The American International Specialty Lines Insurance Co. Inc. (AISLIC) agreed to pay $42.5 million to clean up contamination at four industrial facilities, EPA announced. The four sites, formerly owned by Fruit of the Loom, are located in Michigan, New Jersey and Tennessee.

"Insurers should take note that they may be liable for the cost of cleaning up their bankrupt clients' environmental messes," said Granta Nakayama, assistant administrator for EPA's Office of Enforcement and Compliance Assurance. "EPA will keep pursuing companies who pollute the environment."

Fruit of the Loom filed for bankruptcy in 1999, and the court set up two trusts to receive and distribute the company's remaining assets, including its environmental insurance policies.

The trusts subsequently tried to collect environmental cleanup costs from AISLIC, a member company of AIG Insurance, under the insurance policy that covered response costs and natural resource damages under the Comprehensive Environmental Response, Compensation, and Liability Act.

AISLIC denied coverage and then brought a suit seeking to confirm that it was not obligated to pay the trusts for these costs.

This settlement resolves a lawsuit that began in 2005 over environmental insurance coverage between AISLIC and the two bankruptcy trusts and concludes litigation in which the U.S. Department of Justice intervened on behalf of EPA, the Department of Interior, the Nuclear Regulatory Commission and the National Oceanic and Atmospheric Administration. The states of New Jersey, Tennessee, Illinois and Michigan also have joined the settlement.

Under the settlement agreement, AISLIC will make an initial $30 million payment plus interest from May 15, 2007, and 10 annual payments of $1.25 million to the Fruit of the Loom trusts.

More information on the AISLIC bankruptcy settlement can be found at AISLIC Settlement | Compliance and Enforcement | US EPA