While schoolchildren know that the classic “the dog ate my homework” excuse doesn’t work, insurance companies are willing to try a variation of that excuse. Ace American Insurance Company (Ace), sold a property policy (the Policy) to Exide Technologies, Inc. (Exide). Exide sought coverage under the Policy for acid damage at its former battery factory. Ace denied coverage, citing to the pollution exclusion. The only problem? The Policy contained no pollution exclusion!
Exide had procured policies from other insurers for several years prior to the inception of the Policy, all of which contained pollution exclusions. Exide instructed Marsh USA Inc. (Marsh), its broker, to procure insurance “on the same or better terms and conditions.” The resulting policy contained no pollution exclusion, and Exide sought coverage under the Policy for pollution-related losses.
Ace argued that the Policy should be reformed because the parties intended the policy to contain a pollution exclusion which was left off only by mistake. While Ace claimed Exide’s written insurance proposal had included a pollution exclusion, Ace was unable to produce an underwriting submission that contained instructions to include a pollution exclusion. The judge did not buy what Ace was selling, holding that Ace sold Exide a policy that had “better terms and conditions” than the prior policies, precisely because it didn’t contain a pollution exclusion. A policy with “better terms and conditions” was exactly what Exide had sought to purchase and just what Ace provided, so the judge held that there was no cause for reformation.
Finally, the judge rejected Ace’s remaining arguments, finding that even if other exclusions applied, the “efficient proximate cause” doctrine applied, such that coverage was owed where at least one proximate cause of loss was covered. Because the judge held that there was no pollution exclusion, the pollution of the building from the acid was considered a covered cause of loss and therefore the entire loss was covered.
While we can poke fun at the argument made by Ace in light of the positive result, without the assistance of a quality coverage counsel a different result could have occurred. The insurance professionals at Saxe Doernberger & Vita, P.C., including myself, are always here to assist clients with their coverage needs. You can reach me at firstname.lastname@example.org or by phone at 203-287-2107.