Pollution Exclusion in E&O Policy Bars Coverage

Applying Pennsylvania law, a federal court in Pennsylvania has held that a pollution exclusion in an insurance company’s E&O policy precludes coverage for a dispute between the company and its own policyholder over pollution coverage.  United Nat’l Ins. Co. v. Indian Harbor Ins. Co., 2015 WL 437630 (E.D. Pa. Feb. 2, 2015).  Wiley Rein represented the E&O carrier. 

The E&O carrier issued an insurance company E&O policy to the company.  The company was sued after denying coverage under a real estate pollution policy for costs incurred to clean up groundwater contamination.  The company tendered the pollution coverage action to the E&O carrier, which denied coverage based on an exclusion in the E&O policy for claims based on or arising out of pollution and “any dispute over the existence or absence of, or particular terms, conditions or amount of, insurance coverage” for pollution.

After the company sued the E&O carrier, the E&O carrier moved to dismiss, citing the pollution exclusion.  The court agreed with the E&O carrier, holding that the pollution exclusion was unambiguous and barred coverage for the pollution claim.

The company argued that the E&O carrier waived or was estopped from relying on the pollution exclusion because it had not issued a coverage position for some years after the claim was tendered.  The court disagreed, holding that the company had not alleged any facts showing that the E&O carrier intended to waive its coverage defenses or that the company had reasonably relied to its detriment on the absence of a coverage position.  The court also dismissed the company’s claim for reformation, finding insufficient allegations that the parties “intended” to cover pollution claims under the E&O policy.