Quote of the Day - Ours is the age of substitutes: instead of language, we have jargon: instead of principles, slogans: and, instead of genuine ideas, bright ideas. - Eric Bentlety
How Not To Pay for Environmental Contamination
The absolute pollution exclusion has been clarified once again. This time, however, it's been narrowed.
Environmental response costs are supposedly not covered under this insurance provision, according to the Sixth Appellate District out of San Jose. Perhaps not much of a departure from the California Supreme Court's Foster Gardner decision (free registration required to view), it's nonetheless a blow to insureds, and not good public policy.
In this case, the California Water Quality Control Board ordered CDM Investors to test its property for contaminants. CDM hired an environmental consultant to perform the work, and ultimately proved that the contaminants did not come from CDM's property.
CDM then asked its insurer, American National Fire Insurance Company (part of the Great American family - they even have a ballpark named after the company) to pay for the response costs. ANFIC refused, citing the absolute pollution exclusion as a bar.
The case is procedurally convoluted and that complicated posture plays a part in the court's decision, but suffice it to say that response costs cannot be covered by insurance unless there would have been a lawsuit by the Water Board against CDM.
So, in order to trigger coverage, insureds have to rebuff the government and wait for a lawsuit to be filed - instead of cooperating with the goverment and saving money all around. Sounds like great public policy to me. Let's spend more money, employ more lawyers, waste more time and raise hackles - all to get an insurance company to pay an otherwise legitimate claim.