By Colin Connor, Plews Shadley Racher & Braun LLP
Recently, the Northern District of Indiana reinforced the twenty-year old holding of Am. States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996) that the absolute pollution exclusion is ambiguous, and therefore must be construed in favor of coverage. Old Republic Ins. Co. v. Gary/Chicago Int’l Airport Authority, 2016 U.S. Dist. LEXIS 96361 (N.D. Ind. July 25, 2016). Gary/Chicago International Airport Authority (“Airport Authority”) had sought insurance coverage from Old Republic Insurance Company (“Old Republic”) for the Airport Authority’s government-mandated investigation of potential contaminants at the airport. Old Republic argued that because its 1997-2015 policies excluded both “pollution and contamination” that its pollution exclusion was distinguishable from twenty years of Indiana case law holding that “absolute pollution” exclusions are ambiguous. The Northern District held that Old Republic’s addition of “contamination” did not save its absolute pollution exclusion because “Old Republic's pollution exclusion does not explicitly indicate what constitutes ‘pollution’ or ‘contamination’ so that an ordinary policyholder of average intelligence would know to a certainty that Old Republic would not be responsible for damages arising out of the oily sheen, benzo(a)pyrene, arsenic, and PCBs discovered at the Airport.” Id. at *10. “Because the Court believes 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 construes the insurance policy to further the policy's basic purpose of coverage.” Id. at *11.
The Airport Authority decision serves as a further reminder that you should always ask your clients whether they have insurance coverage available. You never know what potential coverage your client may be missing out on if you do not ask.
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