Pollution Claim Covered by Business Auto or CGL Form?

Q

We have a question about the pollution exclusion in the business auto policy. If, during the process of delivering fuel oil at a private residence, some of the oil accidentally spilled onto the driveway, lawn, etc., would liability for this property damage be excluded? What if, under the same circumstances, property damage is done to the interior of the dwelling? For example, if the delivery driver accidentally put fuel into the wrong pipe, such as one that has been disconnected, the oil would flow freely onto the basement floor.

Also, how would the ISO commercial general liability (CGL) policy apply to this situation: the insured has completed operations coverage, but the general policy carries an absolute exclusion of pollution liability coverage. For example, imagine that the delivery truck slightly overfills a 275 gallon tank in the interior of the structure. As a result, because the tank is in poor condition, it bursts and damages the basement. This would be a completed operation because the damage did not occur until after the insured had completed his delivery and left the premises. Does the pollution exclusion still apply in this instance?

Connecticut Subscriber

A

Neither the business auto policy nor the CGL policy will cover the claim stemming from the oil spills you first described. The pollution exclusion in the business auto policy says that it will not cover claims arising out of the discharge of pollutants “that are…being…handled for movement…from the covered auto.” The exclusion makes no distinction between interior and exterior damage.

The CGL policy excludes coverage of the operation by virtue of exclusion f. This exclusion specifies that there is no coverage for claims “arising out of the…discharge…of pollutants…(d) at…any premises…on which any insured (or others working for the insured) are performing operations: (i) if the pollutants are brought on or to the premises…by such insured.”

Notice the time consideration expressed in the quoted exclusion. It applies while the insured (or others) “are performing operations.” If the operations have been completed and the dispersal of pollutants occurs sometime later (as in the scenario involving the overfilled tank) the exclusion is of no effect. There is completed operations coverage. The business auto policy, on the other hand, could not be brought into the completed operations claim by virtue of paragraph c. of the pollution exclusion. The business auto policy does not cover claims occurring “after the pollutants…are moved from the covered auto to the place where they are finally…abandoned by the insured.”

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