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Vermont Supreme Court Pollution Exclusion
Vermont Supreme Court Finds Absolute Pollution Exclusion Only Excludes Claims For On-Site, First Party Cleanups
Charlie Kingdollar, Stamford
On November 21, 2001, the Vermont Supreme Court held that an absolute pollution exclusion in a Commercial General Liability policy does not apply to exclude claims for the remediation of contaminated third party property, unless the claim involved costs arising out of a government request where a responsible party is found strictly liable without in fact being found negligent under the Superfund law (Agency of Natural Resources Harbor Management Corp. The Summit Management Corp. v. United States Fire Ins. Co. & North River Ins. Co., VT, No. 2000-287 [2001]).
The Vermont high court stated that although the exclusion states that "this insurance does not apply to .... any lost cost or expense arising out of any governmental direction or request that you test for, monitor, cleanup, remove, contain, treat, detoxify or neutralize pollutants," the exclusion "was never intended to be construed to insulate insurers from providing coverage for third party property damage caused by pollution whenever a cleanup was requested or ordered by a government authority," but should only apply to on-site, first party cleanup costs.
The court considered documents from the state's Department of Banking and Insurance (DB&I) which mandated that insurers provide coverage for commercial pollution, and also 1993 correspondence from an ISO Regional Manager which agreed with the DB&I's position that the exclusion does not apply to coverage for third party pollution claims.
Although this case involved a modified ISO absolute pollution exclusion (entitled "Vermont Changes Pollution " Endorsement) the endorsement had been approved by the states DB&I. A previous decision by the Vermont Supreme Court refused to uphold an absolute pollution exclusion because the exclusion had not been approved by state regulators (State of Vermont Agency of Natural Resources v. Glen Falls Ins. Co. [1999]).
A similar provision, excluding government mandated cleanups, exists in ISO's current standard absolute pollution exclusion. This case involved the contamination of third party property arising out of a leaking underground storage tank discovered in 1993. |
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