Perkins Coie and Blackstone Chambers take lead on multi-million dollar arbitration

Tennesee Valley Authority has wrestled $42m settlement from its insurer, Arch Insurance Bermuda, in the first of three arbitration cases following a 2008 accident at the corporation’s power plant.

The arbitration was the first of the three clashes with TVA’s insurers to be resolved and as part of the settlement the parties agreed to make the details public after settling the claim before the hearing.

“Resolution of coverage disputes with Bermuda insurers are usually subject to strict confidentiality provisions,” said Leon Kellner, the Perkins Coie senior partner who led TVA’s outside legal team in connection with this recovery.  “This resolution is unique in that there are no restrictions on disclosing the amount or the terms of the settlement.”

The issue stems from an accident five years ago, when when the ash disposal plant at TVA’s Kingston Power plant failed, causing a flood of coal fly ash slurry across the surrounding area.

State and federal investigations were launched and the accident was the subject of several congressional hearings. The estimated cost is thought to be $1.1bn, of which $855m has already been spent.

TVA is now in dispute with all three layers within its standard liability insurance policy, which includes the Arch Insurance policy – a subsidiary of arch Reinsurance Ltd – with $50m limits, an ACE Bermuda Insurance policy with $150m limits and Zurich Insurance Company with $50m.

TVA has agreed to settle for a 16 per cent discount of its policy to allow its lawyers, Perkins Coie senior partners Kellner and Vivek Chopra, to focus on the other two claims.

The Perkins Coie lawyers acted for TVA with support from Enyo partner Peter Fitzpatrick to resolve the Arch Insurance claim, having instructed Andrew Hunter QC and Andrew Scott, both of Blackstone Chambers.

Sedgwick commercial partner Lawrence Klein acted for Arch Insurance, which rescinded its $50m insurance policy, claiming that TVA had provided incomplete information when it applied for the policy.

Perkins Coie, Enyo and Blackstone Chambers are understood to be working on all three arbitrations, which were all due to take place in London. The next, with ACE Insurance, is slated to take place on 30 September 2013.