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Vol. 9 - Issue 7
October 30, 2020


Court Provides A Pollution Exclusion Reminder


There was a time when the pollution exclusion was my favorite coverage issue and I discussed it with regularity in CO.  While I still follow the issue closely while wearing my coverage lawyer hat, I do not have the same gusto for it when it comes to reporting on decisions here.  The problem is that the provision has been litigated to death.  So decisions involving novel and interesting issues – what I look for when selecting cases for CO – are hard to come by.

The Texas federal court’s pollution exclusion decision in Canal Indemnity Co. v. Caljet, No. 19-2945 (S.D. Tex. Sept. 8, 2020) is far from unique.  But it addresses an important issue, one that comes up less frequently than others and provides a reminder about the clause that is sometimes forgotten.

At issue in Caljet was coverage for Phillips 66, as an additional insured under Auto and CGL policies issued to Coastal Transport Company, for a suit filed against Phillips as follows.

From approximately 1985 to 2016, Elwin Webb worked as a gasoline truck driver for Calzona Tankways and later Coastal Transport Company, Inc.  He loaded benzene-containing gasoline at various terminals and loading racks owned and/or operated by the defendants, including Conoco [predecessor to Phillips 66].  A complaint alleged that: “In the course of his work at the defendants’ premises, [Mr. Webb] was exposed to benzene through inhalation and dermal absorption of the defendants’ gasoline. As a direct and proximate result of his exposure to benzene, [Mr. Webb] contracted Myelodysplastic Syndrome (MDS), a benzene-induced blood and bone marrow cancer.”  Mr. Webb was diagnosed with MDS in January 2016 and shortly thereafter.

Phillips tendered the suit to Coastal.  Canal, Coastal’s insurer, disclaimed coverage to Phillips under both the Auto and CGL policies.  Canal filed an action seeking a determination that it did not owe coverage to Phillips.

After addressing some issues surrounding Philips’s status as an additional insured, the court turned to the applicability of the pollution exclusion in the Auto and CGL policies.  The court noted that the pollution exclusion generally precluded coverage for bodily injury arising out of the “discharge, dispersal, release or escape” of pollutants.

As Canal saw it, the pollution exclusion applied because the complaint alleged that Mr. Webb suffered bodily injury through exposure to benzene, a pollutant.  Eeasy peasy lemon squeezy, right?  No.

The court pointed out that the cases cited by Canal – and, as I see it, Texas law supports benzene being a pollutant under the pollution exclusion – involved “the alleged movement of a pollutant.”  This, the court noted, is a requirement for the applicability of the pollution.

Here, the “movement requirement” had not been satisfied: “[T]he complaint in the Underlying Lawsuit alleges that Mr. Webb was ‘exposed to benzene through inhalation and dermal absorption of . . . gasoline.’ In other words, even if the Court were to assume that benzene is a pollutant in this situation, the bodily injury was allegedly caused by direct exposure to gasoline, not by the discharge, dispersal, seepage, migration, release, or escape of benzene—as required by the Pollution Exclusions. Therefore, the Pollution Exclusions are inapplicable.”

Again, while far from unique, Caljet provides a reminder about an aspect of the pollution exclusion that is sometimes forgotten.


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