LINCOLN, Neb. -- An insurance company said in a new court filing that if it's ordered to pay claims related to lawsuits filed against South Sioux City pertaining to odors from Big Ox Energy, a third company should pay part or all of its costs.
Philadelphia Indemnity Insurance Company on Monday filed a third-party complaint against Arthur J. Gallagher Risk Management Services, saying the company issued a policy to South Sioux City that did not include coverage of the city's sewer system.
The city sued Philadelphia Indemnity and Charter Oak Fire Insurance Company in U.S. District Court in Lincoln, Nebraska, last August, seeking a court order requiring them to cover tort claims filed by residents over losses related to sewage treated by Big Ox and the resulting discharge and backup of hydrogen sulfate gas from the sewer system into homes.
The resulting odors have led to the displacement of numerous residents, and 15 lawsuits have since been filed in Dakota County District Court against the city and Big Ox. The lawsuits allege that Big Ox and the city failed to maintain, operate and modify wastewater treatment facilities and sewer systems to handle waste from the plant and prevent the release of toxic gases.
Philadelphia Indemnity says in its third-party complaint that South Sioux City, through the Arthur J. Gallagher office in Sioux City, applied for an environmental insurance policy to cover the city's sewer system, a requirement under its contract with Big Ox. Philadelphia Indemnity says it provided a quote to Arthur J. Gallagher that did not include sewer coverage because the system schematics required for coverage were not submitted. Arthur J. Gallagher later asked for issuance of the policy as quoted, and it did not include sewer coverage.
Philadelphia Indemnity says it was never informed that the city's contract with Big Ox required sewer system coverage.
The Pennsylvania-based company says the policy issued to the city does not entitle it to receive coverage for legal claims. The case is scheduled for trial in May.
Philadelphia Indemnity said that if it's determined that the city is entitled to coverage, the insurance company is entitled to compensation from Arthur J. Gallagher for all or at least a portion of the claims.
Shortly after Big Ox, which converts organic waste from local industries to methane, began operations in September 2016, residents of a five-block area near the plant began to complain of odors inside and outside their homes and health problems. They are seeking at least $7.4 million for reimbursement of relocation costs and other damages in their lawsuits against the city and Big Ox.
The Denmark, Wisconsin-based company maintains that faulty plumbing in the homes was the primary cause of the odor issues.
The city and Big Ox have paid hundreds of thousands of dollars to reimburse homeowners for living expenses since they were displaced. The city has also spent $1.5 million for sewer upgrades and modifications.
The Nebraska Department of Environmental Quality recently issued a notice of violation to Big Ox alleging violations of state air quality regulations and the plant's air quality construction permit. The company also was given a separate notice of violation connected with a sludge spill caused by a problem with digesters at the plant.