FIFTH CIRCUIT SIDES WITH INSURER IN FINDING NO COVERAGE UNDER POLLUTION EXCLUSION FOR PIPELINE LEAK

By TONI ELLINGTON 

The case of Liberty Mutual Insurance Co. v. Linn Energy, LLC, et al., No. 13-20578, 2014 WL 2905162 (5th Cir. 2014)(unpub. op.) involved Liberty Mutual’s declaratory judgment action by which it sought a determination that it had no duty to defend and indemnify Linn Energy, LLC and Linn Operating, Inc. (“Linn”) in a Louisiana property contamination lawsuit.

The complainants alleged that Linn’s pipeline leaked saltwater brine and other contaminants onto their property.  Liberty Mutual argued that an endorsement to Linn’s policy excluded coverage under a Total Pollution Exclusion provision for property damage that would not have occurred but for the discharge, dispersal, seepage, migration, release or escape of pollutants.  Also at issue was a policy provision for Underground Resources and Equipment Coverage.  The district court agreed with Liberty Mutual, and, applying Texas law, found no coverage.

The Fifth Circuit affirmed the district court’s ruling, finding that the Underground Resources and Equipment Coverage provision extended coverage for those damages not specifically excluded by the Total Pollution Exclusion provision.

Although most insurance policies have pollution exclusions which likely preclude any coverage for pipeline leaks or spills, a company facing liability for contamination should examine all current and legacy policies for potential coverage.  For assistance, contact Toni Ellington at 504-599-8500.