A federal appeals court on Wednesday upheld a pollution exclusion in a Liberty Mutual Insurance Co. applies in protracted litigation even if it involves an oil spill of unknown origin.
In January 2007, Lake Charles, Louisiana-based Central Crude Inc., an oil and natural gas company, discovered a crude oil leak on its property and a nearby area owned by Chevron Corp. in Paradis, Louisiana, according to the judgment of the 5th US Circuit Court of Appeals in New Orleans i Central Crude Inc. v. Liberty Mutual Insurance Co . et al.
Central Crude paid about $1 million to a contractor to perform cleanup, but as of 2019 the source of the leak, which may have been ongoing, remained unclear, without determining whether it occurred from Central Crude̵7;s pipeline, Chevron’s wells, or from oil seeping from the ground, according to the verdict.
Central Crude had a commercial general liability policy with Liberty Mutual that included a pollution exclusion for remediation or removal of pollution.
While the insurer initially agreed to provide limited coverage, it ultimately informed Central Crude in 2007 that there was no coverage for the claim.
Among other things, Central Crude was sued in state court in 2008 for the spill. The company sued the insurer in January 2017 seeking defense and indemnification, including fees and expenses.
The U.S. District Court in Lake Charles ruled in Liberty Mutual’s favor and was affirmed by a three-judge panel of the Court of Appeals.
“Central Crude argues that the total pollution exclusion applies only if the insured is found responsible for the release or release of the pollution,” the appellate ruling said.
However, neither the CGL policy, nor an earlier decision, “requires identification of the party responsible for the oil spill in order to determine whether the total pollution exclusion applies here,” it said, as it affirmed the lower court, ruling that Liberty Mutual’s policy “unequivocally excludes coverage .”
Attorneys in the case had no comment or did not respond to a request for comment.
Last month, a federal appeals court upheld a lower court ruling that a natural resources company cannot reopen coverage disputes involving a pollution exclusion filed against a Traveler Corp. entity.