Pollution Cause Still Applies To Workers’ Injuries

Commercial Umbrella/Excess	No Coverage for Workers
Exclusion	No Responsibility To Defend

United National Insurance issued a $5 million Commercial Umbrella policy to Motiva Enterprises (Motiva), serving as excess coverage over a $1 million CGL. Motiva acquired both policies through an agreement with Hydro Tank, which took responsibility for cleaning industrial sludge from a tank.

After three Motiva employees entered the tank, two fell into the sludge, and a coworker rescued them. All filed lawsuits against Motiva for injuries. Motiva settled and later sought reimbursement from United, which initially refused and then asked for a court declaration of no obligation. The court ruled in favor of United, leading Motiva to appeal.

During the appeal, both parties disagreed on whether the pollution exclusion was applicable. Motiva claimed that exposure to hydrogen sulfide, a pollutant, was an issue, whereas United argued it was protected by the policy exclusion. The higher court examined the responsibilities for reimbursement and defense, concentrating on the exclusion clause.

“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 examined Motiva’s two-part argument. First, the company claimed that the injured workers were harmed by two sources: hydrogen sulfide gas and other chemicals and toxic substances. Second, Motiva questioned whether the sludge should be classified as a pollutant, since it was contained within a vessel at the time of the incident. Ultimately, the court viewed Motiva’s arguments as largely a matter of semantics.

The court determined that the policy specifically excludes pollutants, and sludge—whether identified as hydrogen sulfide gas or just present during the injury—still counts as a pollutant. Because the injuries came from a source that is excluded, the court agreed with United and confirmed the lower court's ruling.

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)