Absolute Pollution Exclusion Unenforceable

Indiana law requires that contaminants be specifically listed.

An Indiana Federal District Court found that a pollution exclusion issued by Old Republic Insurance Co. to the Gary/Chicago International Airport Authority was unenforceable because it did not specifically identify the individual pollutants it was intended to exclude as required by Indiana law.

In 2014, the Indiana Department of Environmental Management instituted a regulatory action against the Airport Authority directing it to investigate and develop an environmental remediation plan after arsenic, benzopyrene and 50 other toxins were discovered on the property.

Old Republic initially agreed to defend the Authority under their sixteen policies which covered the period from 1997 to 2015 under a reservation of rights. The nature of the policies was not specified by the opinion.   Later, the insurer filed a declaratory judgment action seeking a ruling that it had no duty to defend or indemnify the Authority on the basis of its pollution exclusion in the policies.

Old Republic’s motion for summary judgment asserted that its “absolute pollution exclusion” precluded coverage for “pollution and contamination of any kind whatsoever.”  The terms “pollution” and “contamination” were not defined terms in the exclusion.

The judge held that “… the Indiana Supreme Court would determine that Old Republic’s failure to be more specific (by its use of the broad terms ‘pollution’ and ‘contamination’ without more) renders its pollution exclusion ambiguous.”  The court reasoned that Indiana law requires that a pollution exclusion specify the substances that constitute pollution or contamination.  In finding the exclusion ambiguous and unenforceable, the court held that “Old Republic’s pollution exclusion is even broader than the pollution exclusion clauses repeatedly rejected by the Indiana courts, and not one of the 52 different pollutants/contaminants that the airport is required to test for are identified as being excluded from coverage.” Old Republic Ins. Co. v. Gary / Chicago Int’l Airport Auth., No. 2:15-cv-00281 (N.D. Ill. July 25, 2016).

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