Macheca Transp. Co. v. Philadelphia Indemnity Ins. Co. (United States Court of Appeals, 8th Cir., August 9, 2011)
Policyholder in this environmental coverage dispute sued its insurer for damages resulting from a pipe rupture in the policyholder’s warehouse. Specifically, an ammonia leak occurred on the sixth floor of the warehouse after a refrigeration pipe ruptured due to the failure of the ceiling support system, from which the pipes were suspended. Investigation revealed that the weight of ice which had accumulated on the pipe contributed to the failure. The refrigeration pipe fell and landed on pallets of product inside the warehouse. Ammonia leaked from the ruptured pipe causing further damage to the warehouse floors and walls, as well as the product stored inside the warehouse.
In concluding that the pollution exclusion did not apply, the court noted that the all-risk policy contained three categories of exclusions. One category of exclusions (the B.1 exclusions) precluded coverage "regardless of any other cause or event that contributes concurrently or in any sequence to the 'loss.'" In contrast, the other two categories (the B.2 and B.3 exclusions) lacked such language, and, therefore, only precluded coverage if the excluded event was the sole cause of loss. As a consequence, if a covered cause of loss was “a cause” of loss, the B.2 and B.3 exclusions did not preclude coverage.
Under this policy, the pollution exclusion was a B.2 exclusion, wherein the policy would not cover loss "caused by or resulting from . . . [d]ischarge, dispersal, seepage, migration, release or escape of 'pollutants.'" However, the pollutant exclusion contained an exception which stated: "But we will pay for resulting 'loss' to Covered Property when the discharge, dispersal, seepage, migration, release of escape of 'pollutants' is caused by any of the 'specified causes of loss.'" Thus, if a "specified cause of loss" was a cause of the escape or release of a pollutant, the policy provided coverage because the pollutant exclusion was a B.2 exclusion rather than a B.1 exclusion.
Here the court held that it is undisputed the weight of ice accumulating on the refrigeration pipe was “a cause” of the pipe's rupture, which in turn caused the release of the ammonia. The court further noted that the insurer conceded that "If there was a covered event that caused the release of pollutants, then that would be covered." As such, the policyholder was entitled to partial summary judgment on liability under its weight-of-ice claim because the weight of ice was a specified cause of loss.
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