5th Circuit Finds Travelers Policy Excluded Waste Dumping by Mississippi Firm

Courts have found that policy exclusions often fail due to ambiguous wording. In the case of a Mississippi company that allegedly dumped corrosive wastewater into sewer systems, though, Travelers Casualty and Surety Company’s pollution exclusion seems to have nailed it, a federal appeals court said this week.

“An insurance policy’s pollution exclusion deters deliberate or negligent behavior that leads to environmental harm,” a panel of the U.S. 5^th Circuit Court of Appeals wrote in its March 18 decision in Gold Coast Commodities vs. Travelers. “When we hold that a pollution exclusion excludes the insured from coverage, we protect the insurer’s right to disincentivize corporations from engaging in bad faith actions with a known environmental impact.”

The court upheld a lower court ruling that found that Travelers had no duty to defend Gold Coast, a firm that turned used cooking oil and vegetable by-products into animal feed ingredients. The policy clearly excluded the deliberate and unauthorized discharge of wastewater into municipal sewer systems, the courts said.

Travelers “will not be liable for loss for any claim based upon or arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of any pollutant,” the policy exclusion reads.

The exclusion went on to broadly define a pollutant as any solid, liquid gas or thermal irritant or contaminant.

“Therefore, the policy is not ambiguous,” the 5^th Circuit judges noted. “Because the policy is not ambiguous, the claims are excluded from coverage. It, therefore, follows that Gold Coast did not sufficiently plead facts that trigger Traveler’s duty to defend.”

Gold Coast had relied on a 2020 decision by the Mississippi Supreme Court in Omega Protein vs. Evanston Insurance Co. That opinion found that similar exclusion wording was, in fact, ambiguous. The Evanston exclusion did not clearly define what a pollutant is, the 5^th Circuit said. But the Travelers’ policy did.

It’s the second appeals court ruling in the Gold Coast matter in less than a year.

In May 2023, the 5^th Circuit found that Gold Coast’s separate pollution liability policy, with Crum & Forster Specialty Insurance, also carried a clearly worded exclusion. The pollution liability policy covered only accidents, not the intentional, surreptitious, and repeated dumping of the oily mess alleged by the state and local authorities, the court found.

The highly publicized dumping case began in 2017. The city of Brandon, an affluent suburb of Jackson, told authorities that it suspected that Gold Coast was secretly discharging the low-pH, untreated wastewater into public sewers, leading to extensive damage to the sewerage system. The DEQ and the city began investigating.

Brandon crews collected samples of sewage downstream from the feed plant and found that the water was much hotter and more acidic – with high levels of arsenic, lead, cadmium, chromium and mercury.

The city filed suit, charging that the discharge from Gold Coast was so corrosive that the city had to spend significant funds repairing its sewer system.

In August 2022, the owner of Gold Coast pleaded guilty to illegally dumping industrial waste into the Jackson sewer system. A month later, the president and the plant manager were indicted on similar charges, according to news reports and the U.S. attorney’s office. An employee at an industrial services firm also pleaded guilty to assisting Gold Coast in disposing of the toxic waste.

Monday’s 5^th Circuit opinion was penned by Judge James Graves. No judges dissented.

Topics Mississippi