American Ecology, an Agoura Hills-based company specializing in disposing of low-level radioactive waste, has sued its insurance carrier, American Nuclear Insurers, for refusing to pay attorney fees, as well as for damages that might occur in two lawsuits involving the company's controversial dump sites.
The suit was filed Thursday in Los Angeles Superior Court, the day after the insurance group asked a Kentucky court to declare that it not be held responsible for costs associated with a dump in Maxey Flats, Ky., operated by U.S. Ecology, a Louisville-based unit of American Ecology.
The Environmental Protection Agency wants U.S. Ecology to pay $30 million in cleanup costs associated with the Maxey Flats dump. Studies of soil samples have shown traces of highly radioactive plutonium outside the dump.
But American Nuclear Insurers, an unincorporated association of 34 insurance companies based in Farmington, Conn., maintains that its policies cover only lawsuits, not special "Superfund" notices served on American Ecology by the U.S. Environmental Protection Agency.
Considered Long-Term Threat
Superfund sites are those considered to pose a serious long-term threat to human health and thus qualify for federal funds for some of the cleanup. Taxes from industries held responsible for the contamination have contributed a substantial amount to the federal funds.
American Nuclear Insurers claims it is liable for a maximum of $10 million a year in claims. But American Ecology officials say that, because the pollution damage in Kentucky occurred over several years, American Nuclear Insurers should pay up.
"That's what you buy insurance for," said William E. Prachar, American Ecology chairman, chief executive and president.
American Nuclear Insurers could not be reached for comment.
American Ecology has had serious contamination problems at its other dumps in Nevada, Washington state and Illinois.
Because American Ecology was afraid its insurer would also try to avoid responsibility for the Illinois dump site, American Ecology sued American Nuclear Insurers in an attempt to force it to cover any costs at the Illinois site as well.
The Illinois attorney general has filed several suits against U.S. Ecology, charging that radioactive isotopes have leaked from a low-level radioactive-waste site in Sheffield, 120 miles west of Chicago.
"They pooh-poohed the litigation for a while," said Douglas R. Augenthaler, referring to American Ecology, "but they're down to the brass tacks now." Augenthaler follows the company for E. F. Hutton, a New York brokerage.
One suit seeks $97 million in damages based on the "potential harm" the site poses to the environment.
The Illinois suits are now in the discovery stage, and the company expects the legal fees to rise. "We're just starting to pour the bucks in," said Karl J. Eimer, American Ecology secretary and treasurer.
The company's stock has dipped as the suits have progressed. American Ecology has plummeted from a high of $50 last year to its Monday close of $17.
American Ecology has acknowledged its troubles, but points to its 30-year experience as a pioneer in disposing of radioactive waste.
American Ecology, which earned $3.2 million on sales of $47.9 million in 1986, was able to persuade the state of California to overlook the company's past problems. U.S. Ecology is the firm designated by the state to design, build and operate its first low-level radioactive-waste site.
Nevertheless, American Ecology has seen legal costs eat into its profits. During its first quarter, ended March 31, the company said, it spent $600,000 more on legal costs than in the same period a year earlier. As a result, the firm said, net income fell 71%, to $200,000.