270_C056

Pollution Exclusion Applied To Toxic Waste Transported For Disposal

General Liability	Reservation of Rights
Standard Pollution Exclusion	Defense

A reclamation company processed contaminated solvents received from customers for re-use. The leftover waste products were turned over to transporters for disposal. The federal Environmental Protection Agency identified the company as being potentially responsible for clean-up costs at several Kentucky "Superfund" sites as the generator of hazardous substances deposited there. The processor called on its general liability insurer to provide defense and indemnification.

The insurer undertook defense under a reservation of rights and, in light of the standard pollution exclusion in its policy, sought a declaration in federal district court that it was not required to defend or indemnify as a consequence of ensuing federal or state claims. The district court granted summary judgment to the insurer, concluding that the exclusion removed such claims from the scope of coverage. The insured appealed.

The insured argued that it delivered the toxic waste to a transporter for disposal and did not, itself, release hazardous substances into the environment. Therefore, the insurer could not rely on the pollution exclusion. The appeal court said that the policy excluded liability for "the release" of toxic substances, not liability for the named insured's release of toxic substances.

Accordingly, the pollution exclusion was held applicable to the described potential claims against the insured. The judgment of the district court was affirmed in favor of the insurer and against the insured.

U.S. FIDELITY AND GUARANTY CO., Plaintiff, Appellee v. GEORGE W. WHITESIDES CO., INC., Defendant, Appellant. U.S. Court of Appeals for the Sixth Circuit. No. 90-5965. May 14, 1991. CCH 1991-92 Fire and Casualty Cases, Paragraph 3256.