Court Construes Language in Insurance Policy in Case Involving Death of Hogs

In recent years, in Iowa and elsewhere, courts have been faced with the issue of whether a general farm liability insurance policy containing a “pollution exclusion” clause excludes coverage for death of animals or humans caused by the release of carbon monoxide fumes inside a hog confinement facility.  To date, the majority of courts have said that carbon monoxide is a pollutant covered by such an exclusionary clause.  

Here, the plaintiff entered into a contract feeding agreement with a hog supplier. Though the hog building was equipped with a ventilation system to allow manure gases to escape when the pits were pumped, approximately 808 hogs were killed when the ventilation system malfunctioned. The plaintiff properly notified its liability insurance provider (Farm Bureau) of the loss. Farm Bureau denied coverage.  When the hog supplier sued the plaintiff to recover for the dead hogs, the plaintiff sued Farm Bureau on the coverage issue seeking to get the court to order the insurer to defend them under the policy and indemnify them for the loss. 

The trial court examined the policy and held that carbon monoxide poisoning was a “pollutant” within the scope of the pollution exclusion clause.  Farm Bureau had also claimed that even if the pollution exclusion was held not to apply, the “business pursuits” clause contained in the policy would have barred coverage.  But that point was moot once the trial court determined that the pollution exclusion clause applied.   

An appeal, the court examined the “business pursuits” exclusion and did not address the applicability of the pollution exclusion clause.  Farm Bureau argued that since the custom hog farming operation grossed more than $3,000 annually, the operation was a commercial business pursuit and not a farming enterprise.  That position was based on language in the policy that said a “business” does not include “custom farming, including garden plowing, performed by an insured where the gross annual receipts for all such activities do not exceed $3,000” and where “custom farming” was defined as “any farming operation performed by you for others for a charge under any contract or agreement, written or oral.”  The policy defined “farming” as “the process of investment, management or labor to produce agricultural products.”   Based on that policy language, the appellate court agreed that Farm Bureau was not obligated to defend and indemnify the plaintiff. McNeilus Hog Farms v. Farm Bureau Mut. Ins. Co., No. 9-1053/09-0699 (Iowa Ct. App., Feb. 24, 2010).