RECYC SYSTEMS SOUTHEAST LLC v. FARMLAND MUTUAL INSURANCE COMPANY
4:17-cv-00225
| M.D. Ga. | May 16, 2018Background
- Recyc Systems Southeast, LLC stores nutrient-rich poultry processing wastewater in an open-air holding pond on leased land and applies the water as fertilizer to farmland.
- Property owners near the pond sued Recyc in Alabama state court, alleging noxious odors from the pond interfered with their use and enjoyment of their property (property damage).
- Farmland Mutual issued Recyc a commercial general liability policy that defines "pollutants" broadly (including "fumes" and "fertilizers") and contains a pollution exclusion with multiple subparts, including (1)(a) (excludes pollutants "from any premises . . . rented" to the insured) and (1)(d) (excludes pollutants from premises where the insured is performing operations).
- Recyc purchased an endorsement (Herbicide, Pesticide or Fertilizer Applicator Coverage) that carves out paragraph (1)(d) for claims arising from application of fertilizers, but the endorsement does not modify paragraph (1)(a).
- Farmland denied defense and indemnity; Recyc sued Farmland in Georgia for breach of contract, declaratory relief, and specific performance. Farmland moved for judgment on the pleadings asserting the Alabama claims are unambiguously excluded by the pollution exclusion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer has a duty to defend/indemnify for alleged odor-based property damage | Recyc contends policy covers property damage or at least ambiguity requires defense | Farmland contends pollution exclusion bars coverage because odors are "pollutants" originating from rented premises (para. 1(a)) | Court held no duty to defend or indemnify: pollution exclusion (1)(a) unambiguously applies |
| Whether the odors qualify as "pollutants" under the policy definition | Recyc implicitly disputes characterization or argues endorsement preserves coverage | Farmland argues odors are "fumes"/irritants and thus pollutants under the policy | Court held odors fall within the unambiguous definition of "pollutants" (fumes/irritants) |
| Whether the fertilizer-application endorsement resurrects coverage | Recyc argues endorsement prevents exclusion and thus Farmland must cover | Farmland argues endorsement only negates paragraph (1)(d) and does not affect paragraph (1)(a) | Court held endorsement applies only to (1)(d) and does not override (1)(a); coverage remains excluded |
| Whether the underlying complaint even arguably pleads covered loss | Recyc argues allegations could be read to trigger coverage | Farmland argues underlying complaint alleges facts squarely within pollution exclusion | Court held underlying complaint unambiguously falls within exclusion so no arguable basis for coverage |
Key Cases Cited
- Cannon v. City of W. Palm Beach, 250 F.3d 1299 (11th Cir. 2001) (judgment on the pleadings standard)
- Griffin Indus., Inc. v. Irvin, 496 F.3d 1189 (11th Cir. 2007) (attached documents to complaint govern where they contradict pleadings)
- Penn-Am. Ins. Co. v. Disabled Am. Veterans, Inc., 490 S.E.2d 374 (Ga. 1997) (distinguishing insurer's duty to defend and indemnify)
- Ga. Farm Bureau Mut. Ins. Co. v. Smith, 784 S.E.2d 422 (Ga. 2016) (policy interpretation principles; pollution exclusion analysis)
- Reed v. Auto-Owners Ins. Co., 667 S.E.2d 90 (Ga. 2008) (pollutant definition includes matter acting as irritant or contaminant)
- City of Atlanta v. St. Paul Fire & Marine Ins. Co., 498 S.E.2d 782 (Ga. Ct. App. 1998) (insurer has no duty to defend where complaint and policy unambiguously exclude coverage)