Be Careful With Pollution Insurance Coverage Disclosures – How Conditions Actually Disclosed Were Deemed Not Disclosed

A Massachusetts company learned the hard way that you need to pay close attention to policy endorsements when you negotiate them. In Market Forge Industries, Inc. v. Indian Harbor Insurance Company, the Appeals Court of Massachusetts held, in an unpublished decision, that a Pollution and Remediation Legal Liability Policy did not cover the costs of cleaning up certain pollution because the “Pollution Conditions” were not specifically listed in the “Known Conditions” endorsement. This despite the fact that the policy was intended to cover known pollution conditions and the policyholder had specifically disclosed the conditions to the insurer. The Court rejected the insured’s argument that because it had submitted all of the environmental reports and thus had disclosed all of the known conditions, they should be treated as “Known Conditions” and, therefore, covered unless specifically excluded.

The Court couldn’t get past the plain language of the policy, which provided that “[o]nly conditions described in the documents listed in the Known Conditions Document Schedule are disclosed to the Company”. In fact, the insured did not provide any Known Conditions Document Schedule. Thus, even though the conditions were actually disclosed in environmental reports provided to the insurer, they were, by definition, not “disclosed” and not covered.

The lesson here is that when negotiating policies, you need to be very careful to review the specific terms of each endorsement and make sure you get the coverage you think you are paying for.

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