Oil is a Pollutant and Buy Back to Pollution Exception Strictly Construed
Apollo Energy, LLC v. CertainUnderwriters at Lloyd's, London,2019 U.S. Dist. LEXIS 74187, 2019 WL 1938799 (M.D. La.., May 1, 2019,deGravelles, J.)
A backup of water in a container and pump from one of the plaintiff’s wells in Iberville Parish, Louisiana caused an oil spill, which cost over $100,000 to clean up. The defendant insurer issued a Commercial General Liability Insurance Policy to Apollo. The policy had a total pollution exclusion clause and a pollution buy back endorsement, but it required the insured to have notice of a covered occurrence within 30 days and to give the insurer notice within 90 days of such notice.
Apollo informed the insurer 153 days after its knowledge and clean-up of the spill. Coverage was denied for failure to comply within the 90-day notice provision of the policy. The insured argued that the Total Pollution Exception did not apply and asserted that first, oil was not a pollutant, which the court handily dismissed relying on Louisiana law.[1] Second, the insured asserted that there was no “discharge.” Again, the trial judge disagreed citing Doerr.[2] The judge found that the Total Pollution Exception clause applied.
Next, the question was whether the pollution buy back endorsement applied. The answer was based on the decision In re Matter of Complaint of Settoon Towing, L.L.C.[3] The trial court found that Settoon Towing factors, namely: “(1) the strong language in the pollution exclusion, (2) the notice provision of the buyback, and (3) the vessel owner's status as a sophisticated user”[4] required dismissal of the complaint as the insured failed to give timely notice. Under Settoon Towing and Louisiana law, the insurers did not have to show prejudice for untimely notice. The notice provision "reflects the allocation of risk the parties bargained for."[5]
[1] Doerr v.Mobil Oil Corp., 763 So. 2d 611 [La. 2000]; 774So. 2d 119 [La. 2000], [opinion corrected on reh'g.]
[2] Id.
[3] 720 F.3d 268 (5th Cir. 2013).
[4] 2019 U.S. Dist. LEXIS 74187 at *30
[5] 2019 U.S. Dist. LEXIS 74187 at *32
