“Respirable Dust” Exclusion Precludes Coverage for Class Action Complaint Seeking Damages for “Pet Coke” Dust

A federal district court in Indiana has ruled that an insurance policy’s “Respirable Dust” exclusion precluded coverage for a class action complaint seeking damages for injuries allegedly caused by petroleum coke (“pet coke”) dust.

The Case

In 2013, a consolidated class action complaint was filed against George J. Beemsterboer, Inc., and other defendants in the U.S. District Court for the Northern District of Illinois. According to the complaint, Beemsterboer and Beemsterboer Slag & Ballast Corporation had owned, maintained, or controlled a storage and transfer terminal at 2900 East 106th Street in Chicago, situated on the west bank of the Calumet River.  Calumet Transload Railroad LLC had owned, operated, maintained, and controlled a storage transfer terminal located at 10730 South Burley Avenue in Chicago, situated on the east bank of the Calumet River, until February 8, 2007 (together, the “Facilities”).

The complaint alleged that the defendants had failed to take reasonable measures to prevent pet coke and coal dust stored outside the Facilities from contaminating nearby communities. The complaint alleged that pet coke is a lightweight and dust-like byproduct of the crude oil refining process that contains high concentrations of carbon and sulfur and trace elements of metals. At the Facilities, pet coke and coal dust “was and continues to be stored outside in large uncovered piles” and the piles of pet coke and coal dust were “sometimes as high as five stories.”

The complaint alleged that pet coke and coal dust had blown throughout the communities surrounding the Facilities, contaminating the air and coating homes, yards, schools, parks, and other property, thereby reducing property values and interfering with the plaintiffs’ use and enjoyment of the property. It also alleged that pet coke could be inhaled and that, if inhaled, pet coke could be harmful.

The defendants’ insurance carrier, Continental Insurance Company, declined to defend the defendants in the class action and filed a complaint in a federal district court in Indiana seeking a declaratory judgment that it had no duty to defend or indemnify the defendants in the litigation.

The parties moved for summary judgment on the issue of Continental’s alleged duty to provide a defense to the insureds in connection with the class action complaint.

The Court’s Decision

The court granted Continental’s motion.

In its decision, the court found that Continental had no duty to defend or indemnify the defendants, finding coverage barred by the policies’ “Respirable Dust” exclusion.

The court pointed out that the complaint against the defendants alleged that they had caused the emission of “particulate matter” including pet coke, and that such particulate matter could be inhaled. It included several claims relating to respirable “particulate matter,” including allegations that the defendants had “caus[ed] or threaten[ed] the emission of Particulate Matter so as to cause air pollution.” In addition, the court continued, the complaint alleged that such particulate matter had damaged the property of third parties, violated Illinois and municipal air pollution regulations, and demanded that the defendants pay all costs of clean-up.

Based on these allegations, the court found that the complaints alleged property damage arising at least “in part out of the . . . alleged or threatened presence of ‘respirable dust.'”

Accordingly, the court concluded that the policies’ Respirable Dust exclusion applied to exclude coverage for the claims against the defendants in the class action complaint and that Continental had no duty to defend the defendants in the class action litigation.

The case is Continental Ins. Co. v. George J. Beemsterboer, Inc., No. 2:14-CV-00382 (N.D. Ind. Dec. 8, 2015).