United National Insurance Company (United) provided a 5 million dollar Commercial Umbrella policy to Motiva Enterprises (Motiva). The policy was excess over a one million dollar CGL. Both policies were secured by Motiva as part of an agreement with Hydro Tank (Hydro) involving cleaning industrial sludge out of a large mixing tank. Specifically, the contract shifted responsibility for any losses related to the cleaning job from the tank’s owner, Hydro, to Motiva.

After the agreement was made, three Motiva employers entered a  tank to begin cleaning. Immediately, two workers fell over into the sludge and a co-worker rescued them both. All three workers sued Motiva claiming serious brain and heart damage from coming into contact with the tank contents. After settling with the injured workers, Motiva requested reimbursement for the loss from United. The umbrella insurer first denied the claim and then asked a court for a declaratory judgment that the company owed no obligation for the loss. The court ruled in favor of the insurer and Motiva appealed.

As part of the appeal, the two parts re-asserted their original positions; disputing the applicability of the umbrella policy’s pollution exclusion. Motiva argued that the injured workers sued in part for harm from exposure specifically from hydrogen sulfide gas. United’s position was that the exposure was due to a form of pollutant, so it was excluded. The higher court reviewed the matter, separating the distinct obligations of providing reimbursement and providing a legal defense.

The court focused on the umbrella policy’s exclusion (excerpted below, policy subparts omitted):

“This insurance does not apply to:…’Bodily injury’ or ‘property damage’ which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, seepage, migration, dispersal, release or escape of ‘pollutants’ at any time….

“Pollutants” means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. “Waste” includes materials to be recycled, reconditioned or reclaimed.”

The court applied the language to Motiva’s two-pronged position. First, the company alleged that the injured workers claimed harm from two distinct sources, specifying hydrogen sulfide gas as well as other chemicals and toxic substances. Second, Motiva asked whether it was correct to refer to the sludge as a pollutant when, at the time of the loss, it was held within a container.

The court, in essence, found that Motiva’s arguments amounted to an exercise in semantics. In its opinion, the umbrella policy plainly excluded pollutants and the sludge, regardless of the specific mention of a particular chemical (hydrogen sulfide gas) or of its being in a container (rather than outside of containment and actively polluting), still qualified as a pollutant. Since the injuries were related to exposure to an excluded source of loss, the court found in favor of United. The lower court decision was affirmed.

United National Insurance Co.Plaintiff-Appellant v. Hydro Tank, Inc. et al, Defendants, motive Enterprises, L.L.C., Defendant-Appellant. USCTAP, 5th Cir. No. 06-20335. Filed August 13, 2007. Affirmed. http://caselaw.lp.findlawdotcom/data2/circs/5th/0620335cv0p.pdf (downloaded August 21, 2007)