Injuries Caused By a Gas Explosion Covered By Pollution Liability Policy

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In Acuity, A Mut. Ins. Co. v. Chartis Specialty Ins. Co., 2015 WI 28, P52 (Wis. 2015), the Wisconsin Supreme Court has held that a pollution liability policy issued by Chartis Specialty Insurance Co., covered lawsuits alleging property damage and bodily injury caused by a natural gas line explosion. The policy, held by a construction company, was found to be implicated because natural gas is a pollutant and contaminant, the escape of which was a “pollution condition” within the meaning of the policy. The insurer’s argument, that it was the explosion and fire that caused the damage rather than the contact with the pollutants, failed to convince the court. Accordingly, the insurer was required to pay its share of the defense fees and indemnity payments.

This dispute arose between two insurance companies: Acuity, a mutual insurance company, and Cartis Specialty Insurance Company, who had both issued liability policies to the insured. The Acuity policy was a Comprehensive General Liability policy and the Cartis policy was a Contractors’ Pollution Liability policy. Acuity had defended and indemnified the insured in four lawsuits and sought reimbursement from Cartis for half of its defense and indemnity costs. The Supreme Court decision reversed an earlier Wisconsin appeals court ruling in which Acuity had been refused reimbursement from Cartis.

In overturning the appeals court decision, the Supreme Court found that the terms “irritant” and “contaminant”, which were undefined in the policy, included natural gas released into the air from a damaged natural gas pipeline. The court reasoned that the release of these gasses render the surrounding space impure or unclean. In this case, the impurities resulted in an explosion and fire. It was the contaminating nature of the natural gas which caused the damage and therefore the losses were covered.

The court rejected the argument that there could be no concurrent coverage under the commercial general liability policy and the pollution liability policy. The court stated that “depending on the language of the policies and the facts of the case, it is entirely possible for both a commercial general liability policy with a pollution exclusion clause and a contractors’ pollution liability policy to cover the insured’s liability.”

Accordingly, the decision of the court of appeals was reversed.