An Occurrence Can Include The Unintended Physical Damage Caused By Intentional Development Activity

Pollution Exclusion is Effective and Does not Make Policy Illusory

In Employers Mutual Casualty Company v. Tiger Creek Development, Inc., David Erickson, and Cherry Pease, No. 4:21-CV-65 (CDL), United States District Court, M.D. Georgia, Columbus Division (May 25, 2022) the USDC was asked to determine whether Tiger Creek Development, Inc. and David Erickson’s liability insurance policy covers a claim arising from their construction project that allegedly caused sediment deposits to pollute Cherry Pease’s pond.

In the underlying state court lawsuit, Pease alleged that Tiger Creek and Erickson’s work on adjacent property caused runoff that polluted and increased sediment deposits in her pond and damaged her property. Employers Mutual Insurance Company sought summary judgment on its declaratory judgment claim that it has no duty to defend or indemnify Tiger Creek or Erickson for the claims asserted by Pease in the underlying state court action


Tiger Creek began developing property adjacent to Pease’s property in 2018. Tiger Creek’s work required it to remove trees and vegetation from its property. After Tiger Creek began development, Pease noticed an increase in dirt, clay, and excess water flowing into the creek and pond on her property. Pease also noticed discoloration in her pond, sand deposits at the mouth of her pond and along her creek’s banks, and erosion. Pease believed that the problems with her creek and pond stemmed from runoff caused by Tiger Creek’s development activities on the neighboring property.

Pease alleged Tiger Creek’s clearing of trees and vegetation allowed sediment to wash downhill onto her property. In December 2018, Pease notified Tiger Creek and Tiger Creek’s owner, Erickson, about her concerns. Pease met with a Tiger Creek representative in 2019 and 2020 to discuss her concerns. Erickson attended the 2020 meeting and offered to remove the sand from Pease’s pond but Pease did not accept his offer. Tiger Creek and Erickson notified their insurer of Pease’s claim on June 25, 2020, and Employers Mutual sent Tiger Creek a reservation of rights letter. Pease filed the underlying action in the Superior Court of Muscogee County, Georgia on November 5, 2020.

Employers Mutual’s insurance policy provides coverage in the event of property damage caused by a covered occurrence.

Under the policy, an occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policy also states that the insurance does not apply to “pollution, ” which is defined as property damage arising from the “actual, alleged or threatened” discharge of pollutants. “Pollutants” are defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned, or reclaimed.”


Employers Mutual maintains that no coverage exists here under its policy for three independent reasons: 1) there was no covered occurrence, 2) even if there was a covered occurrence, the pollution exclusion excludes coverage, and 3) Erickson and Tiger Creek provided late notice of Pease’s claim.

Was There an Occurrence?

Employers Mutual argued there was no occurrence because Tiger Creek’s alleged contamination of Pease’s pond was not an accident. The policy does not define “accident, ” but Georgia law provides that an “accident” in the insurance context is “an unexpected happening rather than one occurring through intention or design.” Am. Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., Inc., 707 S.E.2d 369, 371 (Ga. 2011) (quoting City of Atlanta v. St. Paul Fire & Marine Ins. Co., 498 S.E.2d 782, 784 (Ga.Ct.App. 1998)).

The USDC concluded that an occurrence, as defined by the insurance policy, can include the unintended physical damage caused by intentional development activity. Although cited by neither party, the Georgia Supreme Court’s decision in American Empire Surplus Lines Insurance Co. v. Hathaway Development Co., 707 S.E.2d 369 (Ga. 2011) was found to be instructive to the USDC. In Hathaway, the court found that a subcontractor’s negligent installation of pipes, which resulted in damage to neighboring property, was an “accident” and thus an “occurrence” under the applicable insurance policy. The Georgia Supreme Court rejected the argument that the subcontractor’s acts could not be occurrences because they were performed intentionally, reasoning that a deliberate act, performed negligently, is an accident if the effect is not the intended or expected result; that is, the result would have been different had the deliberate act been performed correctly.

Thus, the USDC concluded that the sediment runoff constitutes an “occurrence” under the policy, however, that did not resolve the issues presented to the court.

Does the Pollution Exclusion Apply?

Employers Mutual argued that, even if the runoff is an occurrence, the policy’s pollution exclusion excludes coverage. No one disputed that the sediment runoff would be “pollution” under the policy’s definition.

The USDC also noted that the exclusion does not render the insurance coverage under the policy illusory. All policy exclusions restrict coverage. That is their purpose. But limiting the circumstances for which coverage is provided does not make the coverage illusory. Employers Mutual’s policy certainly covers other occurrences that could arise from its insureds’ land development activities other than depositing sediment runoff into a neighboring pond.

Further, the insureds here could not have reasonably expected that their policy would have covered sediment runoff when the policy contains a clear exclusion to the contrary. As a result the USDC concluded that Employers Mutual is entitled to a declaratory judgment that the claims asserted by Pease in the underlying action against Tiger Creek and Erickson are excluded from coverage under the policy.


Employers Mutual’s motion for summary judgment was granted, and a declaratory judgment issued in favor of Employers Mutual that it has no duty to provide coverage for the claims asserted in the underlying state court action involving the Defendants.


Contrary to the hope of people who are insured no policy covers every possible risk of loss. The policy will include some exclusions, like the pollution exclusion in the Employers Mutual policy, because the purpose of exclusions in an insurance policy is to limit the coverage available. In this case since both parties agreed to the obvious, that Ms. Pease’s pond was polluted by the acts of the insureds. Since the exclusion was clear and unambiguous there could be no coverage for the damages claimed and the defendants must defend themselves without the assistance of their insurer.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at and

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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