When you think of sand, the first place you think about is likely not Indiana. But a recent ruling1 was about exactly that – 100,000 tons of abandoned foundry sand left behind when an insured went out of business. The insurance company asserted that an exclusion of coverage applied but the court held otherwise, finding that the property damage had not been expected or intended by the insured.
Cincinnati Insurance Company (“Cincinnati”) provided property damage coverage to International Recycling, Inc (“IRI”) which went out of business and abandoned 100,000 tons of Chrysler foundry sand on property owned by FLM, LLC after Chrysler stopped paying IRI for its sand disposal services. Since Chrysler was IRI’s sole revenue source, IRI then did not have funds to continue to operate and they abandoned the contaminated sand on FLM’s property. The court found this was an “accident” and therefore an “occurrence.” Cincinnati argued that just because something is deemed an “occurrence” does not mean it falls outside of the “expected or intended” exclusion:
This insurance does not apply to:
a. expected or intended injury
“Bodily injury” or “property damage” which may reasonably be expected to result from the intentional or criminal acts of an insured or which is in fact expected or intended by the insured, even if the injury or damage is of a different degree or type than actually expected or intended.
When interpreting insurance policies, an insurer relying on an exclusion must prove its applicability.2 Ambiguities are strictly construed against insurance companies, particularly when a policy excludes coverage.3
Cincinnati did not claim that IRI had the means to remove the sand. IRI did not make a business decision to intentionally abandon the sand, rather it was forced out of business and had no choice other than to leave it behind. The court found that the property damage was not expected or intended by IRI thus the exclusion did not apply.
We often discuss coverage in terms of occurrences, covered perils, exclusions, etc. Just be careful to read each definition within the policy carefully and ask how it applies to that particular case.
Hopefully as you read this you are somewhere sunny with your toes in the sand… just preferably not foundry sand.