Pollution Exclusion and Damage to Property Exclusion Both Bar Coverage for Environmental Remediation

A commercial general liability (“CGL”) insurance policy’s pollution exclusion and its damage to property exclusion both excluded coverage for the costs incurred by an insured oil company that had been directed to remediate and remove water and soil polluted with diesel fuel.   

The Court’s Decision

The court first decided that the claim of the insured, Hardy Oil Company Inc., involved a “classic environmental catastrophe” that led to a government-ordered cleanup – adding that, as Kentucky courts had recognized, these were “exactly the type of situations that the pollution exclusion historically sought to exclude from coverage.” Therefore, it held, Hardy Oil could not claim coverage under the CGL policy.

Moreover, the court continued, even if the pollution exclusion were not at issue, Hardy Oil still would not be able to claim coverage because of the policy’s damage to property exclusion, which stated that the CGL policy did not apply to property damage to property “[y]ou own, rent, or occupy.”

The case is Hardy Oil Co., Inc. v. Nationwide Agribusiness Ins. Co., No. 5:11-cv-00075 (E.D. Ky. Jan. 11, 2013).