Pollution Exclusion in Policy Defeats Claim of Additional Insured

Clear & Unambiguous Exclusion Effective as to Insured and Additional Insured

When a general contractor is made an additional insured of a policy issued to a sub-contractor, the general contractor gains no more coverage than is available to the sub-contractor. No insurance policies cover every possible risk of loss.

In Swank Enterprises, Inc. v.  United Fire And Casualty Company (d/b/a United Fire Group) and John Does 1-10, CV 19-179-M-DWM, United States District Court For The District Of Montana Missoula Division (April 7, 2020) a coverage dispute arose out of injuries sustained by employees of a subcontractor where Swank Enterprises, Inc. was the general contractor and hired T&L Painting, Inc. as a subcontractor.

Two T&L employees filed suit in state court against Swank and Tnemec Company, Inc., an epoxy manufacturer, alleging injury through exposure to chemicals contained in the coatings they applied at the Project (collectively, “the Underlying Cases”). At the time, T&L was insured by Defendant United Fire and Casualty Company. Swank tendered the Underlying Cases to United Fire for defense and indemnity, insisting Swank was an additional insured under T&L’s Policy. United Fire rejected the tender and was sued. United Fire moved for a judgment on the pleadings that it does not owe a duty to defend or indemnify Swank as an additional insured under T&L’s Policy.


Swank, seeking defense and indemnity, bears the initial burden to establish that the claim falls within the basic scope of coverage including showing its status as an additional insured. Whether a defense is owed is determined by the language of the insurance policy. If there is no duty to defend, it follows that there can be no duty to indemnify. United Fire argues it has no duty to defend—and thus indemnify—because Swank is not an additional insured under T&L’s Policy and, alternatively, that the Policy’s Total Pollution Exclusion precludes coverage.

Additional Insured

Pursuant to the Subcontractor’s Agreement, T&L agreed to indemnify Swank for all claims for bodily injury and property damage related to the Project and name Swank as an additional insured on T&L’s Policy with respect to liability for bodily injury, property damage or personal and advertising injury to the extent caused by the negligent acts or omissions of T&L, or those acting on T&L’s behalf, in the performance of Subcontract Work for Contractor at the Project site. T&L provided Swank with a “Certificate of Liability Insurance” produced by Cogswell Insurance Agency LLC on August 18, 2014). The Certificate identifies Swank as the “Certificate Holder” but advises in bold language across the top:


Applicable Endorsements

T&L’s Policy includes four additional insured endorsements: Additional Insured – Owners, Lessees or Contractors – Completed Operations Endorsement; Additional Insured – Managers of Lessors of Premises Endorsement; Contractors Blanket Additional Insured – Limited Products – Completed Operations Coverage Endorsement; and Broadened Liability Plus Endorsement. Because the first two endorsements require that the additional insured be “shown in the Schedule [of Additional Insureds],” and Swank is not listed on that Schedule, United Fire argued only the second two endorsements apply. Swank, on the other hand, insists a genuine issue of material fact exists as to whether United Fire should have listed Swank in the Schedule but wrongfully failed to do so.

Scope of Coverage

Under the two remaining endorsements, United Fire argued that Swank, as an additional insured, is covered by T&L’s Policy only to the extent that T&L is liable for wrongdoing and that liability can be imputed to Swank. While Swank may have a claim against either T&L or United Fire regarding the scope of the insurance that was actually obtained, that dispute is not relevant to the coverage provided under the four corners of T&L’s Policy.

T&L’s Liability

Pursuant to the applicable additional insured endorsements, Swank’s coverage under T&L’s Policy is limited to the extent that T&L’s liability can be imputed to Swank. United Fire argues that Swank cannot make such a showing because: (1) the Underlying Cases do not allege liability against T&L and (2) T&L is immune from such actions under the exclusivity provision of the Workers’ Compensation Act.

The Workers’ Compensation Act generally provides the exclusive remedy for an employee who suffers an injury in the scope of his or her employment. Immunity under the Workers’ Compensation Act does not necessarily bar T&L from being found responsible.

Total Pollution Exclusion

Even assuming that Swank is an additional insured, the court concluded that the Total Pollution Exclusion bars coverage.  Pursuant to the Total Pollution Exclusion, T&L’s Policy does not apply to “‘[b]odily injury’ or ‘property damage’ which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” Since the injuries claimed were the result of the release or escape of pollutants the exclusion applies.

Courts should not try to change definite covenants expressed in plain English and distort them to include a risk clearly excluded by the insurance contract. The Total Pollution exclusion unambiguously bars coverage and the court refused to rewrite the policy.

Even if Swank is entitled to coverage as an additional insured under T&L’s Policy, coverage is excluded under the Total Pollution Exclusion. Because there is no possibility of coverage, United Fire owes neither a duty to defend nor indemnify.


RTFP again resolves an insurance coverage dispute. The USDC read the entire policy, noted that there was a question whether Swank was an additional insured. Regardless, even if an additional insured, the policy specifically, clearly, and unambiguously excluded coverage under the Total Pollution Exclusion. Since there was no duty to indemnify and no duty to defend, Swank recovered nothing from the insurer but may be able to gain indemnity under the terms of its contract if T&L has sufficient assets to pay the indemnity.

© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

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 also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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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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