Pollution Exclusion and Products Liability Claim

We insure a manufacturer that makes a product used in the maritime industry on boats and barges. If this product malfunctions and a barge breaks loose and floats into an oil tanker ship causing damage to the ship and a resultant oil spill, would the standard CGL policy form CG 0001 12/04 provide coverage for the oil cleanup? It does not appear to me that the pollution exclusion would apply to this products liability claim.

New Jersey Subscriber

The CGL form is not going to cover the clean up costs. The second part of the pollution exclusion applies to clean up costs. Now, the exception to the clean up costs exclusion does not provide coverage for the clean up costs themselves. What that exception does is this: if the insured is liable for damages for PD and is covered for the property damages, the clean up costs exclusion is not going to prevent coverage for the actual PD claim.

So, in this case, if the insured is liable for any property damages, and if there is no exclusion in the policy to prevent coverage for these damages (and you are correct that the pollution exclusion, apart from the clean up costs paragraph, does not apply to the PD claim), the clean up costs exclusion won't prevent coverage for the property damage claim.

This exception to the clean up costs exclusion was put in by ISO to separate covered PD claims from clean up costs in order to make sure the clean up costs exclusion was not used as an excuse to prevent coverage for property damage claims that are covered by the policy.

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