Presenting a live 90-minute webinar with interactive Q&A Pollution Exclusion in CGL Policies Navigating Scope of the Exclusion in Light of Differing Court Interpretations THURSDAY, JULY 12, 2012 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Carl A. Salisbury, Partner, Kilpatrick Townsend & Stockton , New York Louis A. Chiafullo, Partner, McCarter & English , Newark, N.J. Jonathan T . Viner, Partner, Bates Carey Nicolaides , Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Pollution Exclusion in CGL Policies History/Evolution of the CGL Pollution Exclusion Jonathan T. Viner, Partner Bates Carey Nicolaides LLP 191 N. Wacker Drive, Suite 2400 Chicago, Illinois 60606 312-762-3143 jviner@bcnlaw.com 5
History/Evolution of the CGL Pollution Exclusion Sudden and Accidental Pollution Exclusion – 1973 ISO Form – Excludes coverage for • Bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapor, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon the land, the atmosphere, or any other water course or body of water, but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental. 6
History/Evolution of the CGL Pollution Exclusion ISO Absolute Pollution Exclusion • Introduced into 1984 ISO form (Exclusion f) • Excludes coverage for: – bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” under enumerated conditions 7
History/Evolution of the CGL Pollution Exclusion ISO Absolute Pollution Exclusion • Applicable conditions include: – At or from premises insured owns, rents or occupies – At or from any site or location used by insured or others for handling, storing, disposing processing or treating waste – Pollutants that are at any time transported, handled, stored, treated, disposed of or processed as waste by insured or someone for whom insured has liability – At or from a site or location on which insured or its (sub)contractors are performing operations, if pollutants brought onto the site for such operations 8
History/Evolution of the CGL Pollution Exclusion ISO Absolute Pollution Exclusion • 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, reconditions or reclaimed. • No coverage for loss, cost or expense arising out of any governmental direction or request to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants. 9
History/Evolution of the CGL Pollution Exclusion Total Pollution Exclusion Endorsement No coverage for Bodily injury or property damage which would not have occurred, in whole or in part, but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time. 10
CARL A. SALISBURY csalisbury@kilpatricktownsend.com 212.775.8779 Carl Salisbury is a partner on the Insurance Recovery Team at Kilpatrick Townsend & Stockton. He has more than 20 years of experience in the litigation and trial of complex commercial disputes. In addition to handling general commercial matters, Mr. Salisbury has more than 20 years of courtroom and trial experience in complex commercial insurance cases and has represented the full gamut of companies in disputes involving large insurance claims, from small and middle-market corporations, condominium associations, restaurants, and non-profit institutions, to Fortune 100 companies. He has helped corporate policyholders recover for insurance claims involving environmental pollution, workplace discrimination, bodily injuries and property damage, mold contamination, construction defects, and a variety of other commercial disputes. He received is law degree at Wake Forest University School of Law, where he was Managing Editor of the Wake Forest University Law Review. He also served as a judicial clerk to the Hon. Reynaldo G. Garza on the United States Court of Appeals for the Fifth Circuit. He is admitted to practice in New York; New Jersey; the U.S. District Court for the District of New York; the U.S. District Court for the District of New Jersey; the U.S. Court of Appeals for the Third Circuit; and the Supreme Court of New Jersey.
Representations About the “Absolute” Pollution Exclusion to State Insurance Regulators We should take them at their word: ► “ That change [from the “sudden & accidental” exclusion to the “APE”] is to introduce a complete on-site emission and a partial off-site exclusion for some operations. For some operations. It is not an absolute exclusion. It does not apply, as it is written, to some off-site premises operations, and it does not apply, as written, to products liability exposures .” Testimony of Michael A. Averill, Manager, Commercial Casualty Division, Insurance Services Office, before the N.J. Dept. of Insurance, December 18, 1985. ►” These are not total, absolute pollution exclusions. It does have significant coverage for completed operations and product liability in certain off-site discharges .” Testimony of Robert J. Sullivan, Vice-president, Governmental Affairs, Crum & Forster, before the N.J. Dept. of Banking & Insurance, December 18, 1985. ►” In the aftermath of the elimination of the sudden and accidental qualification, the new exclusion has at times been mislabeled as absolute. This is an unfortunate misnomer. Given the coverage exceptions I mentioned earlier, this is not an absolute pollution exclusion .” Testimony of Robert Miller, ISO Regional Vice-president for the Southern Region, before the Louisiana Dept. of Insurance, September 6, 1995. 12
Representations About the “Absolute” Pollution Exclusion to Courts Maybe we can’t take them at their word : ► Herbicide used by pest management company on a golf course was a “pollutant.” Nationwide Mut. Ins. Co. v. Lang , Case No. 09-14258 (S.D.Fl. 2010). ► Dust generated from construction project at an airport was a “pollutant.” Devcon Int’l. Corp. v. Reliance Ins. Co., Nos. 07-4602/08-1996, 2010 U.S. App. LEXIS 11619 (3d Cir. June 8, 2010). ► Damage from water and soil escaping from insured’s property was excluded by the APE. Builders Mut. Ins. Co. v. Half Court Press, LLC, No. 6:09-cv-0046, 2010 WL 3033911 (W.D.Va. Aug. 3, 2010). ► APE excludes coverage for manufacturer of filter that failed, causing oil leak . Westwood Prods. Corp. v. Great American E&S Ins. Co ., No. 3:10-cv-03605-MLC-DEA (D.N.J. 2010). 13
Is Pure Drinking Water a “Pollutant”? An underwriter testifies about the scope of the “Absolute Pollution Exclusion.” If “pure spring drinking water” causes property damage, it can be considered a “pollutant.” What about the expectations of “Joe Average” Insured? If the underwriter is correct, is the APE ambiguous? Deposition of Underwriter in Westwood Prods. Corp. v. Great American E&S Ins. Co ., No. 3:10-cv-03605-MLC- DEA (D.N.J. 2010). 14
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