$18.3M payout in Crestwood well water lawsuits jeopardized following court ruling

Oct. 22--A recent Illinois Appellate Court ruling throws into doubt an $18.3 million payout to current and former Crestwood residents who alleged the village's longtime use of well water contaminated with a known carcinogen caused them health issues.

The village agreed to pay $15 million to settle dozens of lawsuits and the current litigation, which an attorney for residents is appealing to the state supreme court, targets Crestwood's engineering firm and a settlement agreed to in May 2015.

That settlement hinged on Burke Engineering Corp. in Orland Park being reimbursed by its insurer, General Casualty. A state appeals court ruled the insurance company had no obligation to cover the cost, according to the 2-1 decision.

Lawsuits were filed after the village's use of the well came to light in 2009. The well water was tainted with chemicals including vinyl chloride, a known carcinogen, and it was being mixed with Lake Michigan water.

Investigators raided Crestwood Village Hall in late April 2009 and carried off boxes of documents, 10 days after a Chicago Tribune investigation found that village officials knowingly supplied residents with the contaminated water.

Village officials told residents and the Illinois Environmental Protection Agency that it was using only Lake Michigan water after 1985, when the contaminated well was discovered, but regulators later learned that Crestwood continued to use the well for as much as 20% of its water supply from 1985 to 2007.

Two village officials were convicted in federal court in Chicago for their roles in covering up the longtime practice of tapping the well.

Village officials steadfastly denied that residents' health was in jeopardy, although many of the lawsuits blamed the use of the well water for illnesses including kidney problems, tumors, different types of cancer and immune system disorders.

After the use of the well was revealed, the IEPA said the public's health was never at risk, but the U.S. EPA has said there is no such thing as a safe exposure level to vinyl chloride, a chemical used in dry cleaning.

Some 300 current and former residents sued Burke Engineering Corp. in May 2013, alleging the firm was negligent in failing to notify residents that the well water being used was contaminated.

The firm provided monitoring and audits of the village's water supply from 1980 until 2006, and Burke's role came to light during the discovery phase of the initial lawsuits filed against the village in 2009, according to Jay Paul Deratany, a Chicago attorney who represented some 280 plaintiffs in those original lawsuits as well as the complaint against Burke Engineering Corp.

In July 2014, a Cook County Circuit Court judge dismissed the negligence claim against Burke Engineering Corp., finding General Casualty was not required to indemnify Burke for the settlement amount and did not act in bad faith in denying coverage, prompting the appeal from residents.

In the meantime, attorneys began talks aimed at settling the matter out of court. The lawsuits had sought damages against Burke Engineering Corp. of $350 million.

Deratany's firm on Oct. 19 asked the state supreme court to consider an appeal of the Sept. 14 appellate decision. He said that if left to stand, the appeals court's decision could have significant repercussions as far as insurance coverage for businesses.

Deratany said that while $100,000 had been earmarked from the settlement of the original Crestwood cases to pay for additional litigation, that money has been exhausted and he is continuing the litigation on his own with hopes of a reversal from the Illinois Supreme Court.

He said he sees a possible willingness on the part of the high court because there was a split decision at the appellate level, with Judge Carl Walker dissenting.

In his dissent, Walker suggested there was sufficient evidence regarding the insurance company's responsibility that the case be sent back to the circuit court for more proceedings.

The appeals court, in affirming the circuit court ruling, wrote that after so many years of litigation on the matter "we realize that this is a disappointing result for the residents of Crestwood."

During the trial on the residents' complaints against Burke Engineering Corp., evidence presented showed that Crestwood officials, in tapping the well, pumped "millions of gallons of tainted drinking water to residents."

General Casualty filed its own counter action, arguing it wasn't obligated to cover the settlement costs because of how the policy was written.

It contended that, based on the negligence claim, it wasn't obligated to pay out in instances where conduct by the insured resulted in "injury or damage that was expected or intended."

In the wake of the original lawsuits, Crestwood has begun to address a root cause in its water distribution system that contributed to the use of the well.

The $25 million project will replace aged water pipes in the village's Playfield subdivision, and Crestwood in late 2018 received a $1.3 million grant from the U.S. Army Corps of Engineers for part of the work. The village is also getting a low-interest loan from the state.

According to evidence and testimony in the court cases, Crestwood officials were aware of substantial leaks in the village's water distribution system but failed to make needed, and costly, repairs. Using the cheaper well water saved the village money and reduced the amount of the more expensive lake water it had to buy, evidence showed.

This story was updated at 7 a.m. Oct. 23 to correct the engineering company was Burke Engineering Corp. of Orland Park.

[email protected]

___

(c)2020 The Daily Southtown (Tinley Park, Ill.)

Visit The Daily Southtown (Tinley Park, Ill.) at www.chicagotribune.com/suburbs/daily-southtown

Distributed by Tribune Content Agency, LLC.