Washington Federal District Court Finds Pollution Exclusion Inapplicable to Property Held in Trust
The U.S. District Court for the Western District of Washington has held that a pollution exclusion’s language was ambiguous as to its application to a bank that acted as trustee for, among other assets, a piece of property that is allegedly the source of environmental contamination. In Bank of Am. v. Travelers Indem. Co., 2008 U.S. Dist. LEXIS 4249 (W. D. Wash. 2008), the Bank of America trustee brought a coverage action against Travelers for coverage related to an underlying environmental coverage suit. Travelers had denied coverage on the basis of a pollution exclusion in the subject policy. The court however found that the exclusion was ambiguous in its application to the Bank which held the property in trust as it applied to contamination by pollutants “at or from premises owned by, rented to, or occupied by the insured.” Noting that in Washington, title and ownership are not necessarily the same thing, the court stated that holding title of the property may not confer any of the benefits of ownership and thus, in the trustee context, the trust did not actually “own” the subject property as it did properties such as its branch offices. Accordingly, the court found the “owned by” language ambiguous, construed it against Travelers and found it had a duty to defend in the underlying suit.
