An Absolute Pollution Exclusion: Reading The ‘Fine' Print

Author:Ms Kelley Godfrey
Profession:Carlton Fields

A federal judge recently relied on a pollution exclusion to find that Great American Insurance Company was not obligated to cover losses associated with the unintended distribution of rock fines into New Jersey's Spruce Run reservoir. In Great American Ins. Co. v. ACE American Ins. Co., No. 4:18-CV-114-A (N.D. Tex. Jul. 10, 2018), the Northern District of Texas examined the scope of an absolute pollution exclusion and found that it applied to bar coverage, despite the fact that rock fines were natural particles which were being maintained for subsequent use or sale.

The Policy

The subject policy was issued by Great American to U.S. Concrete and provided commercial umbrella insurance coverage. Eastern Concrete Materials, Inc.—a wholly-owned subsidiary of U.S. Concrete—was one of more than 60 entities named as insureds under the umbrella policy, which provided protection over and above a commercial general liability policy issued by ACE American. Payment and defense obligations were outlined within the Great American umbrella policy, and an absolute pollution exclusion specifically provided as follows:

The insurance does not apply to:

. . .

L. Any liability, including but not limited to settlements, judgment, costs, charges, expenses, costs of investigations, or the fees of attorneys, experts, or consultants, arising out of or in any way related to:

The actual, alleged or threatened presence, discharge, dispersal, seepage, migration, release, or escape of "pollutants," however caused. Any request, demand or order that any "insured" or others test for, monitor, clean-up, remove, contain, treat, detoxify, neutralize or in any way respond to or assess the effects of "pollutants." . . .

As used in this exclusion "pollutants" means any solid, liquid, gaseous, or thermal irritant or contaminant, including, but not limited to, smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste material. Waste material includes materials which are intended to be or have been recycled, reconditioned or reclaimed.

The Pollutants

Eastern Concrete operated a rock quarry in New Jersey, where rock was crushed into smaller stones. The quarry collected "fines"particles of rock generated during the process of stone crushingand these were typically washed then placed into ponds where they were allowed to settle out. Ultimately, the fines would be removed from the ponds, dried, and either used as reclamation fill within the quarry or sold for use as fill...

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