Pollution Elimination/Oil Spill: Federal Court of Appeals Addresses Insurance Coverage Questions | Celent JD Supra

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The U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”) addressed Total Pollution Elimination (“TPE”) of the Corporate Commercial General Liability (“CGL”) Policy in its Oct. 26 Opinion .look Central Crude, Inc. v. Liberty Mutual Insurance Company, et al.No. 21-30707.

The issue was related to whether or not unexplained oil spills were included in TPE.

Central Crude, Inc. (“CCI”) discovered an oil leak in 2007 on its property and adjacent property owned by Chevron in Paradis, Louisiana. CCI reported the leak to the Louisiana Department of Environmental Quality and engaged an environmental contractor (“EC”) to remediate it. About $1 million was paid to EC for restoration.

Remediation efforts appear to be still underway at the time of issuance of the Opinion. Additionally, it is stated that the source of the leak is unknown. In other words, there was no determination as to whether the spill originated from CCI’s pipeline or Chevron’s well. I was.

CCI is insured by Liberty Mutual Insurance Company (“Liberty”) under its CGL policy. The policy includes TPE guarantees with limited scope as follows:

This insurance does not cover: . .

f. Pollution

(1) PERSONAL INJURY or PROPERTY DAMAGE which, in whole or in part, would not have occurred but for the actual discharge, diffusion, leaching, displacement, release or spillage of the Pollutant;

(2) loss, cost or expense arising from any of the following:

(a) any request, request or order by the Insured or any other person to test, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to or assess the effects of any Contaminant; , statutory or regulatory requirements. “; Also

. . .

The costs incurred by CCI included the aforementioned repair costs and a lawsuit filed by the Columbia Gulf Transmission Company alleging that crude oil threatened the natural gas pipeline.

CCI filed a dismissed lawsuit in the United States District Court (Western District of Louisiana) seeking:

  1. Reimbursement for past and future costs incurred to clean up spills
  2. Reimbursement for Defense Costs Related to Columbia Gulf Transmission Litigation
  3. Damages, Fines, and Attorneys’ Fees for Liberty’s Alleged Bad Faith Denial of Indemnification

A federal district court ruled that TPE barred compensation for CCI’s claims and granted summary judgment in favor of Liberty Mutual.

The Court of Appeals for the Fifth Circuit addressed CCI’s appeal of coverage issues by referencing the Louisiana law that provides that an insurance policy is a contract.

. . will be construed under the same general rules for construing contracts.

These include:

  • The intent of the parties determines the scope, as reflected in the policy language
  • A policy that is clear and expresses the intent of both parties must be in writing and enforced
  • Insurance contracts should not be construed to achieve ludicrous results
  • The purpose of liability insurance is to provide protection against damage claims, so the policy should be construed to be valid and not deny coverage
  • The insurer reserves the right to limit coverage in any way, provided the limitation does not conflict with law/public policy
  • As the party seeking reimbursement, CCI is responsible for demonstrating that the event falls within the terms of the insurance.
  • Liberty bears the burden of demonstrating the applicability of the TPE.

Fifth Circuit Citation Doerr v. Mobil Oil Corp., 774 That’s right. 2d 119, 124 (La. 2000) is an important Louisiana case interpreting TPE. This decision led to extensive discussion of the text, history, and purpose of TPE. The decision is said to clarify that the court should:

. . . construing the pollution exclusion in the light of its general purpose of excluding coverage for environmental pollution, and under such Does not apply to contact.

of door We have identified three factors to consider.

  1. whether the insured is a “polluter” within the meaning of the exclusion;
  2. Whether the substance causing the injury is a “contaminant” within the meaning of the exclusion.When
  3. Whether there has been an “emission, dispersal, seepage, movement, release or leakage” of pollutants by the insured within the meaning of the policy.

Application of the Fifth Circuit door Factors in CCI’s allegations state:

  1. CCI is a pipeline company that transports large volumes of oil at risk of pollution and is therefore a polluter within the meaning of TPE.
  2. Crude oil is a pollutant
  3. A dispersion of crude oil release occurred that affected 4 to 5 acres of land and spilled over 25,000 gallons of liquid.

The Fifth Circuit Court of Appeals rejects CCI’s contention that TPE applies only if the insured is found to be responsible for the release or discharge of pollutants.it quotes door Language directing the court to investigate the conduct of the alleged polluter. CCI was clearly considered a polluter.

The Court of Appeals for the Fifth Circuit ruled that TPE specifically excluded CCI’s costs associated with the removal or removal of crude oil and compensation for any property damage that did not occur in whole or in part, other than the release or spillage of crude oil. It is determined that Further, Liberty holds that he has no legal obligation to CCI.

You can download a copy of the opinion here.

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