only for bodily injury or property damage the insured was legally obligated to cover.
Thompson Thrift pointed to Arizona’s strict liability regime, but the court said the company hadn’t shown any binding order forcing cleanup, reimbursements, or penalties. Voluntary participation in a remediation program didn’t create the legal obligation required under the contract.
Without defense or indemnity, there was no breach. The dismissal closed the door on Thompson Thrift’s claims. Cincinnati declined to comment on the decision.
- The U.S. District Court for the Southern District of Indiana granted Cincinnati’s motion for summary judgment, denying Thompson Thrift’s motion for partial summary judgment.
- The court concluded that even assuming all factual disputes favor Thompson Thrift, no “suit” ever triggered a duty to defend under the policy.
- The court interpreted Indiana law to require a coercive or adversarial administrative proceeding for an insurer’s duty to defend to arise. The ADEQ actions here were deemed investigatory, not coercive.
- The decision also rejects Thompson Thrift’s indemnity claim: the developer failed to show any legally enforceable obligation to pay cleanup or legal costs.
- Bloomberg reports the court ruled that “insurance coverage wasn’t triggered because there was no suit” in the case.
Legal commentary notes that the ruling affirms that insurers may avoid environmental cleanup liability where regulators have not issued coercive orders.
