Pollution Exclusion Precluded Coverage for Suits Alleging Violation of Environmental Laws

April 21, 2017 | Insurance Coverage

The U.S. District Court for the Northern District of Ohio has ruled that the absolute pollution exclusion precluded coverage for lawsuits against a construction company alleging that it had violated federal and state environmental laws by discharging dredged or fill materials into protected wetlands.

The Case

JTO, Inc., an Ohio-based construction company, was sued by federal and state regulators for allegedly violating the federal Clean Water Act and the comparable Ohio statute in connection with its work on two road projects. The suit contended that the projects were located on protected wetlands and that JTO had “discharged dredged or fill material from point sources into the waters of the United States without a permit.”

JTO notified its insurance carrier and sought defense and indemnity coverage. After the insurer denied coverage, JTO sued.

The insurer moved for judgment on the pleadings. Among other things, it argued that the absolute pollution exclusion in its policies foreclosed any duty to defend or indemnify.

JTO argued that its dredging and filling operations had not involved pollutants as defined under the policies.

The District Court’s Decision

The district court granted the insurer’s motion.

In its decision, the district court pointed out that the federal complaint against JTO alleged that dredged and fill material it had discharged into protected waters included “dirt, spoil, rock and sand,” and that those materials “were among the definition of pollutants as listed in the Clean Water Act.” Ohio’s complaint contained “similar allegations” that fell “squarely within the statutory definition of pollution” under Ohio law, the district court added.

The district court ruled that dredge and fill as defined in both the Clean Water Act and the Ohio statute were “contaminants” under the plain language of JTO’s insurance policies.

Finally, the district court concluded, the governmental enforcement actions against JTO were also “clearly” excluded from coverage under the policies as lawsuits by governmental authorities for damages because of “pollutants.”

The case is JTO, Inc. v. Travelers Indemnity Co. of America, No. 1:16CV648 (N.D. Ohio March 16, 2017).

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