The California Court of Appeal recently held that bodily injury claims arising from workplace silica exposure were the result of pollution, the coverage for which was barred by an absolute pollution exclusion. Garamendi v. Golden Eagle Ins. Co. (March 9, 2005). Importantly, and a distinction that will be lost in the sands of time, the decision effectively employs an abuse-of-discretion standard to evaluate the decision of a claims determination of an insurer in liquidation.
When an insurance company pays a first-party claim, it ordinarily is thought to succeed to the insured’s rights as against others who may be responsible for the loss. This is known as subrogation, and virtually all policies expressly provide in the insurance contract that the insured’s rights are transferred to the insurance company. (This is legal subrogation; a claim for subrogation may be found by dint of the insurer’s payment even in the absence of a contract provision, which is called equitable subrogation.)
The courts continue to construe insurance coverage very broadly regarding food-related losses. See Mayerson, Insurance Recovery for Losses from Contaminated or Genetically Modified Foods, 39 Tort Trial & Ins. L. J. 837 (2004), available at http://www.spriggs.com/news/pdfs/ACF6453.pdf Insurance companies need to be mindful in handling claims that the courts for decades have approached these coverage disputes this way.