In its recent decision in Certain Underwriters at Lloyd’s of London v. NFC Mining, Inc., 2011 U.S. App. LEXIS 11924 (6th Cir. June 9, 2011) had occasion to consider the application of a pollution exclusion to coal dust discharged as a result of the insured’s coal prep operations.

In appealing the lower court’s ruling in favor of the insurer, the insured argued that it had a reasonable expectation of coverage for coal dust-related liability based on a certificate of liability insurance that Underwriters were required to file with the Kentucky Department of Surface Mining Reclamation and Enforcement so as to allow the insured to obtain an operating permit.  The certificate represented and warranted, essentially, that the policy issued by Underwriters provided coverage for all personal injury and property damage as required by state law. 

The court held that in the first instance, it was not reasonable for the insured to believe that the certificate of insurance, rather than the policy itself, would set forth the terms of coverage.   The court found support for this conclusion based on the fact that the insured did not sign or approve the certificate, and that the certificate itself was silent as to coverage for pollution-related liabilities.   More significantly, the court held that it is the language of the policy rather than the insured’s expectations - even if reasonable - that control coverage issues.  Thus, concluding that the policy’s pollution exclusion unambiguously precluded coverage for damages caused by coal dust, the Sixth Circuit readily affirmed the lower court’s holding.  As the court explained, “[t]he clarity of the exclusion forecloses NFC’s resort to expectations about what the contract did or did not cover.”