Low, Ball & Lynch’s
WEEKLY
LAW RESUME
Coverage
- Pollution Exclusion - Dirt and Rock
Ortega
Rock Quarry v. Golden Eagle Insurance Corp.
(
Court of Appeal, Fourth
District
The application of the
pollution exclusion after recent Supreme Court cases leaves open for
interpretation the meaning of the word “pollution.” This case applies it to dirt
and gravel.
Ortega Rock Quarry
operated a rock quarry business. A creek ran through the quarry land that Ortega
had leased. After heavy storms, the creek overflowed and washed out an access
road on the leased property. To maintain access to the quarry, Ortega placed
fill dirt from the quarry along the road.
The Environmental
Protection Agency (“EPA”) issued an administrative order to Ortega, alleging
that the fill resulted in an unauthorized discharge of fill material into the
creek. It issued an administrative order demanding that Ortega cease its fill
operations and submit a restoration plan. The EPA
contended that the dirt and rocks that Ortega placed into the creek were
pollutants within the meaning of the Clean Water Act. Ortega assisted in the
development of a restoration plan. The EPA directed Ortega to implement it. In
addition, the lessor of the land filed a civil lawsuit
against Ortega, alleging that Ortega had damaged its property.
Golden Eagle Insurance
Company (“GEIC”) issued a general commercial liability policy and an excess
policy to Ortega. Ortega was also insured under a general commercial liability
policy issued by Continental Casualty Company. Ortega tendered to its insurers,
and the insurers denied defense and indemnity. Ortega sued for breach of
contract and other claims. The trial court granted summary judgment and summary
adjudication in favor of the insurers. Ortega
appealed.
The Court of Appeal
affirmed. First, following established law, the Court held the insurers had no
duty to defend the EPA proceedings because they were not “suits” within the
meaning of the policies. The duty to defend and indemnify applies to lawsuits
filed against an insured, not administrative
proceedings.
As to the action filed
by the lessor, as well as the EPA proceeding, the
Court held the total pollution exclusion in the policies applied. The Court
noted the Clean Water Act defined pollutants as “dredged spoil, solid waste, . . . sludge . . . ”. The Court held that State and
Federal environmental laws provide insight into the scope of the definition of
pollution, even though not specifically incorporated in those policies. The
Court noted that natural dirt and rocks are pollutants within the meaning of the
Clean Water Act when placed in waters of the
Ortega argued that,
since the policy defined “pollutants,” only those irritants or contaminants
listed in the policy were excluded. The Court rejected that contention, and held
that the items listed in the exclusion were not intended to be exclusive, and
did not limit the items included within its scope. The Court concluded that the
exclusion was not ambiguous and applied to the natural dirt and rocks, which
were defined as pollutants under the Clean Water Act. The Court therefore
concluded that it properly applied to Ortega’s activities. The judgment was
therefore affirmed.
COMMENT
This opinion should be
read for its discussion of the pollution exclusion, as well as the application
in this case. Its holding that the exclusion is not limited to the defined
pollutants set forth in the policy will also be of great
import.
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