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Strict liability, broad exclusions: Indiana Court of Appeals bars coverage for barge environmental claim

5/26/26

By: Jacob Berlinger & Patrick Eckler

On April 28, 2026, the Indiana Court of Appeals addressed a significant insurance coverage dispute arising from environmental contamination at a Louisiana shipyard designated as an EPA Superfund site.

In Starr Indemnity & Liability Insurance Co. v. American Commercial Barge Line, LLC, the court considered whether excess liability insurers were obligated to provide coverage to a barge operator for liabilities imposed under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). The underlying contamination stemmed from barge-cleaning operations conducted decades earlier, during which the barge operator’s predecessor delivered barges containing hazardous substances to the site.

The dispute

The dispute centered on two primary issues: whether Indiana law or federal admiralty law governed the policies, and whether the policies’ “watercraft limitation” excluded coverage. The trial court applied Indiana law and found coverage, but the appellate court only agreed in part. While affirming that Indiana law governed—largely due to the insurers’ failure to demonstrate the applicability of federal maritime law—the court ultimately sided with the insurers on the coverage issue

Coverage issue

At the heart of the decision was the interpretation of the policy language excluding liability “arising out of the ownership or maintenance of any watercraft.” The barge operator argued that its liability was driven by the shipyard’s handling of hazardous materials, not its use of barges, and that coverage should apply. The excess insurers countered that the policies’ watercraft limitation barred coverage because the liability stemmed from the delivery of barges containing hazardous substances. The trial court agreed with the barge operator and found coverage, applying a negligence-based analysis.

The appellate court rejected the trial court’s reliance on a negligence-based causation framework, emphasizing that such an approach is incompatible with CERCLA’s strict liability scheme. Unlike traditional tort claims, CERCLA imposes liability based on a party’s statutory connection to the contamination—not on fault or causation. Accordingly, the court held that importing concepts such as the “efficient and predominating cause” test would improperly add a causation requirement where none exists.

Instead, the court applied a plain-language, expansive reading of “arising out of,” focusing on whether the liability originated from or was derived from the ownership or use of watercraft. Viewing the issue through the lens of strict liability, the court concluded that the barge operator’s liability stemmed from its predecessor’s act of sending barges containing hazardous substances to the shipyard—conduct sufficient to trigger CERCLA liability. Because that connection was enough to satisfy the policy’s exclusion, the court found that coverage was barred, reinforcing that traditional causation principles do not control in the strict liability context.

As a result, the court reversed the denial of summary judgment to the insurers and held that coverage was barred, reinforcing the reach of exclusionary language in the context of strict liability environmental claims.

For more information, please contact Jacob Berlinger at jacob.berlinger@fmglaw.com, Patrick Eckler at patrick.eckler@fmglaw.com, or your local FMG attorney.

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