Crestwood seeks to float bonds to fund possible $15 million settlement to end litigation over contaminated well water

By Jonathan Bilyk | Sep 22, 2015

A suburban Chicago village facing hundreds of lawsuits over allegations it knowingly allowed its residents to drink water contaminated with toxic, cancer-causing chemicals for decades has opted to move forward with a potential bond issue to potentially settle the litigation en masse later this year.

The Daily Southtown reported Sept. 21 the Crestwood Village Board has approved the decision to move ahead with a $9 million bond issue to provide the bulk of the funding for a proposed $15 million settlement to end a suite of lawsuits brought on behalf of nearly 365 plaintiffs who assert either they or their relatives were harmed by contamination from the village’s Well No. 1.

Crestwood Mayor Lou Presta said at a recent village board meeting the cases could be settled by the end of 2015, but the issue could be complicated if residents petition to place the bond issue – which would represent an additional property tax levy - on the ballot for a referendum vote.

In the Southtown report, Presta said settling the lawsuits could save the village $700,000 per year in legal fees it is now paying to defend itself against the spate of litigation over the alleged effects of the contamination.

Crestwood is represented in the cases now pending by the firm of Barnes Thornburg, of Chicago.

The village’s legal problems over the contamination began in 2009, when the Chicago Tribune, acting on a tip from village residents, first broke the story of the contamination in the village’s water supply.

According to published reports, the village’s Well No. 1 failed water quality tests in the mid-1980s. In the years since, that well had supposedly been placed out of service, as the village switched to Lake Michigan as its municipal water source. Purportedly, the well would only be drawn upon in cases of emergency.

However, in 2009, the Tribune ran its story, indicating village officials were continuing to pump from the well, with the well at times contributing as much as 30 percent of the village’s water.

Subsequent testing by the U.S. Environmental Protection Agency revealed the well’s water contained toxic levels of contaminants, including dichloroethylene and vinyl chloride, which were believed to have originated from a now-shuttered dry cleaners shop in the village. The U.S. EPA shut down the well at that time.

The chemicals are considered dangerous by public health officials. The U.S. EPA, for instance, considers there to be no safe allowable dosage for vinyl chloride.

Large numbers of residents later brought class actions and other suits against the village, alleging liability for a host of severe health problems, including various cancers, tumors and deaths, they and their families have experienced in the past two decades.

Should plaintiffs and a Cook County Circuit judge sign off on the purported settlement, the deal could represent a relatively quick end to the problems for the village, some relief for residents and victims and likely a payday for the plaintiffs’ lawyers.

In 2010, for instance, the village ended the first wave of litigation, settling with a class of village residents for $2.8 million. Of that total, $500,000 was paid in various ways to village residents, while the lawyers representing the class were paid an additional $400,000.

Attorneys named in that settlement agreement included Larry D. Drury, of Chicago; Burton I. Weinstein, of Baskin, Server, Berke & Weinstein, of Chicago; and Ben Barnow, of Barnow & Associates, of Chicago.

In the years since, hundreds of other purported victims of Crestwood’s contaminated water supply have introduced lawsuits in Cook County Circuit Court. According to court records, they are represented by more than a dozen law practices, including attorney Jay Paul Deratany, of Chicago; the Walsh & Knippen firm, of Wheaton; Power, Rogers & Smith, of Chicago; Hurley McKenna Mertz, of Chicago; the O’Connor Law Group, of Chicago; Leahy & Hoste, of Chicago; Vrdolyak Law Group, of Chicago; attorney Robert A. Kezelis, of Palos Heights; Randall F. Peters, of Chicago; Cogan & McNabola, of Chicago; and Karlin Fleisher Falkenber, of Chicago.

It is not known how much the attorneys might receive as a result of a settlement with the village.

However, some of the money will come from regular village tax revenues and some from insurance, Presta has said.

Just how much will come from insurance, however, remains to be seen, as the village has failed on at least three occasions to persuade insurers to help the village and its officials cover potential losses.

In 2012, a federal judge sided with Scottsdale Indemnity Company, finding the pollution exclusion clause in the village’s policy permitted the insurer to decline coverage. The Seventh Circuit upheld the findings on appeal.

In 2013, a state appellate court ruled similarly in favor of Ironshore Specialty Insurance.

And an action brought by Twin City Fire Insurance Company, an affiliate of The Hartford companies, is still pending in federal district court in Chicago, in which the insurer has similarly asked to be allowed to turn down the village’s request for help.

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Organizations in this Story

Barnes & Thornburg LLP Chicago Tribune Clifford Law Cogan & McNabola Hurley, McKenna & Mertz, P.C. Jay Paul Deratany Karlin, Fleisher & Falkenberg LLC. Leahy and Hoste O'Connor Law Group LLC Phillips Law Offices Power Rogers & Smith Randall F. Peters & Associates The Vrdolyak Law Group LLC. U.S. Environmental Protection Agency (EPA) Walsh, Knippen, Pollock & Cetina, Chartered

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