Indiana Federal Court Holds Insurer Does Not Have Duty To Indemnify Manufacturer’s Contamination Damages

An insurance dispute developed arising from alleged soil and groundwater contamination around an Indiana plant used to manufacture automotive component climate control system parts including radiators, condensers, hoses, compressors, accumulators, fuel injection components, and evaporators.  The aluminum from which the parts were made had to be cleaned, so the site operated 13 degreasers since the early 1960s, which primarily used Trichloroethylene (TCE) and to a lesser extent Trichloroethane (TCA).  Multiple alleged releases at the site allegedly caused a substantial TCE groundwater plume and the company incurred millions of dollars in damages as a result of the Indiana Department of Environmental Management’s demands to remediate the site and the surrounding properties.

The company sought indemnification under two umbrella insurance policies, but the U.S. District Court for the Southern District of Indiana decided earlier this week that the insurer did not have a duty to indemnify the company for the damages it has sustained as a result of the contamination.  Specifically, the court found that the policy’s Pollution Exclusion applied because the damages arose from claims for bodily injury and property damage caused by the pollution releases of the facility or as a result of government demands to decontaminate the site.  Part of the policy excluded coverage for “Any loss, cost, or expense arising out of any governmental direction or request that … the Insured … monitor, clean-up, remove, contain, treat, detoxify, neutralize or assess the effects of pollutants.”  The parties had previously agreed that TCE met the policy’s definition of a “pollutant.”