Maryland Court Rules with Welders in Limiting Scope of Pollution Exclusion

January 19, 2006

On Jan. 6, Maryland’s highest court handed a victory to the welding industry by ruling that the scope of the pollution liability exclusion in a business insurance policy does not encompass welding rod liability.

In Clendenin Brothers, Inc. v. United States Fire Insurance Co., the Maryland Court of Appeals ruled that a total pollution exclusion in U.S. Fire Insurance Company’s commercial general liability policy does not relieve the insurance company of its duties to defend and insure Clendenin Brothers, Inc. against welding liability claims.

The law firm of Dickstein Shapiro Morin & Oshinsky LLP argued on behalf of the policyholders. Dickstein Shapiro served as counsel for both the Gases and Welding Distributors Association, the umbrella membership association for welding rod distributors and manufacturers, and Clendenin Brothers, Inc., a GAWDA member.

“The economic impact of this decision on the welding industry cannot be overstated,” said Rick Doyle, executive director of GAWDA. “Many of our members are mired in disputes with insurers over coverage for welding claims. The Maryland court recognized that insurance companies have an obligation to pay the costs to defend and resolve these claims.”

The court limited the scope of the pollution exclusion to traditional environmental pollution, which does not encompass welding rod liability. Based on the historical development of pollution exclusions in insurance policies, the court recognized that “the insurance industry intended the pollution exclusion to apply only to environmental pollution” and that the terms in the exclusion, such as dispersal, release, contaminant, and pollutant, “are terms of art in environmental law.”

The court’s ruling reaches beyond the insurer’s obligation to defend its policyholder to encompass its obligation to indemnify Clendenin Brothers, according to the lawyers.

“This case is critical to any company facing insurer arguments that pollution exclusions in commercial general liability insurance policies preclude insurance coverage for non-traditional environmental liability,” said Katherine J. Henry of Dickstein Shapiro. “The broad and definitive ruling rejects insurers’ unwarranted claims that pollution exclusions should be read broadly to eviscerate insurance coverage for normal industry activity.”

Source: Dickstein Shapiro

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