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July 25, 2024
Unambiguous Pollution Exclusion Enforced

Gasoline Leaking into a Natural Spring is Excluded Pollution
Post 4842

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In Erie Insurance Exchange v. SHRI BRAMANI, LLC; ERIC MOBERLY; KAP LEASING, INC.; KEVIN MOBERLY; MOBERLY BROTHERS PROPERTIES, LLC; AND PRADIPKUMAR PATEL, No. 2023-CA-0169-MR, Court of Appeals of Kentucky (July 19, 2024) the Court of Appeals was asked to reverse a trial court that the insurer’s pollution exclusion did not exclude coverage for the negligent leakage of gasoline from one of the insured’s underground fuel storage tanks onto the neighboring real property owned by Appellees.

BACKGROUND

The Policy

Erie issued a commercial general liability policy of insurance which covered the premises and the operation of the convenience store and gas station on Lane Allen Road. The policy was in force until June 12, 2020. The policy generally provided coverage for legal liability to third parties arising out of bodily injury, property damage, or personal and advertising injury. As with most policies of insurance, the policy contains several exclusionary clauses including an exclusion of coverage for injuries or damages caused by “pollution.”

The Gas Leak

On or about October 17, 2019, the Kentucky Division of Waste Management (“KDWM”) received a telephonic complaint of petroleum odors around the Lane Allen Food Mart. A KDWM official was sent to investigate and noted what appeared to be petroleum leeching through a groundwater spring. Further investigation and testing indicated that the petroleum was coming from one of the Lane Allen Food Mart’s underground petroleum storage tanks.

Lane Allen Food Mart entered into an Agreed Order with the Energy and Environment Cabinet admitting that it had violated Kentucky Revised Statutes (“KRS”) Chapter 224, and the statute’s accompanying regulations, as related to its underground petroleum storage tanks. Pursuant to the Agreed Order, Lane Allen Food Mart consented to an assessed penalty of ten thousand dollars for the agreed-upon violations.

Post-Leak Events

Following discovery of the fuel leak, Moberly Brothers made a claim against Lane Allen Food Mart. Moberly Brothers alleged that the fuel leak caused it to suffer economic harm as a result of widespread, permanent environmental contamination. Specifically, Moberly Brothers asserted that the leaked fuel entered and contaminated a natural water spring located on its property, which rendered the property unfit for the bottled water facility that was planned for the property. Erie denied the claim based on the pollution exclusion contained in the policy. Erie agreed to defend the claim against the Lane Allen Food Mart under a reservation of rights. Subsequently, Erie filed a separate action against its insureds and Moberly Brothers.

ANALYSIS

Kentucky Courts have always strongly adhered to a policy of protecting the reasonable expectations of policyholders. Although insurance carriers have the right to impose reasonable limitations on their coverage, the question then becomes the reasonableness of the condition as a limitation on public policy as opposed to one of strict contract considerations between private parties where no public interest is involved.

Most consumers would recognize that gasoline is a product that becomes a pollutant when it leaks into the ground and contaminates soil and water. Even a valuable and useful product like gasoline can become a pollutant when it contaminates a natural resource.

The focus of the inquiry under the absolute pollution exclusion is not on the nature of the substance alone, but on the substance in relation to the property damage or bodily injury.

Nature of the Alleged Damage.

Where the purported pollutant results in “contamination, negative health or environmental effects,” the exclusion is enforceable. Moberly Brothers alleges significant environmental damage to its real property due to the gasoline that leaked from the Lane Allen Food Mart’s underground storage tank. Moberly Brothers alleged in its complaint that the petroleum gasoline damaged and contaminated its property and seeks damages to restore and recover the use and value of the property. This is precisely the type of pollution-related damage that falls within the scope of the exclusion.

Gasoline is clearly a pollutant when it leaks from an underground storage tank and enters a neighbor’s land and contaminates the water and soil thereon. Because the pollution-exclusion clause is unambiguous, the property damages suffered by Moberly Brothers are not covered by Erie’s policy of insurance, and the trial court therefore erred in entering a judgment against Erie. The judgment was reversed and remanded for entry of a declaratory judgment in Erie’s favor.

ZALMA OPINION

No insurance policy covers every potential risk of loss. Almost every liability policy has a pollution exclusion. Since gasoline, escaping into the land, is obviously a pollutant and the insured admitted to the pollution, the exclusion applied and the insurer neither owed defense or indemnity to the insureds.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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00:08:09
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14 hours ago
Ambiguity in Insurance Contract Resolved by Jury

Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105

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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.

In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.

BACKGROUND

Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....

00:07:02
June 23, 2025
The Clear Language Of The Insurance Contract Controls

Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104

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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy

In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.

The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS

Parties Involved:

CAEA is insured by Associated Industries Insurance Company, Inc. ...

00:08:22
June 20, 2025
Four Corners of Suit Allows Refusal to Defend

Exclusion Establishes that There is No Duty to Defend Off Site Injuries

Post 5103

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Attack by Vicious Dog Excluded

In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)

Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that

1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.

Presently before the Court are two ...

00:08:29
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

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