This environmental coverage action involved a determination of the insurers’ obligations to reimburse the policyholder for its litigation costs arising from an action commenced by over 400 Chesapeake, Virginia landowners. The landowners alleged a golf course developer caused personal injury and property damage through the use of contaminated fly-ash material during the construction of a nearby golf course.
The policyholder was insured under seven commercial general liability policies that required the insurers to reimburse Headwaters for expenses associated with lawsuits that occurred during the policy period. The insurers denied coverage for the litigation costs because the events giving rise to the claims fell within the policies’ pollution exclusions. The district court agreed that 2003-2006 policies unambiguously applied to bar coverage. On the remaining policies that district court ruled that any potential ambiguity in the pollution exclusion was not significant as the policies unmistakably did not provide coverage for traditional environmental pollution.
On appeal, the policyholder asserted that the exclusions were fundamentally ambiguous due to their breadth, and as such, subsumed all coverage. The Tenth Circuit court discredited these arguments and affirmed the lower court ruling, holding that the policies’ pollution exclusions were not ambiguous and that the underlying complaints “plainly alleged that pollution caused plaintiffs’ injuries.” In an extensive and detailed analysis of the alleged ambiguities contained in each policy, the court held that “the pollution exclusions, while far-reaching, are not ambiguous and do not abolish all coverage under the policies.” The court further held that pollution exclusions applied to the alleged claims and that Headwaters’ ambiguity arguments amounted to a veiled attempt to introduce extrinsic evidence to interpret an unambiguous contract.
This case is an excellent example that clear policy exclusions will be interpreted as written and that use of extrinsic facts to introduce ambiguities into a policy will not be credited by the courts.