Fourth Circuit Finds Arsenic and Lead Contamination Subject to Absolute Pollution Exclusion

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Ross Development Corporation v. Fireman’s Fund Insurance Company, et al. (Index No. 12-2059) (June 6, 2013)

On appeal from the U.S. District of South Carolina, the Fourth Circuit affirmed the court’s ruling that the insurer’s had no duty to defend or indemnify a CERCLA action brought against the insured due to the absolute pollution exclusion in the policies.

Specifically, the parties debated whether, and how quickly, arsenic and lead leached into surrounding soils and when this contamination migrated to and damaged surrounding properties.  The policies excluded coverage for property damage “arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants.”

Finding that the district court provided a clear and detailed analysis, the Fourth Circuit stated that it only needed to address “certain principles that [the insured] appear to misunderstand.”  First, the court said that the underlying CERCLA action clearly triggered the policies, but noted “it is equally clear that the qualified or absolute pollution exclusions in each policy exclude this liability from coverage.”  The court explained that this was because the CERCLA action “arises out of” its “‘discharge’ … of ‘waste’ or a ‘waste material’ … .”  Finding no exception to the exclusion in the policies, the Fourth Circuit affirmed the lower South Carolina decision.