Here is a claim recently reported on the Big I’s Virtual University (VU):

A plumber insured under the current ISO CGL policy was hired to unclog a sewer line at a customer’s home. He accidentally damaged the line, allowing sewage to collect in the house. His CGL insurer denied the claim on the basis that the toilet and sewer lines constituted a “waste facility” subject to exclusion 2.f.(1)(b) in the ISO CGL policy:

  1. Exclusions

This insurance does not apply to:

  1. Pollution

(1)  “Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants”:

(b)  At or from any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste;

The state insurance department was contacted and allegedly advised that the agent should not have used a coverage form with this coverage deficiency, but apparently made no determination of whether the insurer’s interpretation was correct. To make a long story short, the insured did not proceed with litigation and went out of business.

So, is this claim denial reasonable? Based solely on the information provided, the denial appears to be ludicrous. The premises was not used “FOR the handling, storage, disposal, processing or treatment of waste.” This was not the function nor purpose of the premises. There is no “handling” or “storage” of waste on the premises. There is no “disposal” or “processing” or “treatment” of waste on the premises. If this exclusion applied in the context of this claim, EVERY property in America with a toilet connected to a sewer or septic line would be a waste treatment site.

While many, if not most, courts have found that sewage IS a “pollutant” (there’s a VU article about this if you have access as a Big I member), that doesn’t mean that the resulting damage is excluded.

This is the policy provision (exclusion 2.f.(1)(d) that applies to this claim as described [emphasis added]:

(d)  At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured’s behalf are performing operations if the “pollutants” are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor.

This is an operations claim, not a premises claim and the exclusion applies only if the insured brought the pollutant onto the premises. The insured might want to consider reopening this claim.

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Bill Wilson

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One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information