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Vol. 3, Iss. 11
July 16, 2014

Hoosier Maneuver: How To Crack The Indiana Pollution Exclusion Nut


The best way to describe how insurers have fared in Indiana, in their attempt to enforce the pollution exclusion, is this. Insurers are the Brazilian soccer team. Policyholders are the German team. Indiana has surely been a very difficult place for insurers on the pollution exclusion. Ironically, it could be the easiest state -- if insurers drafted the exclusion using the simple instructions that the Indiana Supreme Court has provided.

In general, in Indiana, for the pollution exclusion to apply, the hazardous material argued to be a “pollutant” must be specifically mentioned in the pollution exclusion. State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845 (Ind. 2012).

Last week an Indiana federal court held that a non-specific pollution exclusion precluded coverage for groundwater contamination by TCE. How did the insurer in Visteon Corp. v. National Union Fire Ins. Co., No. 11-200 (S.D. Ind. July 7, 2014) pull this off in the face of Indiana’s strong case law requiring that the “pollutant” at issue must be specifically mentioned in the pollution exclusion? Easy, the insurer succeeded in arguing that Michigan law applied to the dispute.

This 50-Nifty approach was also successful for the insurer in Chubb Customs Ins. Co. v. Standard Fusee Corp., 2 N.E.3d 752 (Ind. App. Ct. 2014), where it convinced an Indiana appeals court that a non-specific pollution exclusion precluded coverage for perchlorate contamination from manufacturing marine signal/safety flares, which fell within the pollution exclusion. The insurer did so by first convincing the Supreme Court of Indiana that Maryland law applied.

 
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