With the advent of the “absolute” pollution exclusion in commercial general liability (“CGL”) policies in the mid-1980s, many in the insurance industry predicted that pollution-related insurance claims soon would be a thing of the past. But as three of our stories this week demonstrate, pollution claims–as well as coverage disputes involving such claims–continue to be prominent today. There are numerous reasons why these claims persist. Older CGL policies continue to provide coverage for pollution-related claims as long as the triggering “occurrence” at issue predates the mid-1980s. Moreover, since pollution coverage became more limited under CGL policies, insurers have marketed (and continue to market) all manner of specialty pollution coverages. In addition, courts interpreting the “absolute” pollution exclusion have recognized numerous exceptions. For all these reasons, policyholders need to be particularly diligent about evaluating their policies for coverage of environmental damage claims.
The policyholders in the cases discussed this week faced some common scenarios. For instance, decisions from both the Eighth and Ninth Circuits held that so-called “PRP letters” from the Environmental Protection Agency (“EPA”) pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) were covered “suits” under standard-form CGL policies. In the Eighth Circuit case, this typically policyholder-friendly position actually worked against the policyholder because it had waited eight years to challenge the insurer’s denial of coverage, and therefore lost the case on a statute of limitations defense. The plaintiff in the Ninth Circuit case fared better, winning a defense from its insurer under Oregon law.
In the third case, a Texas appellate court also weighed in on pollution-related issues, determining that specific exclusions for pollution and mold did not apply to releases of allegedly toxic chemicals from a well because the exclusions conflicted with an endorsement providing “blowout” coverage.
Finally, in a departure from the pollution theme, a decision from a trial court in New York held that the attorney work product doctrine, the attorney-client privilege, and the common interest privilege do not apply to reports prepared by outside counsel regarding investigation of a claim or determination of coverage. As to attorney work product and common interest privilege, the court held that a “firm decision” to deny coverage was required before either may apply. As to attorney-client privilege, the court emphasized that the reports at issue are part of an insurance company’s regular business activities and therefore not privileged.