A policyholder does not have standing to object to a $1 million settlement reached by units of American International Group Inc. and Zurich Insurance Group Ltd. in connection with a huge sinkhole in Louisiana, the U.S. 5th Circuit Court of Appeals in New Orleans ruled, affirming a lower court decision.

The case involves the Bayou Corne sinkhole which emerged in Assumption Parish on Aug. 3, 2012, near the site of Texas Brine’s decades-long salt mining activity. The salt dome operated by Houston-based Texas Brine collapsed, creating the sinkhole, which has expanded to about 34 acres, swallowing trees and releasing methane gas, according to news sources.

Before the collapse, units of AIG and Zurich had insured Texas Brine.

The plaintiffs in the case filed a lawsuit against Texas Brine and its insurers seeking damages for pre-sinkhole subsidence and post-sinkhole damages. The district court certified a class of plaintiffs, the LeBlanc plaintiffs, on May 28, 2013, and amended April 9, 2014. The plaintiffs reached a settlement with Texas Brine and related parties, so the LeBlanc plaintiffs are out of the case, according to court records.

A different class of plaintiffs, the Sanchez plaintiffs, filed their first complaint in October 2014 against Texas Brine and Occidental Chemical Corp., claiming negligence, nuisance, trespass, strict liability and negligence per se. Subsequently, the Sanchez plaintiffs filed a second and third complaint.

The Sanchez plaintiffs, whose property was within a two-mile radius of the center of the sinkhole, sought to recover under two theories of damages: diminution in the value of their land and restoration costs due to pre-sinkhole subsidence.

Eventually, the Sanchez plaintiffs reached a settlement with the pre-2012 insurers for claims related to the pre-sinkhole subsidence damage. Under the settlement, the Sanchez plaintiffs agreed to dismiss with prejudice all claims against pre-2012 insurers and all pre-sinkhole subsidence claims against Texas Brine. In return, the pre-2012 insurers would pay $1 million to the Sanchez class.

Texas Brine, which was not a party to the settlement, objected to the settlement because it did not release Texas Brine of all plaintiffs’ claims against it. The plaintiffs could still pursue claims for post-sinkhole damage.

On Oct. 7, 2019, the district court denied a motion by Texas Brine objecting to the settlement and the court approved the class settlement. Texas Brine appealed, and the appeals court ruled that Texas Brine as a nonparty to the settlement had no standing. The court dismissed Texas Brine’s appeal on March 1.