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Vol. 11 - Issue 5

October 15, 2022


Coverage For Bat Guano Not Precluded By The Pollution Exclusion [And Bat Faith Denial]


I used to get excited by cases involving the applicability of the pollution exclusion to damages to a home caused by bat guano.  But now that there have been a few of them, not so much.  So I might have ignored Auto-Owners Ins. Co. v. Bank, 2022 U.S. Dist. LEXIS 156056 (D.S.C. Aug. 29, 2022).  [But I address it here as the decision includes a twist.]  

The court concluded that the pollution exclusion did not preclude coverage.  Among other reasons for its decision: “Finally, as the court continues to consider the Policy in its entirety, as the court is bound to do, mention must be made that the Policy addresses exclusions for damages caused by animals in provisions separate from the provision addressing pollutants. The Policy specifically bars coverage for damage caused by ‘birds, vermin, rodents or insects.’ An additional provision also excludes coverage for damage caused by ‘animals owned or kept by any insured.’ And not to belabor the obvious, but we are dealing with damage caused by an animal here. Yet Auto-Owners resorts to the section on pollutants to argue coverage is excluded. This court agrees with Nicholson. The existence of two exclusions specifically covering damage caused by animals creates doubt regarding whether the pollutant exclusion was intended to cover animal waste. See Nicholson, 979 F. Supp. 2d at 1067. While the existence of these animal provisions is not dispositive on the interpretive issue, it further adds to the ambiguity of the terms pollutant and waste.”

The court also denied the insurer’s motion to dismiss the insured’s bad faith claim: “Auto-Owners’ denial of coverage letter provides a sparse basis for its decision other than its conclusory statement: ‘the homeowner's policy does not provide coverage for this as bat guano is considered a pollutant under the policy.’  Auto-Owners did not provide a detailed justification for this decision until it responded to the South Carolina Department of Insurance’s inquiry regarding Bank’s administrative complaint.  Auto-Owners asserted that a ‘supreme court case (Hirschhorn v. Auto-Owners Insurance Co.)’ supported its determination.  However, as Bank points out, Auto-Owners failed to specify the Wisconsin Supreme Court authored this decision and not the South Carolina Supreme Court.  Further, the record suggests that Auto-Owners failed to recognize contrary precedent (Nicholson) until the present litigation.”




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