Wisconsin Court Holds Gas Line Explosion Not Covered Under CPL Policy

In its recent decision in Acuity v. Chartis Specialty Ins. Co., 2014 Wisc. App. LEXIS 201 (Wisc. App. Mar. 12, 2014), the Court of Appeals for Wisconsin, District Two, had occasion to consider whether damages resulting from a gas line explosion triggered coverage under a contractors pollution liability policy.

AIG and Acuity insurance both insured Dorner, Inc.: AIG through a contractors pollution liability policy (“CPL”) and Acuity through a commercial general liability policy (“CGL”). While performing excavation work, a Dorner employee disturbed an underground natural gas line, which in turn caused an explosion.  The explosion resulted in four underlying suits for bodily injury and property damage.  Each of the suits alleged that Dorner’s work caused gas to leak from the line and ignite, and that the explosion and ensuing fire resulted in plaintiffs’ injuries and property damage.

While Acuity agreed that the underlying suits triggered a duty to defend under the CGL policy it issued, AIG took the position that the CPL policy was not triggered since the underlying suits did not alleged bodily injury or property damage resulting from a “pollution condition,” a term defined as:

… the discharge, dispersal, release or escape of any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, medical waste and waste materials into or upon land, or any structure on land … provided such conditions are not naturally present in the environment in the concentration or amounts discovered. Pollution Conditions shall include Microbial Matter in any structure on land and the atmosphere within that structure.

On motion for summary judgment, the trial court ruled against AIG, holding that the release of natural gas was a pollution condition since people do not want gas “loose in the environment,” and as such, a gas leak would be considered a pollutant.

On appeal, the Wisconsin appellate court reversed the lower court’s holding, concluding that the bodily injury and property damage alleged did not result from contact with the discharged natural gas, but instead resulted solely from the explosion and fire.  The court reasoned that regardless of the fact that Dorner’s work resulted in a release of natural gas, it was the nature of the claim (harms caused by an explosion and fire) that determined AIG’s coverage obligation, not the fact that the explosion would not have happened but for the gas release.  As such, the court concluded that “[w]e do not deem it fairly debatable that any of the complaints allege even one theory to trigger [AIG’s] duty to defend.”



Topics:  Contractors, Discharge of Pollutants, Environmental Liability, Explosions, Natural Gas, Oil & Gas

Published In: Civil Procedure Updates, General Business Updates, Energy & Utilities Updates, Insurance Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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