A group of insurance companies don't have to cover a dairy operation's costs to defend or settle a lawsuit alleging groundwater contamination by the inadequate handling of manure.
U.S. District Judge Thomas O. Rice, in the U.S. District Court for the Eastern District of Washington, ruled such coverage is barred under a pollution exclusion in the insurers' policies, according to Tiffany Dowell Lashmet, assistant professor and extension specialist in agricultural law with Texas A&M Agrilife Extension.
In 2013, several nonprofit groups filed a lawsuit against Cow Palace, located in the lower Yakima Valley, contending manure was improperly stored and managed, and therefore a pollutant under the federal Resource Conservation Recovery Act (RCRA). When the lawsuit was filed, the dairies' insurance carriers denied a duty to defend or indemnify, claiming that a pollution exclusion clause in the insurance policy excluded this claim.
During the course of litigation, the trial court sided with the plaintiffs, finding that manure met the definition of solid waste. In a May 2015 settlement, Cow Palace agreed to take a number of manure management steps.
After the settlement was reached with the environmental groups, the dairies filed their own suit in 2016, seeking a declaratory judgment by a court that the insurance companies were required to defend and indemnify the dairies pursuant to the policy. Specifically, the dairies argued that the pollution exclusion did not apply to manure and, even if it did, there was an efficient proximate cause that would require coverage by the insurers (Dolsen Cos. et al. v. QBE Insurance Co. et al., case number 1:16-cv-03141).
On Sept. 11, Judge Rice ruled an insurance policy “absolute pollution exclusion” meant the insurers had no duty to defend or indemnify Cow Palace. The reason for this, the judge held, was that in the circumstances surrounding the intitial lawsuit against the dairies, the manure, which allegedly contaminated groundwater did constitute a pollutant, was expressly excluded from the insurance policy’s coverage. Further, the court rejected the dairies’ attempt to argue that the actual cause of the damage was a covered event, rather than a pollutant.
This case is now the second time in the last couple of years that a court has held manure contamination of groundwater to be excluded from coverage based upon a pollutant exclusion clause in an insurance policy. A similar result was reached by the Wisconsin Supreme Court in 2014 (Wilson Mutual Insurance Co. v. Falk).
For more on environmental insurance policies, read: Insurance shortcomings may leave you exposed to costly environmental liability. 
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Dave Natzke
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