Nascimento v. Preferred Mutual Insurance Co.

Jan 18: In the U.S. Court of Appeals, First Circuit, Case No. 07-1792. Jack Nascimento appeals a district court judgment from the State of Massachusetts declaring that Preferred Mutual Insurance Company (Preferred Mutual) is under no contractual obligation to defend him in an environmental liability suit brought against him by his neighbors, Tiago and Maria Leal. The Appeals Court said, "We affirm, albeit on slightly different grounds than those relied upon by the district court."

On March 25, 2005, Nascimento placed a claim with Preferred Mutual requesting it to defend and indemnify him under his Commercial General Liability (CGL) policy effective from November 9, 1996 to November 9, 1997. On April 15, 2005, Preferred Mutual denied coverage under the CGL policy’s total pollution exclusion.

According to the Appeals Court, the district court based its decision solely on section f(2)(a) of the total pollution exclusion. The district court held that all of the damages claims set out in the Leal complaint involved remediation costs. Relying solely upon section (f)(2)(a), the district court held that the CGL policy excluded coverage for such "remediation damages." Nascimento, concedes that section (f)(2)(a) bars remediation damages, however, he says the Leal complaint seeks "both remediation and non-remediation damages."

Following the district court’s decision in this case and during the pendency of this appeal, the Massachusetts Supreme Judicial Court decided McGregor, in which "it interpreted the same total pollution exclusion clause as appears in Nascimento’s policy." Under McGregor, the total pollution exclusion in Nascimento’s CGL policy bars "all" of the Leals’ claims. McGregor holds that once the oil becomes a pollutant, the total pollution exclusion of the CGL policy is triggered and coverage for remediation and non-remediation claims is barred.

The Appeals Court concluded, "In this case, the home heating oil leaked from the UST Nascimento continuously used. The leak caused the pollution damage for which the Leals seek reimbursement. Therefore, section f(1)(a) of the total pollution exclusion was triggered, and Preferred Mutual has no duty to defend Nascimento in the Leal suit."

Access the complete opinion (click here).