Insurance Policies Have Limitations: Cincinnati Ins. Co. v. Roy’s Plumbing

Love Canal, in Upstate New York, is among the most famous examples of environmental pollution. For years, toxic chemicals were discarded and buried at the site. Cleanup efforts of varying magnitudes lasted for decades. Eventually, though, the area was pronounced safe and was settled for a new community. However, members of that community allege that the cleanup was not sufficient, that the environment continues to be toxic, and that they, their children, their pets, and the local biosphere have suffered terribly as a result.

In their lawsuits, Love Canal residents alleged that Roy’s Plumbing, “while working as a contractor in January 2011, negligently performed inspections and construction work at homes near the Love Canal site . . . in connection with a multiyear program of sewer refurbishment in the Love Canal area, which includes sewer replacement, root and debris removal, trenching, pipelining, manhole rehabilitation, leaky joint grouting, cross connection identification and removal, and sewer line upgrading.” Cincinnati Ins. Co. v. Roy’s Plumbing, Inc., 13-cv-1000 (W.D.NY June 10, 2016) (quoting from one of the lawsuits).

Roy’s Plumbing asked Cincinnati Insurance Company (“CIC”), which had issued to Roy’s Plumbing general liability insurance, to defend the lawsuit. CIC took the position that it had no duty to provide a defense, and the United States District Court for the Western District of New York agreed. Here’s why:

CIC’s policy had a Total Pollutant Exclusion – a provision that stated that any injury caused in whole or in part by pollutants would not be covered by the policy. Roy’s Plumbing argued that the provision did not apply because the Roy’s Plumbing hadn’t actually polluted, it argued that it just flushed out the sewers, which is standard work for a plumbing company. However, this was inconsequential because the injury was from the environmental pollution and, as such, was not covered.

Courts’ views, interpretations, and applications of insurance policy provisions vary greatly, especially regarding pollution exclusions. This case was under New York law. That law may not apply in your state. This court properly looked to the injury, as required by the policy language, another court may veer from that. Here’s a lesson, though, that we all can take away: insurance policies have limitations. Even the broadest policies still have definitions, exclusions, conditions. All of these clauses box in coverage, and that’s actually a good thing.

Insurance companies charge premiums based on what is covered in the policy being purchased. If policies offered unlimited coverage, premiums would skyrocket and the policyholder would essentially be forced to buy insurance he doesn’t need. Instead, risks are broken down into categories and policyholders can choose what to purchase and what to decline. For example, your car insurance policy does not contain coverage for a house fire. For that, you need a homeowners policy. Why not group the two together? Because many people don’t have both a house and a car, many people have just one or the other. By separating the coverages, people have the option to purchase one or both.

Turning back to Roy’s Plumbing, Roy’s Plumbing did not purchase a policy with pollution insurance coverage. Accordingly, such coverage was not available.