Pollution Claims Excluded by a Commercial Auto Policy
The auto liability section of the standard commercial auto policy contains a broad pollution exclusion. This exclusion eliminates coverage for most third-party pollution claims. For unsuspecting policyholders, the exclusion can create some unpleasant surprises. Consider the following example.
Hal owns Hal's Horticultural, a wholesaler of garden supplies. The company owns several large trucks that are used to deliver products to customers. One day, Ned, a company employee, is using one of the trucks to deliver a load of liquid weed killer to a customer. Ned driving is on a state road when a deer suddenly runs out in front of him. He swerves to avoid the deer and sideswipes a parked car. Ned then crashes the truck into a tree. Ned is unhurt but the impact has caused his load of weed killer to fly off the truck.
Several one-gallon bottles of concentrated weed killer have landed in a nearby creek. The bottles are broken and weed killer is seeping into the creek.
Soon after the accident, Hal's Horticultural receives two claims. One is from Jim, the owner of the parked car. Jim demands that Hal's Horticultural pay the cost of repairing his vehicle. The second claim is from the state pollution control board. The board contends that Hal's is responsible for polluting the creek with weed killer. It demands that Hal's clean up the creek and then test the water to ensure that the weed killer has been removed. Hal forwards the two claims to A-One Insurance, his firm's commercial auto insurer.
He's confident the claims will be covered since his policy includes liability coverage.
Hal is dismayed at the response he receives from his insurance company. A-One Insurance agrees to pay the cost of repairing Bill's car. However, it refuses to cover any of the costs to clean up the creek. The insurer contends that the weed killer is a pollutant. Moreover, the water contamination resulted from the release of pollutants being transported by one of Hal's trucks. Thus, the cost of the cleanup is excluded by the pollution exclusion.
Pollutants Being Transported by You or on Your Behalf
The pollution exclusion eliminates coverage for claims arising from a release of pollutants being transported by you or on your behalf. In the previous scenario, the creek was polluted by weed killer Hal's company was transporting on a company-owned truck. Thus, the pollution claim against the company was excluded.
Pollutants Being Loaded onto, or Unloaded from, a Covered Auto
No coverage is provided for pollutants released while they are being loaded onto or unloaded from a covered auto. For example, suppose that a Hal's Horticultural employee is delivering liquid fertilizer to a customer in a company-owned truck. The employee is pulling a carton of bottles off the truck when the carton breaks. Several bottles are smashed. Fertilizer spills out of the truck and seeps into a well on the customer's property. The customer demands that Hal's pay the cost of cleaning up the well water.
The claim is excluded because the damage arose out of the unloading of fertilizer from a covered auto.
Being Stored, Disposed of, Treated or Processed in or on a Covered Auto
The exclusion applies to pollutants being stored, disposed of, treated or processed in or on an insured vehicle. For instance, suppose that Hal's is temporarily storing liquid fertilizer in a tanker truck parked at its premises. A valve on the truck breaks and pesticide flows out of the truck. The pesticide seeps onto a neighbor's property. The neighbor demands that Hal's pay to clean up the pesticide. The damage is excluded because it arose from pollutants stored on a covered auto.
Before They Are Loaded onto a Vehicle
Also excluded are claims stemming from pollutants released before they are loaded onto an insured auto. For example, two employees of Hal's stop by a customer's loading dock to pick up bottles of insecticide. The bottles were delivered the previous week by mistake. Before the workers begin moving the insecticide, they notice that one of the bottles has rolled off a pallet and broken. Insecticide has spilled all over the customer's warehouse. The customer demands that Hal's pay the cost of cleaning up the insecticide.
This loss is excluded because it involves damage that occurred on the customer's premises. It did not arise out of the use of a covered auto.
After They Have Been Unloaded from a Vehicle
This exclusion is similar to the previous one in that it applies to losses that occur on the customer's premises. For example, two workers employed by Hal's have delivered a load of extra strength liquid weed killer to a customer. They have unloaded the bottles and stacked them on a shelf, per the customer's request. They are about to leave when several bottles suddenly tumble off the shelf and break. The customer demands that Hal's pay the cost to clean up the weed killer. Because the loss occurred after the pollutants had already been unloaded from the auto, it is excluded.
While the pollution exclusion is broad, it does not exclude all claims involving pollution. The exclusion contains some important exceptions. These give back some coverage for pollution-related claims.
Optional Coverage for Pollutants Transported by Autos
A business like Hal's that transports potentially hazardous substances may protect itself against pollution claims by purchasing an endorsement. The endorsement is called Pollution Liability - Broadened Coverage for Covered Autos.
This endorsement amends the first three parts of the pollution exclusion (described above). When the endorsement is added, these three sections apply only to liability assumed under a contract. In other words, the three exclusions do not apply unless you have signed a contract in which you have assumed responsibility for pollutants released while being transported, loaded or unloaded, stored, treated etc. on a covered auto.
For example, suppose that Hal's Horticultural has purchased pollution liability coverage under the Broadened Coverage endorsement. Will the endorsement cover the cleanup costs imposed by the state pollution board? The answer is yes, as long as Hal's hasn't agreed in a contract to assume liability for pollutants released during their transport.
Two additional points should be mentioned regarding the endorsement. First, it covers cleanup costs only if they result from an accident that also causes bodily injury or property damage covered by the policy. That is, the endorsement does not cover cleanup costs in the absence of covered bodily injury or property damage. Secondly, the endorsement has no effect on the last two sections of the pollution exclusion. It provides no coverage for claims involving pollutants released before they are loaded onto a vehicle, or after they have been unloaded.