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Liberty Mutual off the hook in oil leak case


A federal appeals court affirmed Wednesday that a pollution exclusion in a Liberty Mutual Insurance Co. policy applies in long-running litigation even if it involves an oil leak of unknown origins.

In January 2007, Lake Charles, Louisiana-based Central Crude Inc., an oil and natural gas company, discovered a crude oil leak on its property and a neighboring tract owned by Chevron Corp. in Paradis, Louisiana, according to the ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Central Crude Inc. v. Liberty Mutual Insurance Co. et al.

Central Crude paid about $1 million to a contractor to conduct remediation, but as of 2019 the source of the leak, which may have been ongoing, remained unclear, with no determination whether it occurred from Central Crude’s pipeline, Chevron’s wells or from oil seeping from the ground, according to the ruling.

Central Crude had a commercial general liability policy with Liberty Mutual that included a pollution exclusion for the cleanup or removal of pollutants.

While the insurer initially agreed to provide limited coverage, it ultimately informed Central Crude in 2007 there was no coverage for the claim.

Central Crude was among others sued in state court in 2008 over the spill. The company sued the insurer in January 2017 seeking defense and indemnification, among other fees and expenses. 

The U.S. District Court in Lake Charles ruled in Liberty Mutual’s favor and was affirmed by a three-judge appeals court panel. 

“Central Crude contends that the total pollution exclusion is applicable only if the insured is found to be responsible for the release or discharge of the pollutant,” the appellate ruling said.

However, neither the CGL policy, nor an earlier ruling, “requires identification of the party at fault for the oil spill in determining whether the total pollution exclusion applies here,” it said, in affirming the lower court and ruling that Liberty Mutual’s policy “unambiguously excludes coverage.”

Attorneys in the case had no comment or did not respond to a request for comment.

Last month, a federal appeals court affirmed a lower court and ruled that a natural resources company cannot re-open coverage litigation involving a pollution exclusion that was filed against a Travelers Corp. unit.