<b>Insurance Company Not Liable for Fort James Cleanup</B>

An insurance company wants no part of paying for cleanup costs incurred by Fort James Corp. because of its pollution of the Fox River area, according to a lawsuit filed in federal court.

The United States Fidelity and Guaranty Co., an insurer of the former Fort Howard Paper Co., is asking a judge to declare that it is not obligated to defend the company or pay any costs associated with pollution cleanup. The suit was filed Tuesday.

Fort Howard carried liability insurance with USF&G from 1975 through 1994, the suit says.

The lawsuit alleges that Fort Howard did not notify USF&G of any potential pollution claims until 1994, even though the papermaker had been told by the DNR as early as 1959 that "its operations were contaminating the environment, including the waterways, of the State of Wisconsin."

The company also received various notifications from federal agencies over the years that it was polluting the Wolf River area, but still failed to notify the insurer, the suit says.

The suit names as a defendant the Fort James Operating Co., which merged with the Fort Howard Corp. in 1997. It is now part of Georgia-Pacific Corp. A Georgia-Pacific spokesman said Wednesday firm officials have not seen the suit and could not comment on it.

Fort James and State Department of Natural Resources officials in November reached a settlement calling for the papermaker to provide $51 million worth of recreational resources, restored wetlands and improved fisheries to the state for damage done to the river by pollution from its plant in Green Bay. In exchange, the state agreed not to sue the company for damages arising from the release of PCBs into the river. Environmental groups quickly denounced the deal, saying it was struck behind closed doors and fell far short of what the papermaker should pay.

In the agreement, the state broke ranks with federal agencies and reached a settlement before any attempt to clean up the polluted river bottom.

Fort James and other paper mills released PCBs into the river when they were making and recycling carbonless copy paper. In 1977, the federal government banned the chemicals, which studies have linked to cancer, reproductive problems and poor mental development in children.

Under the agreement with the state, Fort James actually would spend only $7 million on specific projects in the Green Bay area, but get credit, under a complicated formula, with repairing $51 million in resource damage.

The suit says lawyers for Fort Howard notified USF&G in July 1994 that the insurer had "a duty to defend" pollution claims.

USF&G, of Baltimore, denied that, but "Fort Howard continues to contend that USF&G has a duty to defend and to indemnify Fort Howard with respect to the pollution claims," the suit said. The insurer is seeking a ruling on its obligations now because Fort James is in settlement negotiations with state and federal regulators, the suit says. A determination of USF&G's obligations in needed in part to decide whether it should participate in settlement negotiations, the suit says.

The suit alleges that Fort James is not entitled to coverage under its policies because the papermaker did not give timely notice to the insurer. Milwaukee Journal Sentinel