In two related coverage actions, the US Court of Appeals for the Eighth Circuit addressed the application of the absolute pollution exclusion in commercial general liability insurance policies to lawsuits alleging harm from lead extraction operations. Doe Run Resources Corp. v. Lexington Ins. Co., No. 12-1255, 2013 WL 2631145 (8th Cir. Jun. 13, 2013); Doe Run Resources Corp. v. Lexington Ins. Co., No. 12-3498, 2013 WL 2631161 (8th Cir. Jun. 13, 2013). The Eighth Circuit held that under Missouri law the absolute pollution exclusion precludes coverage for lawsuits premised entirely on the release of hazardous lead materials, and therefore, an insurer does not have a duty to defend such suits. Where a lawsuit includes allegations that the policyholder distributed hazardous waste materials as a product, the Eighth Circuit held that the absolute pollution exclusion does not bar coverage under Missouri law and the insurer’s duty to defend may be potentially triggered.
The policyholder, a lead producer, operated facilities in Missouri that extracted lead concentrate from lead ore. Three lawsuits were brought against the policyholder regarding its lead operations. The policyholder sought a defense for the three lawsuits under commercial general liability policies. The policies contained various pollution exclusions, which the court termed the “absolute pollution exclusion.” These exclusions barred coverage for bodily injury and property damage arising out of the “discharge, dispersal, seepage, migration, release or escape” of pollutants. The Eighth Circuit affirmed summary judgment to the insurer with respect to two of the lawsuits, holding that the insurer did not have a duty to defend the suits, but it reversed summary judgment to the insurer with respect to the third lawsuit, holding that the third lawsuit included allegations that fell outside the absolute pollution exclusion.
One lawsuit, brought by an adjacent landowner, alleged environmental property damage, including contamination of the soil, air and water around one of the policyholder’s facilities. Another lawsuit, brought on behalf of minors, alleged injuries due to exposure to lead, including allegations that the release of toxic substances will necessitate medical monitoring services for children. The Eighth Circuit held that the absolute pollution exclusion barred coverage for these two lawsuits because the suits were premised “entirely” on allegations that the policyholder was liable for causing the “release” or “discharge” of hazardous wastes. Doe Run Resources Corp., 2013 WL 2631145, at *4.
The policyholder argued that the absolute pollution exclusion was ambiguous because it was in the business of producing lead concentrate and therefore, in purchasing the insurance policy, it would not have reasonably believed that lead was “pollutant.” Rejecting this argument, the court explained that “discarded or abandoned lead concentrate and tailings are not products that [the policyholder] intends to sell.” Id. at *6 (emphases in the original).
The policyholder also claimed that the insurer had deleted a lead exclusion from the insurance policies at the insistence of the policyholder because the policyholder was in the business of processing and selling lead. The deletion of the lead exclusion, according to the policyholder, created an ambiguity as to whether the absolute pollution exclusions applied to lead. The Eighth Circuit disagreed, noting that “the absence of an exclusion, standing alone, does not imply coverage.” Id. at 7. The court explained that “[t]he parties’ deletion of the lead exclusion left the remainder of the CGL policy in full force and effect, including its absolute pollution exclusion.” Id.
The third lawsuit was also brought on behalf of minors for alleged injuries due to lead exposure. The Eighth Circuit held, however, that the absolute pollution exclusion did not bar coverage for this suit because the suit was more “broadly pleaded.” Doe Run Resources Corp., 2013 WL 2631161, at *5. The Eighth Circuit pointed to allegations that the policyholder “distributed” lead chat and other toxic substances into the community for use as fill material; for use on roads, streets, alleyways, and driveways; for use in the foundations of homes and other buildings; and for use in children’s sandboxes. The Eighth Circuit also pointed to allegations in the third suit that the policyholder had left a waste pile open and available for public use without posting warnings about the dangers of exposure to lead.
Based on these allegations, the Eighth Circuit reasoned that the third lawsuit was not premised entirely on the alleged “release” of hazardous wastes. The court further decided that the suit contained allegations that the policyholder had “distributed” toxic substances, and according to the court, “‘[d]istribute’ is not among the transitive verbs that trigger the pollution exclusion.” Id. The court reasoned that “the distribution of material . . . for use as a product is markedly different than the inadvertent ‘discharge, dispersal, seepage, migration, release or escape’ of those waste materials.” Id.