The South Carolina Court of Appeals found there was no coverage for an inverse condemnation action based upon the policy's pollution exclusion. South Carolina Ins. Reserve Fund v. E. Richland County Public Service District, 2016 S. C. App. LEXIS 32 (S.C. Ct. App. March 23, 2016).
In 2010, Coley Brown filed a complaint against the East Richland County Public Service District ("District") for inverse condemnation, trespass, and negligence. The complaint alleged that the District had installed a sewage force main line and an air relief valve on Brown's street, and the valve released offensive odors on his property many times a day. The stench caused Brown to buy a new piece of property and move, but he was unable to sell the old property. The district tendered the complaint to the South Carolina Insurance Reserve Fund ("Fund"), but coverage was denied.
The policy's pollution exclusion stated no coverage existed for:
. . . personal injury or property damage arsing out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release, or escape is sudden and accidental.
The Fund filed a complaint against the District seeking a declaratory judgment that the Fund had no duty to defend or indemnify the District in the Brown matter. At trial, the District's executive director testified that when the sewage pumps were activated, the air in the main lines was forced out through an air vacuum valve. If this air was not released, the sewer lines would explode. The court ruled the policy's exclusion barring the inverse condemnation claim was valid and enforceable.
As to the negligence and trespass claims, the court found the pollution exclusions' reference to gases and fumes encompassed the offensive odors delineated in Brown's complaint. The court also determined the discharges of offensive odors were included within the District's ordinary operations. Thus, the pollution exclusion's exception for sudden and accidental releases was inapplicable.
On appeal, the appellate court found that the pollution exclusion was applicable even though it did not mention offensive odors. The odors could be properly classified as "fumes" or "gasses," both of which were listed in the exclusion. Further the exception in the exclusion for "sudden and accidental" releases did not apply. The District's executive director testified the air release valve was essential to the operation of the sewer line because it prevented the lines from exploding. The pumps usually turned on several times a day. Accordingly, the District's knowledge that the pumps would turn on occasionally was sufficient to demonstrate that the releasing of the odors was not only expected, it was a necessary function of the line's normal operations.
Thanks to Robert Thomas, fellow Damon Key blogger and inverse condemnation attorney extraordinaire, for the tip on this case.
