How Insurance is a Key Player in Today's Global Entrepreneurship

By Jessica Cambridge, J.D., M.S.

Part Two: The Pollution Exclusion and Claims Examples

??????????? Global Entrepreneurship Week helps to encourage individuals on a global scale to consider how launching a business could become a reality. There are a variety of businesses across the country and across the world, but a common theme of these businesses, no matter the type, is the need to secure the appropriate insurance to help mitigate potential risk exposure. ?

The following claims examples help to illustrate how two very different industries can be affected by the pollution exclusion. The first example involves a plumbing business looking for coverage under its CGL policy.? The second example demonstrates how a pollution exclusion prevented coverage for a hockey facility owner when a malfunctioning Zamboni machine released gases that entered one of the arena’s locker rooms and injured university players.

(1)? ?Cincinatti Insurance Company v. Roy's Plumbing, Inc., 692 Fed.Appx. 37 (NY, 2017)

Roy's Plumbing ran a plumbing, heating and cooling business in Niagara Falls, New York.

It was hired by the City of Niagara Falls to conduct sewer refurbishment and replacement, root and tree removal, trenching, and sewer line upgrading in the vicinity of the former Love Canal Superfund site. ?

Neighboring residents brought bodily injury and property damage claims against Roy's Plumbing, alleging that it had negligently disturbed, exposed and discharged contaminated sediment from the nearby Love Canal site while performing work.? The complaint alleged that the plumbing contractor exacerbated the contamination when it used high pressure hoses to wash the roadway and storm drains.? The residents also claimed that Roy's Plumbing left an open trench for several weeks, further allowing contaminants to be dispersed onto the residents' property.

Roy's Plumbing submitted the claim to its Commercial General Liability insurer, but the CGL policy contained a pollution exclusion, and the insurer refused to defend or indemnify the plumbing contractor.? The Court agreed, finding that the residents' bodily injury and property damage claims alleged the release, discharge or dispersal of "pollutants" as a result of Roy's Plumbing's operations, and therefore it was not covered for these claims.?

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(2)? U.S. Fidelity and Guaranty Co. v. Lehigh Valley Ice Arena, Inc., 121 Fed.Appx. 976 (PA, 2005)

This second case involves a Pennsylvania hockey arena that hosted an

intercollegiate hockey game.? The Zamboni machine malfunctioned due to an incomplete combustion of propane, resulting in carbon monoxide, nitrogen dioxide, and additional gases being generated and seriously injuring players from one of the university hockey teams. When the gases went through the facility’s ventilation system, the gases were then released into the locker room used by the university hockey players, causing serious pulmonary-related injuries that affected a total of 19 players.

Two separate lawsuits were brought against the hockey arena. While the hockey arena insurer initially defended both suits, it later argued that it had no duty to defend nor indemnify the arena because of a pollution exclusion in the arena’s policy.

The Court ultimately found that there was no coverage under the policy for this type of third-party liability. ?The bodily injury claims from the injured players were excluded under the pollution exclusion, leaving the arena uninsured for this loss.?

?????????? The case examples above illustrate how a pollution exclusion may apply to risks not traditionally thought of as involving environmental contamination. ?So, while considering CGL insurance coverage as a start-up business, it is important to understand potential gaps in that coverage and how they may relate to your intended operations and activities. ??