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This exclusion does not apply if valid “underlying insurance” for the pollution liability risks described above exists or
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Did Pollutant, or Lack of Oxygen, Kill Sewer Worker? Issue Leads Court to Rule that Insurers May Have Duty to Indemnify Insureds

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Although it found that insurance carriers did not have a duty to defend their insureds, a federal district court in Texas has ruled that they may have a duty to indemnify them, where an amended autopsy report raised a genuine issue of material fact as to whether a sewer worker’s death fell outside the policies’ pollution exclusion.

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Did Pollutant, or Lack of Oxygen, Kill Sewer Worker? Issue Leads Court to Rule that Insurers May Have Duty to Indemnify Insureds

  1. 1. The Insurance Coverage Law Information Center The following article is from National Underwriter’s latest online resource, FC&S Legal: The Insurance Coverage Law Information Center. DID POLLUTANT, OR LACK OF OXYGEN, KILL SEWER WORKER? ISSUE LEADS COURT TO RULE THAT INSURERS MAY HAVE DUTY TO INDEMNIFY INSUREDS June 5, 2014 Steven A. Meyerowitz, Esq., Director, FC&S Legal Although it found that insurance carriers did not have a duty to defend their insureds, a federal district court in Texas has ruled that they may have a duty to indemnify them, where an amended autopsy report raised a genuine issue of material fact as to whether a sewer worker’s death fell outside the policies’ pollution exclusion. The Case The city of Gordon, Texas, contracted with Jacob and Martin, Ltd., for it to design and install a new sewer system. The city also contracted with Granbury Contracting & Utilities, Inc., to install sewer lines. While working on the project, a project engineer allegedly directed Eliseo Alberto Ramirez Rodriguez, an employee of Granbury, to open a manhole, climb inside it, and remove a plug from the sewer line. After Mr. Ramirez removed the plug, toxic fumes allegedly were released and he died from methane inhalation. Mr. Ramirez’s parents sued Jacob and Martin, the project engineer, the lead engineer, and the general partner of Jacob and Martin under the Texas Wrongful Death and Survival statutes. Thereafter, Acadia Insurance Company and Continental Western Insurance Company, which had issued general liability and umbrella policies to Jacob and Martin, Ltd., sought a declaration that they owed no duty to defend or indemnify the defendants in the lawsuit filed by Mr. Ramirez’s parents. The insurers moved for summary judgment. The insureds asked the court to consider extrinsic evidence that they contended demonstrated that Mr. Ramirez may have died from a lack of oxygen. The Policies The general liability policy issued by Acadia excluded: “[b]odily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” ... [a]t or from any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste. The umbrella policy issued by Continental Western excluded: “[b]odily injury” or “property damage” which would not have occurred in whole or part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.... The Continental Western policy also stated: Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com
  2. 2. This exclusion does not apply if valid “underlying insurance” for the pollution liability risks described above exists or would have existed but for the exhaustion of underlying limits for “bodily injury” and “property damage.” Coverage provided will follow the provisions, exclusion, and limitations of the “underlying insurance.” Both policies defined: pollutants as: any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed. The Court’s Decision In its decision, the court first rejected the insureds’ argument that it should consider extrinsic evidence that they contended demonstrated that Mr. Ramirez might have died from a lack of oxygen, ruling that it would not consider “any evidence beyond the policies and underlying pleading.” The court noted that the insureds did not dispute that methane was a pollutant or that the exclusions otherwise applied to the facts alleged in the underlying suit. The court, therefore, concluded that the insurers were entitled to summary judgment on their duty to defend. The court reached a different result on the duty of the insurers to indemnify. It explained that an insurer’s duty to indemnify turned on the facts actually established, rather than alleged, in the underlying dispute. The court noted that the autopsy report was amended to change the cause of death from “asphyxia due to methane gas inhalation” to “asphyxia due to oxygen displacement in a confined space.” In the court’s view, the amended autopsy report raised a genuine issue of material fact as to whether Mr. Ramirez’s death fell outside the policies’ pollution exclusion. According to the court, the insurers had failed to demonstrate that the substance that displaced the oxygen “was in fact a pollutant as defined by the policies.” According to the court, it was “not sufficient” for the insurers to note that the oxygen must have been displaced by another substance; rather, it ruled, the insurers had to show, by competent summary judgment evidence, that the substance that displaced the oxygen was a pollutant under the policies and that the means by which the oxygen was displaced fell within the exclusions. Accordingly, the court concluded that the insurers had failed to meet their burden to demonstrate that they were entitled to judgment as a matter of law on the duty to indemnify. The case is Acadia Ins. Co. v. Jacob and Martin, Ltd., No. 4:13–cv–798–O (N.D. Tex. May 28, 2014). Attorneys involved include: Beth D. Bradley, Summer L. Frederick, Tollefson Bradley Ball & Mitchell LLP, Dallas, TX, for Plaintiffs; Robert B. Wagstaff, McMahon Surovik Suttle PC, Abilene, TX, for Defendants. Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com
  3. 3. Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com Copyright © 2014 The National Underwriter Company. All Rights Reserved. NOTE: The content posted to this account from FC&S Legal: The Insurance Coverage Law Information Center is current to the date of its initial publication. There may have been further developments of the issues discussed since the original publication. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the services of a competent professional person should be sought. For more information, or to begin your free trial: • Call: 1-800-543-0874 • Email: customerservice@SummitProNets.com • Online: www.fcandslegal.com FC&S Legal guarantees you instant access to the most authoritative and comprehensive insurance coverage law information available today. This powerful, up-to-the-minute online resource enables you to stay apprised of the latest developments through your desktop, laptop, tablet, or smart phone —whenever and wherever you need it.

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