A rather bizarre case involving cow manure brought the contentious topic of the pollution liability exclusion to the forefront again this week. A Wisconsin appeals court determined that because manure is traditionally considered “liquid gold” by farmers, a carrier must cover losses caused by cow manure that polluted a local aquifer and contaminated water wells.
Had the court leaned the other way, cow manure would have joined odd items like bat droppings, restaurant odor and pig farm stink as substances ruled pollutants—and therefore excluded from commercial general liability coverage—by courts in recent years.
Even within the same court, divisions on what qualifies as a pollutant are confusing. The same Wisconsin Supreme Court ruled recently that a mixture of bat feces and urine was a pollutant in a homeowners coverage case, but that carbon dioxide in an office building was not.
“The same substance can be a ‘pollutant’ in some contexts, but not in others,” said a Colorado state judge in one pollution liability exclusion case this year, highlighting the massive gray area many feel with regard to the exclusion.
Craig Stanovich with Auston & Stanovich Risk Managers believes all these vagueries mean producers should err on the side of caution and obtain extra coverage when it comes to possible pollutants.
“Risk managers, brokers and agents would do well to either extensively amend the CGL or obtain separate pollution coverage for any of their policyholders who have more than minimal or incidental pollution exposures,” Stanovich recommended. “When read literally, the pollution exclusion says nothing about environmental damage or industrial polluters. In fact, not only is the term ‘pollution’ not defined, it does not appear anywhere within the 695-word exclusion.”
Stanovich again reinforced that court opinion on what constitutes a pollutant is mixed, meaning it is difficult to draw lasting lessons from any one decision.
However, Laura Foggan of Wiley Rein LLP told Law360 that recent court trends indicated insurers will generally come out on top in pollution liability exclusion cases.
“Looking at 2013, the courts were quite kind to insurers on the pollution exclusion,” Foggan said, noting that four out of five federal appeals court cases rule in favor of carriers.