An insurer can deny coverage based on a policy’s pollution exclusion even if it didn’t address that issue in its original denial letter, a federal appeals court said Monday, affirming a lower court.
Century Communities of Georgia LLC, which owns land in Sugar Hill, Georgia, entered into a subcontract with Magnum Contracting LLC pursuant to which Magnum agreed to add Century as an additional insured on its commercial general liability policy with Selective Insurance Group entity Selective Way Insurance Co. ., based in Branchville, New Jersey, according to the ruling by the 11th US Circuit Court of Appeals in Atlanta in Century Communities of Georgia LLC v. Selective Way Insurance Co.
In August 2018, Century, based in Peachtree, Georgia, sought defense and indemnification to a lawsuit alleging that grading its property prior to implementing an erosion control program caused the runoff of water, sediment, silt, mud and other pollutants.
Selective denied coverage, and Century sued the insurer in US District Court in Atlanta.
Selective filed a motion for summary judgment, arguing, among other things, that it had no duty to defend based on its policy’s pollution exclusion. Century responded that Selective had waived its ability to assert the exclusion as a defense because it had not cited it in its coverage denial letter.
The district court ruled in Selective’s favor and was affirmed by a three-judge court panel, which said the insurer “retained the ability to rely on the pollution exclusion denying coverage,” even though it did not include it in its denial letter.
Attorneys in the case did not respond to requests for comment.