Charley Barber v. Arch Ins. Co
20-6307
| 6th Cir. | Jul 7, 2021Background
- Armstrong Coal employees were indicted for conspiring to submit falsified coal-dust samples to MSHA; criminal trial pending.
- Employees sought defense costs under Armstrong’s directors & officers (D&O) liability policy issued by Arch Insurance.
- The policy broadly covered defense costs for criminal proceedings premised on a "Wrongful Act" by an Insured Person.
- Arch denied coverage based on a pollution exclusion that barred claims "arising from, based upon, or attributable to" (a) discharge/release of "Pollutants" or (b) any "direction, request or voluntary decision to test for, abate, monitor" Pollutants.
- Employees argued coal dust is not a "pollutant" under the policy and that the criminal prosecution did not "arise from" MSHA monitoring/testing obligations.
- The district court granted summary judgment for Arch; Sixth Circuit affirmed, holding the exclusion barred coverage and thus defeated related bad-faith claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether coal dust is a "Pollutant" under the policy | Coal dust in a mine (where it belongs) is not a pollutant; policy language should be read contextually | Policy defines "Pollutant" to include contaminants or irritants; coal dust is a contaminant/irritant and is regulated | Coal dust is a "contaminant or irritant" under the policy and thus a Pollutant for these claims |
| Whether the criminal charges "arise from" excluded monitoring/testing activity | Prosecution was caused by the conspiracy to commit fraud, not by MSHA testing/monitoring obligations | The prosecution has a causal connection to MSHA's duty to test/monitor; exclusion covers claims arising from a direction to test or monitor Pollutants | The charges "arise from" the regulatory direction to test/monitor coal dust (some causal connection suffices) |
| Whether Arch had a duty to defend or indemnify despite exclusion | Even if indemnity is excluded, Arch must at least defend | The pollution exclusion eliminates both defense and indemnity obligations for these claims | No duty to defend or indemnify because the exclusion precludes coverage |
| Whether employees may pursue a bad-faith denial claim absent coverage obligation | Bad-faith claim can proceed regardless of coverage outcome | Kentucky law requires an underlying contractual obligation to provide coverage before bad-faith liability | Bad-faith claim fails as a matter of law without a duty to provide coverage |
Key Cases Cited
- Kemper Nat. Ins. Cos. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869 (Ky. 2002) (insurance-contract interpretation is a question of law)
- Ky. Ass’n of Ctys. All Lines Fund Tr. v. McClendon, 157 S.W.3d 626 (Ky. 2005) (unambiguous policy terms enforceable)
- Motorists Mut. Ins. Co. v. RSJ, Inc., 926 S.W.2d 679 (Ky. Ct. App. 1996) (case-by-case approach to pollution exclusions; warns against literal overbreadth)
- Certain Underwriters at Lloyd’s, London v. Abundance Coal, Inc., 352 S.W.3d 594 (Ky. Ct. App. 2011) (interpretive framework for coal-dust pollution exclusions)
- U.S. Fidelity & Guar. Co. v. Star Fire Coals, Inc., 856 F.2d 31 (6th Cir. 1988) (coal dust falls within pollution exclusion)
- Certain Underwriters at Lloyd’s of London v. NFC Mining, Inc., 427 F. App’x 404 (6th Cir. 2011) (coal dust as a solid irritant/contaminant)
- Travelers Indem. Co. v. Armstrong, 565 S.W.3d 550 (Ky. 2018) (bad-faith claim requires contractual duty to provide coverage)