A federal appeals court has upheld a lower court ruling that says an insurer is not obligated to indemnify a restaurant recycling firm for delivering defective fat to a swine producer under a pollution exclusion in its policy.

St. Paul, Minnesota-based Restaurant Recycling LLC purchases used fat products, such as waste cooking oil from restaurants, and then processes and resells the substances to livestock producers for blending with other ingredients in their animal feed, according to Monday’s ruling by the 8th U.S. Circuit Court of Appeals in St. Louis in Restaurant Recycling LLC, New Fashion Pork LLP v. Employer Mutual Casualty Co. et al.

From July to September 2014, Restaurant Recycling delivered several loads of its blended fats to Jackson, Minnesota-based New Fashion Pork LLP. 

These fats were allegedly contaminated with two substances, lasalocid, a chemical agent known to cause deaths to horses, turkey and swine, and lascadoil, a byproduct in lasalocid’s manufacture that is an industrial waste product and not approved for human or animal consumption, according to the ruling.

New Fashion Pork sued Restaurant Recycling in Minnesota state court seeking reimbursement of its payment for the fat product and damages for the serious health issues the contaminated feed allegedly caused to its swine, according to the ruling.

Restaurant Recycling’s insurer, Des Moines, Iowa-based Employer Mutual Casualty Co., denied coverage, claiming damages fell within the policy’s total pollution exclusion in its commercial general liability policy.

Restaurant Recycling filed suit in U.S. District Court in Minneapolis seeking a declaratory judgment it was entitled to defense and indemnification. The court ruled in the insurer’s favor.

The ruling was affirmed by a unanimous three-judge appeals court panel. Restaurant Recycling concedes that lascadoil is a pollutant, but said it is not excluded under the policy’s pollution exclusion because its dispersal was not intentional, said the ruling.

“We are not convinced by the plain-meaning argument,” the ruling said. “That the insurance policy provides coverage for property damage caused by ‘occurrences,’ or accidents, does not mean logically that the exclusion is limited to intentional acts,” said the ruling, in affirming the lower court’s ruling.

Restaurant Recycling’s attorney had no comment, while other attorneys in the case did not immediately respond to requests for comment.