The Fifth Circuit affirmed the district court's holding that the pollution liability insurer owed a duty to defend a generating plant sued by the EPA. Louisiana Generating L.L.C. v. Illinois Union Ins. Co., 2013 U.S. App. LEXIS 9837 (5th Cir. May 15, 2013).
Louisiana Generating ("LaGen") was sued by the EPA for violations of the Clean Air Act and Louisiana environmental laws. The complaint alleged that the plant had emitted excess amounts of regulated pollutants into the air. Relief sought by the EPA included enjoining LaGen from operating its plants until they were in compliance with the federal and state laws, an order to remedy past violations, applying for proper permits, and ordering LaGen to take actions to remedy,mitigate and offset the harm to public health and the environment.
LaGen was insured by Illinois Union Insurance Company ("ILU") under a Custom Premises Pollution Liability Insurance Policy. ILU refused to defend, arguing none of the prayers for relief were covered by the policy. The district court disagreed and granted summary judgment to LaGen because there was a duty to defend.
On appeal, ILU argued relief for property damage and remediation costs were unavailable to the EPA as a matter of law because the Clean Air Act only allowed the EPA to seek prospective relief and not monetary damages. The policy provided coverage for "Claims, remediation costs, and associated legal defense expenses . . . as a result of a pollution condition." The Fifth Circuit found that the EPA suit included allegations and prayers for relief that could potentially result in covered remediation costs. For example, the EPA complaint alleged a covered "pollution condition.
The Fifth Circuit also rejected ILU's argument that injunctive relief was excluded from coverage by the Fines and Penalties exclusion. The provision excluded coverage for "Payment of criminal fines, criminal penalties, punitive, exemplary or injunctive relief." The exclusion only applied to criminal and punitive fines and penalties, and did not exclude coverage for all injunctive relief.
