A federal court in South Carolina has ruled that a pollution exclusion clause in an insurance policy bars coverage for property damage caused by the placement of slag that later leaked arsenic and lead into the ground. Ross Development Corp. v. Fireman’s Fund Ins. Co., No. 08-3672 (D.S.C. 8/10/12). The underlying lawsuit arose out of the clean-up and remediation of the Columbia Nitrogen Site in Charleston, South Carolina, under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCL A).  

In October 2008, plaintiff Ross Development filed an amended complaint in state court seeking a declaration that several insurance policies covering periods between 1972 and 1992 provide coverage for its liability as a potentially responsible party (PRP) in the CERCL A lawsuit. It was apparently undisputed that Ross intentionally deposited pyrite slag on the ground at the site over the course of several years. Ross argued that the policies’ pollution exclusion applies only if the policyholder intended or expected that property damage from pollution would result from its actions—not merely if the “discharge, dispersal, release, or escape itself was intentional or expected.”  

Citing the pollution exclusion’s text, the court held, “[t]he plain language of this exclusion prohibits coverage of intentional acts only if the resulting ‘property damage’ is itself expected or intended. On the other hand, the pollution exclusion bars coverage unless the ‘discharge, dispersal, release, or escape’ of pollution—not the ‘property damage’ caused by such a ‘discharge, dispersal, release or escape’—was accidental or unexpected.”