Pollution Exclusion: Indiana Federal Court Finds Exclusion Applies To Offsite Soil And Groundwater Contamination
An Indiana federal district court, applying Michigan law, held that offsite soil and groundwater contamination resulting from Visteon Corporation’s (Visteon) historical use of trichloroethylene (TCE) as a degreaser was barred by the absolute pollution exclusion contained in its National Union Fire Insurance Company of Pittsburgh, P.A. (National Union) insurance policies.
Visteon operated a Connersville, Indiana plant that manufactured automotive component climate control system parts, including radiators and fuel injection components. When manufacturing these parts, TCE was used as a degreaser. Multiple historical releases of TCE occurred from the 1960s to 2000 and beyond, resulting in a TCE groundwater plume from the site. In 2001, the Indiana Department of Environmental Management notified Visteon of the possible contamination at the site and the surrounding area. Visteon spent millions of dollars remediating the site and defending and resolving property damage and bodily injury claims made by neighboring landowners.
Visteon sought coverage from National Union, which issued umbrella policies to Visteon from 2000-2002. National Union argued that the pollution exclusion in the policies excluded coverage. The National Union policies contained an absolute pollution exclusion, barring coverage “arising out of the actual or threatened discharge, dispersal, seepage, migration, release or escape of pollutants….” The policies also excluded coverage for any remediation costs.
Visteon conceded that its claim for damages fell within the National Union policies’ exclusions, but claimed it was nevertheless entitled to coverage under an exception to the pollution-related exclusion, i.e., the Products-Completed Operations Coverage (PCOH). The PCOH provided coverage for “all Bodily and Property Damage occurring away from premises you own or rent and arising out of …Your Work….” Visteon argued that the bodily injury and property damage arose from offsite impacts of TCE released from the Visteon site as a result of Visteon’s work. “According to Visteon, its ‘work’ was completed each time a contract for automotive parts with Ford or some third-party was satisfied.” National Union argued that Visteon’s operations were not “complete” until at least 2007, when Visteon ceased actively manufacturing automotive parts at the Connersville facility. Therefore, National Union asserted the PCOH coverage did not apply.
In rejecting Visteon’s policy interpretation, the court held: “Such an interpretation would have the unintended effect of erasing the line between premises-operations and products-completed operations coverage, as almost any pollution claim involving offsite contamination could be characterized as a completed operations claim.” Instead, the court found that, based upon the language of the PCOH exception, the provision was intended to cover offsite contractor work. “As Visteon is neither a contractor nor a subcontractor, and the offsite TCE contamination did not arise from offsite work, Visteon does not fall within the PCOH exception to the pollution exclusion. Visteon Corporation v. National Union Fire Ins. Co. of Pittsburgh, P.A., 1:11-cv-00200-RLY-TAB (S.D. Ind. July 7, 2014).