POLLUTION EXCLUSION AMBIGUOUS REGARDING PERMITTED EMISSIONS

Commercial General Liability	Pollution Exclusion
Expected or Intended Injury	Ambiguity

Imperial Marble Corporation (Imperial) manufactured marble countertops, vanities and other products. Its operations were following the Environmental Protection Agency emission standards. However, in 2007, the homeowners living within a mile-wide radius of the manufacturer filed a class action against it seeking damages due to its emissions.

Imperial notified Erie Insurance Exchange (Erie), its commercial general liability carrier, of the action but Erie denied the claim and filed for a summary judgment asking to be relieved of any duty to defend the lawsuit or to provide coverage. Imperial filed a countermotion and also added an allegation that Erie’s denial was a breach of duty. The trial court ruled in favor of Erie and Imperial appealed.

Erie denied coverage based on the pollution and expected and intended injury exclusions. Its argument was that because Imperial intentionally discharged pollutants coverage did not apply.

Imperial argued that because it was operating in compliance with EPA standards that it believed coverage would apply. Imperial also argued that it had never been told that damage caused by the emissions would not be covered or that separate coverage should be purchased.

The trial court believed that the complaint’s wording plainly alleged emission of pollutants and, therefore, Erie’s pollution exclusion applied. Further, that believed that emission standards references were irrelevant.

The higher court examined the decision, focusing on the policy language of the referenced exclusions as well as the policy’s insuring agreement regarding occurrences. In its opinion, Imperial could not be found to have intentionally emitted pollutants because its emissions followed EPA standards. The higher court also held the opinion that, because Imperial’s emissions were permitted, the policy language with regard to what constitutes pollution may be ambiguous. Finally, because, in its opinion, the lawsuit contained elements that were subject to interpretation, the trial court erred in granted summary judgment. The lower court was reversed and remanded for review consistent with the higher court decision.

Erie Insurance Exchange, Plaintiff-Appellee v. Imperial Marble Corp., Defendant-Appellant and Third-Party Plaintiff. AppCt of IL, Third District. No. 100380. Filed September 15, 2011. Reversed and remanded. (Downloaded 9/21/11 via Insurance Occurrence Tracker, LinkedIn Group)