“Pollution exclusion” clause in insurance policy at issue in case involving livestock damaged by contaminated feed

A rather common clause in insurance policies is the so-called “pollution exclusion” clause. Under such a clause, the insurance company is not required to pay for damages the insured sustains due to pollution-related damages. Originally, such clauses applied only to damages due to environmental pollution in industrial settings, but more recently they have been held applicable in settings not necessarily involving industrial activities. That was the situation presented in this case.

The plaintiff operated a cattle ranch. The defendant delivered a load of feed pellets to the ranch, but the pellets were mixed with scrap aluminum. The delivery truck had been used to haul recycled scrap metal to an aluminum supply company and had not been cleaned out properly before the feed pellets were loaded. The cattle ate the contaminated feed and began to develop traumatic reticuloperitonitis (hardware disease). As a result, the plaintiff was no longer able to sell the cattle as purebred premium Gelbvieh-Angus cattle without first providing notice to buyers (under Kansas law, there is no implied warranty in livestock sales that the livestock are merchantable unless the seller knew the animals were sick at the time at the sale). As a result, the market value of the cattle declined significantly.

The defendant’s truck was covered by a liability insurance policy as required by Kansas law. The policy contained a pollution-exclusion clause that excluded coverage for bodily injury or property damage arising from the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants. The policy defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. The plaintiff claimed that the exclusionary clause did not apply, but the insurance company moved for summary judgment on the basis that the damages caused by the contaminated feed were excluded from coverage under the policy.

The court first determined that the definition of “pollutant” under the policy was clear and unambiguous, and included any irritating or contaminating substance in any form. The court also held that the pollution exclusion clause was likewise unambiguous and refused to limit its application to environmental pollution (although the court did not explain its rationale on the latter point, stating merely that the plain meaning of unambiguous terms in an insurance policy must be applied strictly). Because the clause applied, the issue became whether the scrap metal constituted “waste” that was “discharged” within the scope of the clause. The defendant argued that the clause didn’t apply because scrap metal did not fit within the policy definition of “waste,” and the plaintiff argued that the clause didn’t apply because scrap metal was not a “pollutant.” The insurance company argued that the exclusionary language was worded broadly to define any solid irritant. Since the claim was that the plaintiff’s cattle were damaged by a solid that was “released” into the cattle feed, the insurance company argued that the clause applied to exclude coverage.

The court held the pollution exclusion clause applicable to bar recovery. The scrap metal was a pollutant, the court reasoned, because it was a solid contaminant. It was a contaminant because once it became mixed with the feed pellets, it became harmful. So, the “pollution” occurred when the scrap metal was dispersed into the feed pellets. That event, the court ruled, was covered by the pollution exclusion clause. As a result, summary judgment was awarded to the insurance company. Judd Ranch, Inc. v. Glaser Trucking Service, Inc., et al., No. 06-1245-WEB, 2007 U.S. Dist. Ct. LEXIS 37628 (D. Kan. May 22, 2007).