Nationwide Mutual Ins. Co. v. Lang Management, Inc. (United States District Court, Southern District of Florida, October 6, 2010)
Plaintiff insurer moved for a declaration in this environmental coverage matter that it had no duty to defend or indemnify its insured under its policy for an underlying lawsuit involving the use of herbicides on a golf course. Specifically, Legacy Golf and Tennis Club sued the insured, which was hired by the PGA to maintain the lakes within the golf course. The underlying suit alleged that the insured (Lang) hired Lake & Wetland Management (L&W) to perform service, maintenance and inspection of the lakes within the Legacy golf course. L&W was alleged to have contaminated the lakes with an herbicide, Diuron that is toxic to humans, animals, and plant life. Because the lake water was used for irrigation, the suit alleged that the herbicide-contaminated water was sprayed all over the course. Thus, the complaint alleged vicarious liability and negligent hiring and supervision against the insured, Lang, as well as property damage and resultant costs, including loss of memberships at the club.
At issue was whether the claim for negligent hiring and supervision in the underlying suit was covered under the policies or whether it was excluded pursuant to the pollution exclusion. Upon analyzing the policy language of the exclusion, the court determined there were two ways in which the exclusion would apply: one, if the pollution caused bodily injury or property damage, and two, if there was a claim for “any loss, cost or expense that arises out of any request, demand, order or statutory or regulatory requirement that the insured or others … monitor … or in any way respond to, or assess the effects of pollutants.”
The court held that the first prong of the exclusion was met as the claim for negligent hiring and supervision specifically sought damages relating to property damage, and thus, to that extent it was barred by the exclusion. However, the underlying complaint also sought damages for resultant economic damages related to the loss of membership fees, and as such, the court was required to assess whether the claim for negligent hiring fell under the second prong of the exclusion, as well. In determining that the exclusion also applied to the economic damages, the court noted that the Florida Supreme Court has adopted the “general consensus” regarding the phrase “arising out of” giving it a broad reading. Thus, as the negligent hiring and supervision claims arose from a request or demand that the “insured or others” (i.e., Lang or L&W) monitor, respond to, or assess the effects of the herbicide used on the golf course, the exclusion explicitly applied, and thus, included L&W’s actions. Therefore, the court held that “no portion of the negligent hiring claim arises from anything other than L&W’s use of Diuron” and therefore, the insurer had no duty to defend the underlying case.
For a copy of the decision here
Paul Steck and Joanna Roberto
case provided courtesy of lexis