Mining Operator’s Lead Waste Determined To Fall Within The Policies’ Pollution Exclusion

Doe Run Resources Corp. v. Lexington Ins. Co.
(United States District Court, Eastern District of Missouri, April 23, 2012)

In this coverage dispute, the insurer moved for summary judgment asserting that the policy’s pollution exclusion precluded coverage for environmental contamination due to the release of mining wastes.  Specifically, Doe Run was involved in the mining, milling, and smelting of lead.  An underlying complaint alleged that Doe Run’s mining operations adversely impacted the environment and human health through the release of toxic contamination in to the soil, air and water from its lead and zinc mines resulting in violations of various federal laws including, RCRA, the Clean Water Act and the Clean Air Act. 

After Lexington denied coverage, Doe Run sought a declaration that its insurer was obligated to pay its defense to the underlying Nadist suit.  At issue were eight policies issued by Lexington from 1998 to 2006, each of which contained a pollution exclusion.  Lexington argued that it was entitled to summary judgment on all of Doe Run's claims because the plaintiff's allegations "fall squarely within the terms of the pollution exclusions," and even the broadest reading of the Nadist complaint permits no reasonable interpretation other than that the injuries alleged therein arose out of the discharge, dispersal, release, or escape of pollutants or contaminants, thus bringing the complaint fully within the language of both forms of the pollution exclusion contained in the Lexington policies. 

In contrast, Doe Run argued that Lexington could only deny a defense based on the pollution exclusions if it can prove that every allegation in Nadist fell within the exclusion such that under the "potential for coverage" standard, Lexington owed a defense. Doe Run asserted that the Nadist complaint included allegations concerning lead, metals, and other substances that are commercially valuable materials to Doe Run. It further contended that under Missouri law, such commercially valuable materials, unless expressly identified in the policy definition of "pollutant," are not considered "pollutants," and here the policies failed to list lead in the definition of "pollutant." Doe Run also relied on the deletion of the "lead exclusion" in its policies after 2004 arguing that application of the pollution exclusions to the claims in Nadist "would all but render coverage illusory" under the policies.

The court, in rejecting Doe Run’s arguments, held that the failure to list lead as a pollutant in the pollution exclusion did not “by itself, … automatically render the exclusion ambiguous.”  The district court also concluded that the absence of a lead-specific exclusion did not undermine the pollution exclusions or reverse their effect.   Lastly, the court noted that Lexington’s 2008 disclaimer referencing the lack of a lead exclusion did not indicate an intent to cover those claims, as the lead exclusion at issue was far broader than the pollution exclusion.    As such, the court held that Lexington met its burden establishing that the pollution exclusion, even when strictly construed against the insurer, precluded Doe Runs right to coverage under the subject policies.

For a copy of this decision, click here.

Joanna M. Roberto and Paul C. Steck 

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