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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Interpleader Protects All Claimants Against Life Policy and the Insurer
Who’s on First to Get Life Insurance Proceeds
Post 5184
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Interpleader Protects All Claimants Against Life Policy and the Insurer
In Metropolitan Life Insurance Company v. Selena Sanchez, et al, No. 2:24-cv-03278-TLN-CSK, United States District Court, E.D. California (September 3, 2025) the USDC applied interpleader law.
Case Overview
This case involves an interpleader action brought by the Metropolitan Life Insurance Company (Plaintiff-in-Interpleader) against Selena Sanchez and other defendants (Defendants-in-Interpleader).
Key Points
Plaintiff-in-Interpleader’s Application:
The Plaintiff-in-Interpleader...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
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In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...
APPRAISAL AWARD SETS AMOUNT OF DAMAGES RECOVERED FROM INSURER
Post 5180
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It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
Evidence Required to Prove Breach of Contract
Read the full article at https://www.linkedin.com/pulse/evidence-required-prove-breach-contract-barry-zalma-esq-cfe-rfelc, see the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.
It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
In Debbie Beaty and Jonathan Hayes v. Homeowners Of America Insurance Company, No. 01-23-00844-CV, Court of Appeals of Texas, First District (August 26, 2025) Debbie Beaty and Jonathan Hayes filed a claim under their homeowner’s insurance policy with Homeowners of ...
