Pollution Exclusion is Effective and Does not Make Policy Illusory

Read the full article at https://lnkd.in/ggaC8r_p and at https://zalma.com/blog plus more than 4200 posts.

In Employers Mutual Casualty Company v. Tiger Creek Development, Inc., David Erickson, and Cherry Pease, No. 4:21-CV-65 (CDL), United States District Court, M.D. Georgia, Columbus Division (May 25, 2022) the USDC was asked to determine whether Tiger Creek Development, Inc. and David Erickson’s liability insurance policy covers a claim arising from their construction project that allegedly caused sediment deposits to pollute Cherry Pease’s pond.

In the underlying state court lawsuit, Pease alleged that Tiger Creek and Erickson’s work on adjacent property caused runoff that polluted and increased sediment deposits in her pond and damaged her property. Employers Mutual Insurance Company sought summary judgment on its declaratory judgment claim that it has no duty to defend or indemnify Tiger Creek or Erickson for the claims asserted by Pease in the underlying state court action

FACTUAL BACKGROUND

Pease alleged Tiger Creek’s clearing of trees and vegetation allowed sediment to wash downhill onto her property. In December 2018, Pease notified Tiger Creek and Tiger Creek’s owner, Erickson, about her concerns. 

DISCUSSION

Was There an Occurrence?

Employers Mutual argued there was no occurrence because Tiger Creek’s alleged contamination of Pease’s pond was not an accident. The USDC concluded that an occurrence, as defined by the insurance policy, can include the unintended physical damage caused by intentional development activity. 

Thus, the USDC concluded that the sediment runoff constitutes an “occurrence” under the policy, however, that did not resolve the issues presented to the court.

Does the Pollution Exclusion Apply?

All policy exclusions restrict coverage. That is their purpose. But limiting the circumstances for which coverage is provided does not make the coverage illusory. The insureds here could not have reasonably expected that their policy would have covered sediment runoff when the policy contains a clear exclusion to the contrary. 

Employers Mutual’s motion for summary judgment was granted.

ZALMA OPINION

Contrary to the hope of people who are insured no policy covers every possible risk of loss. Since both parties agreed to the obvious, that Ms. Pease’s pond was polluted by the acts of the insureds and the exclusion was clear and unambiguous there could be no coverage for the damages claimed and the defendants must defend themselves without the assistance of their insurer.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].

Subscribe to Zalma on Insurance at locals.com https://lnkd.in/gn5WAi6C.

Subscribe to Excellence in Claims Handling at https://lnkd.in/gNm9EWKJ.

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;