Environmental Coverage Disputes Continue Evolution in 2022
In the decades since environmental protection activists organized the first Earth Day in 1970, courts have been grappling with disputes between companies and their insurers over coverage for pollution and environmental remediation, and the battles continued in early 2022.
In January, a Texas federal judge rejected a Travelers unit's bid to toss a coverage dispute over a June 2017 saltwater spill.
U.S. Magistrate Judge Irma Carrillo Ramirez said a total pollution exclusion in a policy issued by St. Paul Fire and Marine Insurance Co. did not relieve the insurer from covering the $3.5 million policyholder Pogo Resources LLC would have pay to remediate damages from the spill.
James Carter of Blank Rome LLP told Law360 that the timing of the closure of the sale played an integral role in the court's decision. Carter, who represents policyholders, explained that Pogo purchased the site in May 2017, the bankruptcy court approved the sale in July 2017 and the sale closed in August 2017.
As a result, Carter said, Paladin was responsible for the site until the sale closed and its insurance coverage was still applicable at the time of the incident.
"The decision relied on the bankruptcy code but it is consistent with the general rule that if the assignment occurs after a loss, the anti-assignment clause is unenforceable," Carter explained.
Carter continued that the ruling is interesting with regard to the policy's pollution exclusion, which can be a real obstacle to getting coverage for pollution events unless it is ambiguous. He pointed out that the pollution exclusion in the Travelers unit's policy had competing endorsements that conflicted with one another, thereby "opening up the door to coverage."
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"Environmental Coverage Disputes Continue Evolution in 2022," by Shane Dilworth was published in Law360 on April 22, 2022.