First Circuit Addresses Scope of Antitrust Exclusion in E&O Policy

In its recent decision in The Saint Consulting Group, Inc. v. Endurance Am. Specialty Ins. Co., 2012 U.S. App. LEXIS 22631 (1^st Cir. Nov. 2, 2012), the United States Court of Appeals for the First Circuit, applying Massachusetts law, had occasion to consider the application of a restraint of trade exclusion in a professional liability policy.

The insured, The Saint Consulting Group (“Saint”), was a real estate consulting firm specializing in land use disputes.  In particular, Saint had developed a specialty in representing grocery stores in their attempts to prohibit or delay Wal-Mart from opening stores in their client’s territories by spurring litigation and regulatory proceedings.  At issue in the insurance coverage dispute were Saint’s efforts to block two Wal-Mart stores from being developed in Illinois.   Underlying plaintiff, Rubloff Development, had purchased two parcels of land it intended sell to Wal-Mart to be used for construction of Wal-Mart and other retail stores.  Saint, acting on behalf of a competing grocery store, undertook efforts to rally local businesses against the Wal-Mart stores.  Saint’s efforts in these regards were led by a single employee, Leigh Mayo, who used a pseudonym while pursuing these efforts, allegedly concocted false stories about the negative the effects of Wal-Mart stores, and concealed the fact that he was a Saint employee working on behalf of a Wal-Mart competitor.

While these anti-Wal-Mart efforts were still proceeding, Leigh Mayo left Saint’s employ, and shortly thereafter sold to Rubloff thousands of internal documents concerning Saint’s efforts to block the Wal-Mart stores.  Upon learning of this, Saint demanded the documents back.  Rubloff shortly thereafter filed suit action against Saint seeking only a judicial declaration that the documents were not privileged and that Rubloff could keep them for future use in a lawsuit.  Rubloff shortly thereafter amended its complaint to seek various forms of injunctive relief concerning other documents in Saint’s possession.   While the court dismissed Rubloff’s claim for injunctive relief, it ultimately declared that Rubloff was entitled to keep the documents.  Just prior to ruling on Rubloff’s claim for declaratory relief, Rubloff filed a second amended complaint that included substantive causes of actions relating to Saint’s efforts to block or delay the Wal-Mart stores.  Specifically, the second amended complaint included causes action of for RICO violations based Saint’s efforts to conceal Mayo’s true identity and employer, conspiracy to restrain trade under the Sherman Act and Illinois Antitrust Act, tortious interference with prospective economic advantage, common law fraud, and conspiracy.  

Saint ultimately was successful in having each of these causes of action dismissed.  It did so, however, without the assistance of its professional liability insurer, Endurance, which had denied coverage to Saint for the original and amended complaints on the basis of a restraint of trade exclusion stating that coverage did not apply:

… to any Claim based upon or arising out of any actual or alleged price fixing, restraint of trade, monopolization or unfair trade practices including actual or alleged violations of the Sherman Anti-Trust Act, the Clayton Act, or any similar provision [of] any state, federal or local statutory law or common law anywhere in the world.

In the subsequent insurance coverage action, the United States District Court for the District of Massachusetts granted Endurance’s motion to dismiss, concluding that the exclusion barred coverage for the causes of action specifically brought under the Sherman Act and the Illinois Antitrust Act, and that it also applied to the other causes of action since each such cause of action arose out of the same alleged restraint of trade.

In considering the matter on appeal, the First Circuit noted that under Massachusetts law, if even one cause of action escaped the restraint of trade exclusion, then Endurance would have an obligation to defend the suit in its entirety.  Beginning first with the amended complaint filed in the underlying action, the court agreed that the causes of action for antitrust violation under federal and state statute were excluded.  “Far more interesting” to the court was whether the RICO causes of action and common law causes of action were excluded, notwithstanding the fact that they were not titled as “restraint of trade” counts.  In considering this issue, the court observed that the exclusion applied to causes of action “based upon or arising out of any actual or alleged . . . restraint of trade.”  The phrase “arising out of,” it noted, is typically afforded a broad construction under Massachusetts law.  With this in mind, the court observed that:

It can hardly be disputed that the factual allegations of the Second Amended Complaint allege a conspiracy to forestall competition through misuse of legal proceedings and through deception. And every count in the Rubloff Action that is not itself described as an antitrust claim depends centrally on the alleged existence of such a scheme.

The court therefore concluded that because the statutory and common law causes of action in the second amended complaint were premised on Saint’s efforts to restrain trade, the exclusion applied to each such cause of action.  In so holding, the court rejected Saint’s argument that its success in the underlying action evidenced the fact that Saint had not engaged in the prohibited conduct.  The court found this argument to be a “non-sequitur,” explaining:

Exclusion N depends not on whether conduct occurred or, if so, whether it was unlawful, but on what the complaint alleged. What was factually alleged in the Second Amended Complaint in no uncertain terms was an anti-competitive scheme and, where the pertinent counts arise out of that alleged scheme, Exclusion N negates coverage.  The exclusion does not depend on whether a successful defense can be advanced: it excludes meritless claims quite as much as ones that may prove successful.

After concluding that Saint was not entitled to coverage for the second amended complaint, the court then sought coverage for the initial complaint concerning only Rubloff’s declaratory judgment action to keep the internal documents sold by Mayo as well as certain injunctive relief.  The court concluded that coverage was unavailable for that complaint, since the dispute over possession of documents did not involve a wrongful act arising out of Saint’s professional services, and thus did not fall within the policy’s insuring agreement.

Eleventh Circuit Affirms Duty to Defend Legionnaires’ Disease Lawsuit

In its recent decision in Westport Ins. Corp. v. VN Hotel Group, 2012 U.S. App. LEXIS 22187 (11^th Cir. Oct. 25, 2012), the United States Court of Appeals for the Eleventh Circuit, applying Florida law, had occasion to consider whether a pollution exclusion and a fungi/bacteria exclusion operated to bar coverage for an underlying wrongful death claim involving Legionnaires' Disease.

The underlying lawsuit involved three individuals staying at a Quality Suites in Florida, all of whom contracted Legionnaires’ Disease while guests.  One of these individuals died while the two others required significant medical attention.  Two lawsuits were brought against VN Hotels, as the owner and operator of the Quality Suites.  The suits alleged that the plaintiffs contracted the disease as a result of exposure to legionella bacteria contained in shower water in their own rooms, or from steam generated by the hotels’ outdoor spa.  The plaintiffs later conceded, however, that the source of the bacteria was from the hotel’s outdoor spa.  VN Hotels tendered its defense to its general liability insurer, Westport Insurance.

Westport brought a coverage action against VN Hotels, seeking a declaratory judgment that its policy’s pollution exclusion and fungi/bacteria exclusion precluded a finding of coverage.  The pollution exclusion applied to:

"Bodily injury" . . . arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":

                                                * * *

"Pollutants" means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste . . . .

Additionally, the policy’s fungi/bacteria exclusion applied to:

"Bodily injury" . . . which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of any "fungi" or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage. 

The fungi/bacteria exclusion, however, also contained an exception applicable to:

This exclusion does not apply to any 'fungi' or bacteria that are, are on, or are contained in, a good or product intended for bodily consumption.

On motion for summary judgment, the Middle District of Florida found in favor of VN Hotels, concluding that bacteria is not a “pollutant” for the purpose of the pollution exclusion.  The district court further held that the bacteria exclusion was inapplicable since the bacteria was not “within” a structure, and that in any event, the exception applied as the bacteria was contained in a good or product intended for bodily consumption.

On appeal, the Eleventh Circuit agreed with the lower court’s logic that bacteria did not qualify as a pollutant, at least under Westport’s policy, as such a ruling would render meaningless the policy’s fungi/bacteria exclusion.  Turning to the issue of the policy’s exclusion for bacteria, the Eleventh Circuit found persuasive the lower court’s reasoning that an outdoor spa is not clearly part of the hotel’s “structure,” which the court agreed must be defined narrowly, explaining:

In this Policy, the term "building" modifies the term "structure" and shows that "structure" is to be narrowly construed …  Thus, we, like the district court, conclude that an outdoor spa would not qualify as a "structure" for purposes of the exclusion.

Importantly for insurers and insureds alike, neither the district court nor the Eleventh Circuit held the bacteria exclusion unenforceable.  Rather, the two holdings appear limited to the language of the exclusion – requiring the bacteria to be on or within a building or structure – and the unique facts involved.  Further, other Florida courts, including the Eleventh Circuit, have held that similar claims are barred by the pollution exclusion.  See, e.g., Markel Ins. Co. v. Florida West Covered RV & Boat Storage, LLC, No. 8:09-cv-2427-T-27TGW (M.D. Fla. Mar. 9, 2011), aff’d, 2011 U.S. App. LEXIS 16552 (holding that pollution exclusion applied to bacterial infection caused by millings from roadwork); First Specialty Ins. Corp. v. GRS Mgmt. Assocs., 2009 U.S. Dist. LEXIS 72708 (S.D. Fla. Aug. 17, 2009) (concluding virus in swimming pool excluded by pollution exclusion); Nova Cas. Co. v. Waserstein, 424 F. Supp. 2d 1325 (S.D. Fla. 2006).

Florida Court Holds E&O Insurer Has Duty to Defend Civil Conspiracy Claim

In its recent decision in Philadelphia Indem. Ins. Co. v. Hamic, 2012 U.S. Dist. LEXIS 150067 (M.D. Fla. Oct. 18, 2012), the United States District Court for the Middle District of Florida had occasion to consider whether a legal malpractice insurer has a duty to defend a civil conspiracy claim.

The insured law firm of Hamic, Jones, Hamic & Sturwold, P.A., and an individual member of the firm, were sued for alleged civil conspiracy to commit malicious prosecution, extortion and other harms.  The complaint was subsequently amended to include a malicious prosecution claim only against the individual attorney, and the Middle District of Florida held on summary judgment that the malicious prosecution claim triggered Philadelphia Indemnity Company’s duty to defend the entire suit.  Philadelphia moved for reconsideration solely on the issue of whether it had a duty to defend the Hamic law firm, against which a claim for malicious prosecution had not been asserted.  In other words, Philadelphia sought a ruling that a civil conspiracy claim, in and of itself, did not trigger its policy’s coverage.

In support of this argument, Philadelphia relied on case law in the general liability context standing for the proposition that claims for intentional torts are not covered.  The court acknowledged that most, but not all, claims of intentional torts are not insured under a general liability policy.  The court distinguished typical professional liability policies from general liability policies, finding that professional liability policies typically do provide coverage for intentional torts unless specifically excluded.  It further noted that Philadelphia’s policy did not contain an intentional acts exclusion and therefore provided coverage for intentional torts, although “not specifically malicious prosecution or conspiracies.”

With this in mind, the court considered the nature of a claim for civil conspiracy, the gist of which, it explained, is not the conspiracy itself, but instead the civil wrong accomplished by the conspiracy.  In this case, the “civil wrong” giving rise to the underlying plaintiff’s claim was alleged malicious prosecution, which the court had previously concluded on summary judgment was covered under Philadelphia’s policy.   The court therefore held that the civil conspiracy claim necessarily was covered, explaining that:

Because malicious prosecution falls within the coverage of the policy at issue under the facts as alleged in this case, there is also coverage for the conspiracy to commit malicious prosecution. The tort of civil conspiracy does not require a finding of specific intent to harm the plaintiff or to extract an intended result. Essentially the intent to commit the tort does not also mandate an intent to do the harm that resulted, which was an arrest. Based on these principles, Philadelphia owes a duty to defend the insureds on the claim of conspiracy.

Ohio Supreme Court Holds Faulty Workmanship Is Not an Occurrence

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In its recent decision in Westfield Ins. Co. v. Custom Agri Systems, 2012 Ohio 4712 (Ohio Oct. 16, 2012), the Supreme Court of Ohio, answering a question certified by the United States Court of Appeals for the Sixth Circuit, had occasion to consider whether “claims of defective construction/workmanship brought by a property owner [are] claims for ‘property damage’ caused by an ‘occurrence’ under a commercial general liability policy.”  The court also had before it the certified question of whether the contractual liability exclusion applies to bar coverage for such claims.

The coverage dispute in Westfield arose out of Younglove Construction’s contract with PSD Development to build a feed-manufacturing plant in Sandusky, Ohio.  Younglove brought suit against PSD for non-payment of funds, which resulted in PSD filing a counterclaim for defective construction of a steel bin that had been built by Younglove’s subcontractor, Custom Agri Systems.  Younglove subsequently brought a third-party action against Custom, alleging defective construction and consequential damages resulting from the defective construction.  Custom, in turn, tendered its defense to its general liability insurer Westfield.  Westfield intervened in the lawsuit to seek a declaration that it had no coverage obligation to Custom, as Younglove’s third-party claim did not allege “property damage” arising out of an “occurrence.”  Westfield also sought a declaration with respect to the application of its policy’s contractual liability exclusion.   The Northern District of Ohio acknowledged that there was an open question under Ohio law as to whether construction defect claims qualify for coverage under general liability policies, but nevertheless granted summary judgment in Westfield’s favor.  The matter was appealed to the Sixth Circuit, which certified the question to the Ohio Supreme Court.

Citing to the Ohio Appellate Court decision in Heile v. Herrmann, 736 N.E.2d 566 (1st Dist.1999), as well as insurance treatises and case law from other states, the Ohio Supreme Court agreed with the general proposition that general liability policies are “not intended to protect business owners against every risk of operating a business,” nor are they “intended to insure the risks of an insured causing damage to the insured's own work.”  The court nevertheless stated that these general principles did not end the inquiry, but instead, the court was required to determine whether “Custom's alleged defective construction of and workmanship on the steel grain bin constitute ‘property damage’ caused by an ‘occurrence.’”

The court began its analysis with an overview of what constitutes an “occurrence,” defined by the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  It noted that the term “accident” was not defined by the Westfield policy, but that the term has an inherent “fortuity principle,” and thus is generally defined to mean “unexpected as well as unintended.”  Relying on the concept of fortuity, as well the decisions by lower Ohio courts and by the Arkansas Supreme Court in Essex Ins. Co. v. Holder, 37261 S.W.3d 456 (2008), the court concluded that faulty workmanship is not an occurrence for the purpose of a general liability policy, explaining:

… claims for faulty workmanship, such as the one in the present case, are not fortuitous in the context of a CGL policy like the one here. In keeping with the spirit of fortuity that is fundamental to insurance coverage, we hold that the CGL policy does not provide coverage to Custom for its alleged defective construction of and workmanship on the steel grain bin. Our holding is consistent with the majority of Ohio courts that have denied coverage for this type of claim. The majority view is that claims of defective construction or workmanship are not claims for "property damage" caused by an "occurrence" under a CGL policy.

In light of its holding on this issue, the Ohio Supreme Court did not need to reach the second certified question concerning the application of the Westfield policy’s contractual liability exclusion.

Florida Court Allows Extrinsic Facts for Determining Duty to Defend

In its recent decision in Composite Structures, Inc. v. Cont'l Ins. Co., 2012 U.S. Dist. LEXIS 147320 (M.D. Fla. Oct. 12, 2012), the United States District Court for the Middle District of Florida considered if and when an insurer can rely on facts extrinsic to a complaint for the purpose of determining a duty to defend.

The insured, Marlow Marine Sales was named as a defendant in an underlying suit brought by two individuals claiming bodily injuries as a result of exposure to carbon monoxide fumes while working aboard a yacht designed, manufactured and sold by Marlow.  Marlow subsequently tendered the matter to its general liability insurer, Continental.  One month after suit was filed, during which time Continental was still in the process of investigating Marlow’s right to coverage, plaintiffs in the underlying suit filed a memorandum of law specifying the time period during which they were exposed to the fumes.  Continental learned of this filing and relied on the information contained therein to deny coverage based on a pollution exclusion that only applied if the insured did not learn of the occurrence within seventy-two (72) hours of its commencement.   Continental relied on the information contained in the subsequently filed memorandum, which was not otherwise in the complaint, to conclude that this exception to the exclusion was inapplicable.

Marlow agreed that it did not learn of the occurrence within the seventy-two hour window.  It nevertheless contended that it was entitled to a defense since Continental only learned of the facts relevant to the coverage defense from a pleading filed subsequent to the complaint.  Marlow argued that Continental could not rely on such extrinsic facts in determining its defense obligation, but instead its duty to defend could only be determined by the complaint, which contained no facts one way or the other relevant to the application of the exception to the exclusion.  In light of this silence, Marlow contended that Continental was required to have provided a defense.

The court agreed that under Florida law, consideration of the duty to defend is typically restricted to the allegations in the complaint.  Citing to the Florida Supreme Court decision in Higgins v. State Farm Fire & Cas. Co., 894 So. 2d 5(Fla. 2004), however, the court acknowledged an exception to this rule where the insurer’s defense to coverage “is based on factual issues that would not normally be alleged in the underlying complaint.”  While the underlying suit against Marlow contained allegations relevant to the pollution exclusion, it did not contain allegations bearing on the issue of when Marlow became aware of the alleged occurrence.  The court nevertheless went on to consider whether these facts should have been asserted in the underlying suit.  The court answered this question in the negative, explaining that such facts were irrelevant in a products liability suit alleging causes of action for negligence and strict liability:

Neither cause of action requires a plaintiff to allege the specific date on which he informed the defendant of his injuries or the specific date on which the defendant informed its insurer. Indeed, before filing suit, an injured plaintiff is unlikely to be privy to information regarding the date on which a defendant informs its insurer of the incident. Those facts "would not normally be alleged in the underlying complaint," and therefore, the duty to defend can only be determined by examining outside evidence.

The court agreed that these facts extrinsic to the underlying complaint conclusively established that Marlow was not aware of the alleged occurrence within the seventy-two hour period necessary to trigger the policy’s exception to the pollution exclusion.   Thus, underlying the circumstances, the court held that “Continental was well within its rights to deny coverage.”

Pennsylvania Federal Court Addresses Reasonable Expectations Doctrine

In its recent decision in Austin James Associates, Inc. v. American International Specialty Lines Insurance Co., 2012 U.S. Dist. LEXIS 144449 (M.D. Penn. Oct. 5, 2012), the United States District Court for the Middle District of Pennsylvania had occasion to consider the application of the reasonable expectations doctrine to a commercial insured.

Austin James was insured under a remediation cost cap insurance policy issued by American International Specialty Lines Insurance Co (“AISLIC”).  Austin James paid its premium to AISLIC in February 2004 with the expectation that the policy would become effective on March 1, 2004 and would have a five (5) year duration.  For reasons not reflected in the opinion, AISLIC changed both the inception date and the policy period at the time of policy issuance.  Years later, when Austin James sought reimbursement for remediation costs under the policy, it first learned that the policy reflected an inception date of May 20, 2004 instead of March 1, 2004, and that the policy period was four years and four months instead of five years.  AISLIC denied Austin James’ demand for reimbursement under the policy on the basis that the policy had already expired.  Austin James subsequently brought a declaratory judgment action against AISLIC alleging breach of contract. 

AISLIC moved to dismiss Austin James’ suit on two grounds, the first being that Austin James’ suit was barred based on its own failure to have read the policy at the time it was issued.  AISLIC argued that under Pennsylvania law, a breach of contract claim cannot be sustained on a contention that a party to the contract did not read or understand the contract.  Austin James countered that based Pennsylvania’s “reasonable expectations” doctrine, applicable in the insurance context, it had no duty to have read the policy, and that its understanding of the policy period controlled.  The court agreed, explaining:

Under [the reasonable expectations] doctrine, an insurance policy exclusion will not apply where the insurer or agent has created in the insured a reasonable expectation of coverage.  Here, plaintiff prepaid for insurance for a particular policy period.  The defendant changed that period unilaterally.  Defendant provided a copy of the policy to plaintiff but did not provide separate notice of this change.  Therefore, plaintiff reasonably expected the policy to accurately reflect the agreed-upon starting date and term length. 

In reaching its conclusion, the court considered and rejected AISLIC’s argument that Pennsylvania’s “reasonable expectations” doctrine applies only in the context of individual policyholders, and not to commercial enterprises – an issue that remains unresolved under Pennsylvania law.  The court noted that in Reliance Ins. Co. v. Moessner, 121 F.3d 895 (3d Cir. 1997), the Third Circuit, applying Pennsylvania law predicted that the doctrine would apply even when the insured is a “sophisticated purchaser” of insurance, i.e., a large commercial enterprise.  AISLIC argued that in Madison Construction Co. v. Harleysville Mutual Ins., 735 A.2d 100 (Pa. 1999), Pennsylvania’s Supreme Court refused to extend the doctrine to commercial enterprises. Observing that the issue was not fully briefed in Madison Construction and that the Supreme Court’s consideration of the issue was limited to a brief mention in a footnote, the Middle District concluded that Madison Construction did not overrule Moessner, noting:

This footnote, which merely explains that the court declined to address an argument, is not the equivalent of the court holding that commercial entities are not protected by the reasonable expectations doctrine.

The Middle District further noted that the Third Circuit continued to apply the reasonable expectations doctrine to commercial insureds even after Madison Construction, as reflected in its decision in UPMC Health System v. Metropolitan Life Ins. Co., 391 F.3d 497 (3d Cir. 2004).   In light of the Third Circuit decisions, and the lack of any clear authority to the contrary from Pennsylvania’s Supreme Court, the Middle District of Pennsylvania rejected AISLIC’s argument that the reasonable expectations doctrine cannot apply to commercial entities. 

AISLIC argued as a secondary basis for dismissal that Austin James’ suit was barred by Pennsylvania’s four-year statute of limitation.  Specifically, AISLIC contended that the statute began running sometime in 2004 when the policy was issued.  The court rejected this, noting that on a breach of contract claim, the statute of limitations began running from the time of AISLIC’s denial of coverage in 2009, not in 2004 when the policy was issued.

Missouri Federal Court Affirms Denial of Coverage Based on Pollution Exclusion

In its recent decision in Doe Run Resources Corp. v. Lexington Ins. Co., 2012 U.S. Dist. LEXIS 140981 (E.D. Mo. Sept. 28, 2012), the United States District Court for the Eastern District of Missouri had occasion to consider whether the total pollution exclusion is ambiguous for failure to define the term “pollutants,” or for failure to include this term to include specific constituents.

The insured, Doe Run Resources Corporation, was named as a defendant in two lawsuits resulting from its mining, milling and smelting operations.  Specifically, both suits alleged bodily injuries resulting from Doe Run’s release of lead, cadmium and other toxic substances from chat and tailing piles located at two different facilities in Missouri.  Doe Run sought coverage for these suits from its general liability carrier, Lexington, which insured Doe Run under successive policies dating back to 1995.  Lexington denied coverage on the basis that the suits did not allege “bodily injury” or “property damage” arising out of an occurrence, as well as on the basis of the application of its policies’ pollution exclusion. 

For the policies issued from 1995 through 2003, the Lexington policies contained a pollution exclusion applicable to:

… bodily injury or property damage (including the loss of use thereof) caused by, contributed to or arising out of the actual or threatened discharge, dispersal, release, or escape of smoke, vapors, soot, fumes, acids, alklis, toxic chemicals, liquids or gases, waste materials or other irritants, pollutants or contaminants into or upon the land, the atmosphere or any course of body of water, whether above or below ground.

Notably, these policies did not define the term “pollutants.”  For the policies issued beginning in 2004, the pollution exclusion barred coverage for:

… "bodily injury" or "property damage" which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.

These policies define “pollutants” in relevant part as “any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

After concluding that Missouri law governed the Lexington policies, the court considered Doe Run’s arguments on summary judgment as to why the pollution exclusions were inapplicable.  Doe Run argued that the policies did not specifically exclude lead or other commercial products or commercial materials, and that the Lexington policies did not define “pollutants” to include lead and the other constituents at issue.

The court began its decision by noting that the language policies’ pollution exclusions were clear and unambiguous, even the pre-2004 exclusions that did not specifically define “pollutants.”  Relying on a standard dictionary definition, the court agreed that that the term “pollutants” is commonly understood as something that pollutes or contaminates the environment, especially with man-made waste.  Finding that the underlying suits alleged releases of pollutants from Doe Run’s facilities, thereby contaminating the environment, the court agreed that the suits “describe pollutants, as that term is used in its typical and ordinary sense.” 

Doe Run nevertheless argued that the decision in Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., 997 S.W. 510 (Mo. Ct. App. 1999) required a different outcome.  Hocker involved the application of the pollution exclusion to an insured gas company’s accidental release of 2,000 gallons of gasoline into the ground.  The Missouri Court of Appeals held the exclusion was ambiguous as to whether gasoline was a “pollutant” for the purpose of a pollution exclusion, since in the eyes of that particular insured, gasoline was not a pollutant but instead the only product it sold.  The Doe Run court nevertheless found Hocker to be distinguishable since it involved “the onetime release of Hocker Oil’s finished product, gasoline, into the ground.”  By contrast, the underlying suits filed against Doe Run alleged negligent and careless releases of lead, cadmium and other toxic materials into the environment over a number of years.  The court found this to be a critical distinction:

That is, unlike Hocker's isolated accident, the [underlying lawsuits] allege the continual and systematic release of pollutants into the environment. Moreover, despite Doe Run's pleas to the contrary, the products involved here are not finished products. Even if some of these raw materials are marketable (as Doe Run claims), their continued release of these contaminants into the community constitutes pollution. In sum, "the Court believes that contamination caused by a gasoline leak resulting from a failed plug is quite different from contamination resulting from lead concentrate abandoned on a landowner's property."

The court also distinguished a Missouri trial court decision relying on Hocker in which Doe Run was a party.  That decision concluded that the pollution exclusion did not clearly apply to claims involving releases of lead, arsenic, cadmium or sulfur dioxide since the policies at issue (not issued by Lexington) did not define “pollutants” to include those materials.  The Eastern District of Missouri found the reasoning of the state trial court’s decision to be flawed, concluding that the mere fact that lead or other constituents were not included in the definitions of pollutants did not “undermine” the application of the exclusion or otherwise render its application ambiguous.