Travelers wins in pollution case

Court rules in carrier's favor as food product supplier goes rogue

Travelers wins in pollution case

Legal Insights

By Kenneth Araullo

Travelers is officially safe from a potentially huge lawsuit after an appeals court ruled against a food supplier.

In a recent judgment, the US Court of Appeals for the Fifth Circuit ruled that Gold Coast Commodities Inc, a firm specializing in transforming used cooking oil and vegetable byproducts into ingredients for animal feed, is not covered by its insurance policy with Travelers Casualty and Surety Co. of America due to the policy’s explicit pollution exclusion clause.

A report from Feed Strategy noted that this decision came after allegations that the company had discharged pollutants into the municipal sewer systems. The case highlighted the clear language used in the insurance policy’s pollution exclusion, leading to the conclusion that Travelers was under no obligation to defend Gold Coast against lawsuits accusing it of pollution.

“An insurance policy’s pollution exclusion deters deliberate or negligent behavior that leads to environmental harm. When we hold that a pollution exclusion excludes the insured from coverage, we protect the insurer’s right to disincentivize corporations from engaging in bad faith actions with a known environmental impact. This case arises from claims asserted against an insured and, due to a pollution exclusion, those claims fall outside the insurance policy’s reach,” the ruling said.

Lawsuits against Gold Coast

Operating out of Brandon, Mississippi, Gold Coast was insured by Travelers from June 2016 until June 2019. During this period, the city of Brandon initiated legal action in July 2018 against the company, alleging it had illegally discharged “significant amounts of high-temperature, corrosive, low-pH wastewater” into the city’s sewerage system.

Similarly, in June 2021, the City of Jackson brought forth a lawsuit in the Circuit Court of Hinds County, accusing Gold Coast and its executives of disposing “high-temperature and corrosive” industrial waste into its sewer system within the same insurance timeframe.

Both cities are seeking reparations for the alleged environmental damage caused by the negligent release of pollutants. In response, Travelers invoked the pollution exclusion clause of its policy, which states that the insurer “will not be liable for loss for any claim based upon or arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of any pollutant.”

The policy further clarifies that “pollutant” encompasses a wide range of contaminants, including any “solid, liquid, gaseous or thermal irritant or contaminant, such as smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste,” with waste being defined as including materials intended for recycling, reconditioning, or reclamation.

The district court originally ruled that the allegations against Gold Coast were unequivocally excluded from coverage under the pollution exclusion, a stance that the appeals court upheld. The appellate court reinforced the district court’s interpretation, noting that the intentional discharge of hazardous waste falls squarely within the type of activities the pollution exclusion aims to address.

“The policy is not ambiguous. Because the policy is not ambiguous, the claims are excluded from coverage,” the appeals court said.

The ruling is another victory for Travelers, with the company also recently reporting that its quarterly earnings surpassed expectations.

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