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No duty to defend for Zurich unit in pollution case

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A Zurich Insurance Group unit is not obligated to provide defense costs coverage to a Las Vegas tire and auto retailer under its coverage’s pollution exclusion, says a federal appeals court, in affirming a lower court ruling.

Ted Wiens Tire and Auto Centers in Las Vegas was charged in state and federal litigation with contributing to pollution created at the former site of a dry cleaner at a Las Vegas shopping center, via a 1993 oil spill at its premises, according to a ruling by the U.S. District Court in Las Vegas in Southern Nevada TBA Supply company dba Ted Wiens Tire and Auto Centers vs. Universal Underwriters Insurance Company. It was eventually dismissed from the litigation.

Schaumburg, Illinois-based Universal Underwriters denied coverage for defense costs based on a pollution exclusion in its coverage. The retailer filed suit in the district court on charges including breach of contract and good faith.

The district court dismissed the case. The “only pollution damages suits covered by the policies are those arising from damages caused by Wiens’ release of pollutants away from premises it owns or occupied, such as a spill of pollutants being transported to or from such premises,” said the district court ruling.

A three-judge appeals court panel of the 9th U.S. Circuit Court of Appeals in San Francisco unanimously upheld the lower court’s ruling in Thursday’s decision.

“The district court properly concluded that there was no potential for insurance coverage and thus no duty to defend because the allegations in the third-party complaint fall squarely within the pollution exclusion,” said the ruling.