Prior Knowledge of Contaminant Does Not Preclude Coverage Under Known Pollution Condition

Lennar Mare Island v. Steadfast Insurance Co. (E.D. Cal., March 31, 2016)

A policyholder filed suit against its insurer, seeking coverage under an environmental liability policy for costs the policyholder incurred pursuant to a remediation consent order. The policyholder then moved for summary judgment, which the court denied in most respects except for the policyholder’s request for a declaration to limit the scope of the known-pollution condition in the policy. Specifically, the policyholder argued that the condition did not include pollutants that were simply known prior to the policy period, and coverage for such pollutants should not be precluded under the condition. The court agreed with the policyholder’s interpretation, and explained that the known-pollution condition should not be that expansive because the policy contained extensive language to identify certain substances or contaminants that fell within the condition. As such, the court held that a person’s or entity’s actual knowledge of a pollution condition was insufficient to establish that condition is a known-pollution condition.