Pssst, Wanna Hear a Dirty Story?

The question of what defines a “pollutant” might never be decisively answered. From a Clorox bleach spill causing a customer to slip and fall in a grocery store, to an overturned milk truck asphyxiating fish in a trout ranch pond, the CGL pollution exclusion is often cited to deny claims. Sometimes it’s a success (dead fish) and sometimes it is not (bleached blonde).

Not long ago, the Virtual University “Ask an Expert” service received a question from an agent whose insured is a real estate developer. Allegedly, grading operations had altered water flow and caused soil to erode, damaging a neighboring property. The developer’s CGL insurer denied the claim, citing the pollution exclusion.

Well, as you learn in high school physics, every form of matter is a solid, liquid or gas. So almost anything can be a “pollutant” if it is a “contaminant or irritant” in the right context. This is the first time, though, that we’ve heard of “muddy waters” as anything more than a great bluesman. Fortunately, the courts have examined this issue on many occasions.

In Tsakopoulos v. American Manufacturers Mutual Ins. Co., the U.S. district court for California decided a similar case dealing with the issue of whether or not “dirt” can be a pollutant. Essentially, the court found that the CGL pollution exclusion did not apply to soil runoff, despite the plaintiff being held liable under the Clean Water Act which can, under many circumstances, consider soil as a pollutant.

For a complete discussion of this issue, including expert opinions and several court case citations, click here.

Something Stinks…

It’s a scenario that takes place every day: An insured calls your office to report a claim involving a toilet, sink or washing machine that overflowed, damaging the carpeting, flooring, woodwork or other property. The adjuster determines that the overflow resulted from a clogged drain and denies the claim, citing the homeowners “water damage” exclusion.

Debated for years, this type of claim involves balancing the covered peril of accidental discharge from a plumbing system with the exclusion for sewers or drains backing up. Even the Virtual University faculty members can’t fully agree on the issue.

For more information, court case citations and expert opinion, click here.

When Do Occurrences Occur?

One of the most misunderstood insurance issues involves what event triggers coverage under a liability policy. Is it when the negligence occurs or when, possibly years later, the bodily injury or property damage occurs? Is there a difference in the coverage trigger between an occurrence and a claims-made policy? And how does this issue affect discontinued operations and products exposures?

The ISO CGL policy, both occurrence and claims-made forms, are clear that coverage is triggered at the time of the bodily injury or property damage, not when the negligence occurs. In both CGL forms, the bodily injury or property damage must occur before the policy expires in order to trigger coverage under that policy. The main difference between the forms is that the trigger period begins on the inception date of the occurrence form and the retroactive date of the claims-made form.

Another condition of the claims-made form is that the claim itself must be made during the policy period of the responding policy or within a basic or extended reporting period. The claim under the occurrence form in which the occurrence happened can be made at any time in the future.

Confused? Well, exactly when did the bodily injury or property damage occur? That can be a problem in long-term exposure claims involving asbestos, chemicals, smoking, etc. Also, various jurisdictions rely on different trigger theories such as manifestation, injury-in-fact, exposure, continuous trigger, etc.

For more information, click here.

Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.