Tred R. Eyerly | Insurance Law Hawaii
The Mississippi Supreme Court found the pollution exclusion ambiguous under the facts presented. Omega Protein, Inc. v. Evanston Ins. Co., 2022 Miss. LEXIS 90 (Miss. March 31, 2022).
Omega Protein, Inc., entered a contract with Ascu-fab to perform welding and other fabrication work at their facility. Accu-fab was required to have CGL coverage naming Omega as an additional insured. Accu-fab purchased a $1 million primer policy from Colony Insurance Company and a $5 million excess policy issued by Evanston Insurance Company.
Accu-fab performed welding and other fabrication work on a large metal storage tank used for the temporary storage of stickwater, which was a liquid composed of water, fish oil, and fish solids. An explosion occurred at the Omega plant while Accu-fab workers were welding and grinding on a large metal tank that was used for the temporary storage of stickwater. One of Accu-fab’s workers , Jerry Lee Tayler, was killed, another was seriously injured, and still others suffered less serous injuries.
Omega was sued in various lawsuits. Omega tendered the defense of the lawsuits to Colony and Evanston. Colony filed this declaratory judgment action seeking a declaration that there was no coverage due to the pollution exclusion. Evanston intervened, also arguing the claim was barred by its pollution exclusion. Omega and the Taylor estates settled with Colony contributing its policy limits of $1 million.
In this declaratory judgment actin, Omega filed motions for partial summary judgment, alleging that the pollution exclusion did not apply. Evanston also filed a motion for summary judgment arguing that Omega was not an additional insured under the Colony policy or the excess policy. Evanston also argued that Omega was not entitled to indemnity because there were no factual allegations of negligence against Accu-fab in the underlying cases and also because its own pollution exclusion barred Omega’s claims.
A special master was appointed to address the motions for summary judgment. The special master recommended that coverage was barred under the pollution exclusion and that Omega qualified as an additional insured under the policy in addition to Evanston’s coverage being triggered by the $1 million payment by Colony. The trial court granted Evanston’s summary judgment motion. Omega appealed, and Evanston cross-appealed.
The Evanston pollution exclusion did not apply to “ultimate net loss” . . . “arising out of or contributed to in any way by the actual, alleged or threatened discharge, dispersal, release, migration, escape or seepage of pollutants.” Stickwater was a byproduct of the fish meal and fish oil production process. The stickwater produced methanethiol, hydrogen sullied, and methane – all three of which were extremely flammable.
Omega asserted that the gasses emitted from the stickwater tank were not irritants or contaminants because they were found naturally in the ambient air. Further, the gasses in the stickwater tank were not irritants or contaminants under the pollution exclusion since they were property contained within the tank and were not contacting, contaminating, or irritating anything. Evanston argued that the gasses emitted from the tank fit squarely within the pollution exclusion language.
After considering dictionary definitions, the court determined that the pollution exclusion was susceptible to more than one reasonable interpretation and, therefore, ambiguous. Accordingly, it was construed in favor of coverage.
The court next determined that Evanston’s excess policy was not triggered because there was no exhaustion of the underlying policy. Nor was there a showing of negligence by Accu-fab.
Finally, the court found that Omega was not an additional insured under Accu-fab’s policies. Omega was an a an additional insured only if there was a determination of negligence on Accu-fab’s part. The underlying policy, and Evanston’s following form policy, required a determination that Omega incurred liability on behalf of negligence attributed to Accu-fab. But there was never any adjudication made regarding negligence of Accu-fab because of the settlement. Therefore, Evanston failed to prove that Omega was not covered under the excess policy.
However, Evanston intervened in the declaratory judgment suit and assumed the burden of proof. Because there was no adjudication of fault or negligence attributed to Accu-fab, Evanston failed to prove that Omega was not covered under the excess policy, The trial court erred by finding that Omega qualified as an additional insured under the excess policy.
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