Hoosier land owners sleep well at night knowing that they are insured against liability for environmental contamination because Indiana does not enforce the standard pollution exclusion clauses found in many insurance polies. State Automobile Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845 (Ind. 2012); Am. States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996). However, just because an insured’s contaminated site is located in Indiana does not necessarily mean that the pollution exclusion will be void.

In a recent case, the 7th Circuit applied Michigan law to an insurance policy covering Visteon’s Connersville, Ind., facility to foreclose coverage. Visteon Corp. v. National Union Fire Insurance Company of Pittsburgh, 777 F.3d 415 (7th Cir. 2015). Michigan law enforces the standard pollution exclusion in insurance policies; thus, Visteon was left holding the bag for the millions of dollars it spent cleaning up TCE contamination and settling lawsuits with its neighbors.

The court determined that Michigan law applied to Visteon’s insurance policy because that policy covered all of Visteon’s facilities located anywhere in the world. Indiana has previously declared that it follows the “uniform-contract approach” to choice-of-law issues involving insurance policies that cover risk in multiple states. Nat’l Union Fire Ins. Co. of Pittsburgh v. Standard Fusee Corp., 940 N.E.2d 810 (Ind. 2011). Under that approach, the court looks at which state has the “most intimate contacts” and applies the law of that state to any risk covered by the policy.

In Visteon’s case, the plant was located in Indiana, but that was essentially the only Indiana contact. Visteon had 14 covered plants located in Michigan (more than it had in any other state), compared to only three plants in Indiana. In addition, Visteon’s headquarters and the personnel who negotiated the insurance contract were all located in Michigan. Based on these facts, the court held that Michigan law and its interpretation of the pollution exclusion applied to the insurance policy. Had the policy Visteon purchased covered only its Indiana plants, the pollution exclusion would have been invalid and Visteon might have recovered millions of dollars under the policy. Unfortunately for Visteon, it had insured all of its facilities nationwide with only one policy.