Dirty Water Deemed a Pollutant?

An 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. High school physics class teaches that every form of matter is a solid, liquid or gas. Therefore, almost anything can be a “pollutant” if it is a “contaminant or irritant” In the right context. This is the first time, though, that the Virtual University staff has heard “muddy waters” being defined as a pollutant. Fortunately, the courts have examined this issue often.

In the case of Tsakopoulos v. American Manufacturers Mutual Ins. Co., the California U.S. District Court decided a similar case dealing with the issue of whether or not “dirt” can be a pollutant. 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 a pollutant. For a complete discussion, click here.

Coverage Comes with CGL

If you want to earn a quick $10, place this bet with a colleague: “Does a CGL policy cover professional liability?” The majority will say, “Of course not.” They are wrong. The basic axiom of liability is that everything is covered unless it is excluded.

Agents need to read CGL like an all-risk property policy—everything is covered unless it is excluded. Unlike the simple homeowners policy, there is no professional exclusion on a CGL policy and there never has been. Therefore, the CGL does cover professional liability.

However, an important issue is whether a loss triggers the CGL insuring agreement. The issue: Is the claim a true “occurrence” and covered by the CGL or an “act, error or omission” that is not truly accidental and, thus, does not trigger CGL coverage?

Click here to read more about these issues and download a whitepaper that outlines what constitutes professional services.

Loss Doesn’t Mean Theft

An insured sends brass bathroom fixtures to the manufacturer to be replated or replaced. The manufacturer loses the fixtures, and then refuses to replace them. Is this loss covered by the HO policy?
In order to answer this question, consider the following coverage issues:

1. Does this involve loss of property under Coverage A, B or C?
2. Depending on the answer to No. 1, are there any limitations that apply to losses to property of that class?
3. If the property falls under Coverages A or B, do any exclusions apply? If the property falls under Coverage C, does a named peril apply? Regardless of the coverage category, do any general exclusions apply?
4. Are there any other policy provisions that apply?

The VU staff consensus is that this is a Coverage C claim and, as such, requires that a named peril apply. Unlike open perils coverage A and B where the burden of proof is on the insurer, for a named peril to apply, the burden of proof is on the insured to demonstrate that the loss constitutes a theft.

Clearly, if the contents were covered under an HO-5, or an HO-3 with the HO-15 endorsement attached, the loss is most likely covered. Absent that, though, a mere property loss does not constitute theft because there was no intent to deprive the insured of his property.

However, some agents tend to disagree. Click here.

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