Insurance Coverage



Rick Pinto, Deb Bowers, and Adam White recently obtained a favorable outcome from the Fourth Circuit Court of Appeals in late November, affirming the entry of summary judgment on behalf of their client, Buckeye Fire Equipment Company. The Fourth Circuit relied on the reasoning used by the Federal District Court for the Western District of North Carolina, which held that Buckeye Fire’s insurer had a duty to defend their insured in connection with a class action lawsuit currently pending in South Carolina.

Colony Insurance Company asked the Western District to enter a declaratory judgment that it had no duty to defend Buckeye Fire in nearly a thousand lawsuits all alleging, generally, that certain chemicals used in fire suppression systems manufactured by Buckeye Fire caused personal injury, water contamination, and environmental damage. Colony argued that its “Hazardous Materials Exclusion” meant it did not have to defend Buckeye Fire, while Buckeye Fire argued that the same Exclusion only applied in true “environmental pollution” cases and did not apply to cases where the injured parties claimed they came in direct physical contact with the chemicals.

The Western District sided with Buckeye Fire, ruling that North Carolina law required Colony to defend Buckeye Fire in what it called “direct exposure” cases—those same cases where injured individuals alleged direct contact with the chemicals. In reaching its decision, the Western District relied on long-standing North Carolina case law, specifically West American Insurance Co. v. Tufco Flooring East, Inc., 409 S.E.2d 692 (1991), for the proposition that insurance clauses which try to exclude coverage for what is traditionally considered “environmental harm” do not apply unless the harm alleged included a “discharge into the environment.” In the Buckeye Fire case, this meant that Colony Insurance could not exclude coverage for “direct exposure” cases, because the harm alleged was not the result of “discharge into the environment.”

The Fourth Circuit’s opinion can be found at Colony Insurance Co. v. Buckeye Fire Equipment Co., 2021 U.S. App. LEXIS 34305 (4th Cir. Nov. 18, 2021). The more interesting and informative opinion from the Western District can be found at Colony Insurance Co. v. Buckeye Fire Equipment Co., 2020 U.S. Dist. Ct. LEXIS 194709 (W.D.N.C. Oct. 20, 2020).