Statute of Limitations and Pollution Exclusion at Play for Toxic Tort Coverage Analysis (PA)
The Western District of Pennsylvania recently determined that a number of insurers did not owe coverage for hundreds of bodily injury claims brought forth in a toxic-tort action. In Allegheny Ludlum, LLC. v. Liberty Mutual Insurance Company, et al., the District Court granted the defendants’ motions for summary judgment after determining that the plaintiff’s claims were brought too late and that a pollution exclusion barred coverage.
The underlying lawsuit involved four employees of Arvin-Meritor, Inc. (“Arvin-Meritor”) claiming bodily injuries as a result of toxic chemical exposure against Allegheny Ludlum, LLC (“Allegheny”) . Included in the plaintiffs’ complaint, was a claim for wantonness. During the relevant time period, Allegheny was insured by Liberty Mutual Insurance Company (“Liberty”), Hartford Casualty Insurance Company (“Hartford”), Continental Casualty Company (“Continental”), and U.S. Fidelity and Guaranty Company (“U.S. Fidelity”). Ultimately, Allegheny settled the litigation in 2017 but later changed its position as to whether its insurers owed it coverage.
In 2010, Allegheny told Liberty and Hartford that they did not owe it coverage for the lawsuit. In 2013, Liberty and Hartford set a cost-share limit for Allegheny’s defense costs prior to 2009. However, three years later, Allegheny claimed it wrongly interpreted the underlying action and consequently erred in negotiating the cost-share. As a result of all four of its insurers denying coverage, Allegheny filed a declaratory judgment action alleging failure to defend and bad faith.
First, the District Court determined that Allegheny’s claims against Liberty and Hartford were time-barred. Liberty and Hartford argued that Allegheny’s declaratory judgment action was untimely under Pennsylvania’s statute of limitations of four years. Specifically, Liberty and Hartford argued that the statute of limitations began to run once coverage was disclaimed whereas Allegheny argued that the statute of limitations does not begin to run until after the termination of the underlying action.
The District Court determined that Allegheny had a sufficient factual basis to conclude that Hartford and Liberty did not intend to provide coverage when they denied coverage back in 2010. Additionally, the District Court emphasized that all parties agreed on this issue at that same time. The District Court opined that “[t]here can be no greater guarantee against the potential of a claim failing within an insurance policy than when an insured itself takes the position that coverage is not obliged.”
Additionally, the District Court determined that Allegheny’s bad faith claims were also barred under the two year statute of limitations for statutory bad faith and the four year statute of limitations for common law bad faith. The District Court determined that because the statute of limitations began to run when the insurer denied coverage, Allegheny’s bad faith counts were clearly time-barred as a matter of law.
Second, the District Court determined that Allegheny’s claims against Continental did not apply as there was no “occurrence” that took place and that claims against U.S. Fidelity were also barred due to a pollution exclusion. The U.S. Fidelity policy specifically excluded bodily injury expected or intended by the insured that would not have occurred but for exposure to pollutants. Further, the District Court stated that the toxic tort in the underlying case was the exposure of employees to welding fumes containing toxic substances. Determining that “fumes” was listed in the policy’s definition of “pollutants,” the District Court determined that the exposure to the fumes clearly fell into the pollutants exclusion. As such, the District Court determined that the language of the policy related to this exclusion was clear and unambiguous and dismissed Allegheny’s claims against U.S. Fidelity.
Overall, the main takeaway from this lawsuit is the significant barriers to coverage once an insured has conceded that no coverage is owed to it and later attempts to change its mind. Additionally, this case once against emphasizes the importance of clear and unambiguous language within an insurance policy, this time through the pollution exclusion.
Thanks to Zhanna Dubinsky for her post. Please contact Vincent F. Terrasi with any questions of comments.