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Smith v. Reliance Ins. Co. of Ill.

Citation: 32 ELR 20478
No. Nos. 01-CA-888 C et al., 807 So. 2d 1010/(La. Ct. App., 01/14/2002)

The court holds that an insurance company must defend a wastewater treatment impoundment facility against claims filed by individuals living near the facility after a breakdown caused the release of substances and noxious odors. The court first holds that the insurer failed to meet its burden of proving that a total pollution exclusion clause relieved the insurer of its duty to defend the facility. Similarly, the court holds that the terms of another exclusion clause in the policy regarding waste or disposal sites do not unambiguously apply to the facility at issue here. There are no allegations that the facility is a waste or disposal site as stated in the policy, and the exclusion clause does not contain a definition of the term waste. The fact that waste is defined as nuclear waste in another exclusion clause simply creates ambiguity as to the term's meaning in the exclusion clause at issue. The court also holds that two other exclusion clauses in the policy do not unambiguously exclude coverage for the individuals' alleged inconvenience, harm due to the increased presence of mosquitoes, or personal injury. Consequently, the court holds that because the exclusions do not preclude every possibility of coverage, the insurer owes a duty of defense to the facility. In addition, the court holds that the insurer must pay the facility's costs of defense and all future costs of defense. The individuals' allegations and the insurer's claim of coverage exclusions create a conflict of interest between the insurer and the facility that entitles the facility to assume control of the defense action and to select its own counsel.

The full text of this decision is available from ELR (19 pp., ELR Order No. L-450).

Counsel for Plaintiffs
Robert S. Abdalian
Law Offices of Robert S. Abdalian
3801 N. Causeway, Ste. 204, Metairie LA 70002

Counsel for Defendant
James R. Sutterfield
Sutterfield & Webb
650 Poydras St., Ste. 2715, New Orleans LA 70130
(504) 598-2715