Injuries Caused In Oilfield Mud Tank Not Subject To Insurance Policy’s Pollution Exemption
In December 2012, an oilfield worker for a services subcontractor specializing in the cleaning of mud tanks arrived at a worksite and proceeded to clean a tank at the instruction of the general contractor. The general contractor allegedly failed to inform the worker that the tank contained large quantities of caustic materials and as a result, the worker entered the tank without the necessary safety equipment and waded in the mud, which caused significant burns and major injuries. In an attempt to treat the injuries, one coworker poured vinegar on the burns, which only exacerbated the damage. The worker brought suit against the general contractor and the owner of the worksite, among others.
The general contractor was covered by an insurance policy that included coverage for sums that the general contractor became legally obligated to pay as damages because of “bodily injury” to which the insurance applied. The insurer agreed in the policy to defend the general contractor against any lawsuit seeking “those damages.” The policy, however, excluded coverage for “bodily injury or property damages which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” The insurer contended that this Pollution Exclusion applied because the “caustic materials” in the tank were “pollutants” that were “dispersed” in the mud tank. The U.S. District Court for the Southern District of Texas rejected this argument, explaining that the worker claimed that he entered the mud tank and while inside the tank came into contact with the caustic materials (i.e., he did not allege that the caustic components of the mud was dispersed or emitted). According to the court, the insurer failed to meet its burden of proving that an exclusion to the affirmative grant of coverage applied in the case and thus had a duty to defend the general contractor.
The court, however, did find that the insurer did not owe a duty to defend the owner of the worksite as an additional insured to the same insurance policy issued to the general contractor. The policy excluded coverage to an additional insured for claims “based on liability arising from bodily injury to a person hired to work on behalf of any insured” (emphasis in original). Because the worker was hired to perform work on behalf of the general contractor (the “insured”), this exclusion applied so that no duty to defend extended to the worksite owner.
