Windsor School District v. State of Vermont and Department of Corrections

Summary

The Vermont Supreme Court affirmed an award requiring the State and Department of Corrections to reimburse Windsor School District for reasonable consultant and attorney expenses incurred in investigating and monitoring remediation of hazardous contamination caused during the State's prior use of the property. The court applied Vermont's Waste Management Act and the common-law Albright exception to the American Rule, while declining to award attorney's fees incurred in prosecuting the indemnity action itself. The court did not reach alternative groundwater-protection and implied-indemnity theories because they would provide no additional relief.

Holdings

1. Under Vermont's equitable exception to the American Rule, a responsible party may recover reasonable attorney's fees incurred to protect its legal interests during an environmental cleanup when the other responsible party's conduct necessitated those expenses.
2. Reasonable consultant expenses incurred by an innocent responsible party to investigate, monitor, and help discharge environmental-remediation obligations are recoverable as indemnity under 10 V.S.A. § 6615(i), even when the expenses were incurred by the party rather than directly by the State.
3. The equitable exception permitting recovery of fees incurred to protect a party's interests in a third-party proceeding does not extend to attorney's fees incurred in prosecuting the action seeking indemnification for those fees.
4. Attorney's fees incurred in a declaratory-relief action against insurers to establish coverage or a duty to defend are not recoverable as environmental-cleanup indemnity expenses.
5. Prejudgment interest was not mandatory because the claimed expenses were disputed and not readily ascertainable, and the trial court did not abuse its discretion in denying discretionary interest.
6. The collateral-source rule barred DOC from offsetting Windsor's insurance proceeds against the indemnity award, notwithstanding the absence of a specific finding of negligence and the State's subsidization of school-district operating expenses.

Questions Presented

1. Whether Windsor could recover attorney's fees incurred while monitoring and protecting its interests during the environmental investigation and remediation.
2. Whether Windsor could recover consultant expenses incurred in investigating and monitoring remediation under Vermont's Waste Management Act.
3. Whether the Vermont Groundwater Protection Statute or common-law implied indemnity provided an alternative basis for additional recovery.
4. Whether Windsor could recover attorney's fees incurred in prosecuting its indemnity action against DOC.
5. Whether Windsor could recover attorney's fees incurred in a declaratory-relief action against its insurers for coverage and defense costs.
6. Whether Windsor was entitled to prejudgment interest.
7. Whether the collateral-source rule barred DOC from offsetting Windsor's insurance proceeds against the indemnity award.

Disposition

affirmed