Strategies, Challenges, and Answers

Insurance Company owes No Duty to Defend where Policy includes Enforceable Pollution Exclusion

Back in the 2000s, Al Phillips the Cleaner, a Las Vegas dry cleaner, had a location in the Maryland Square Shopping Center near the Boulevard Mall.  A Ted Wiens Auto Service Center was just across the street.

Residents of the Maryland Square area complained that they had been injured by the release of perchloroethylene, sometimes called PEC or PERC.  PEC is used in dry cleaning and as an industrial degreaser and spot remover.

Of the PEC release, a local newspaper wrote:

The chemical bled into the groundwater, forming a plume over time that now stretches more than a mile long. The contaminated groundwater ranges from about 400 to 1,000 feet in width, and runs up to 70 feet deep in some areas. In some areas, PCE evaporated and turned into a gas, seeping into the air inside of homes.

Daniel Rothberg, Chemical plume in central Las Vegas to soon undergo cleanup, Las Vegas Sun, June 22, 2016.  Link HERE

The residents filed suit, initially against Al Phillips the Cleaner and later adding the Ted Wiens Service Center as a defendant.  The Complaint alleged that not only had Al Phillips the Cleaner caused a release of PEC but that in 1993 a spill of PEC was reported at the Ted Wiens location as well. Plaintiffs claimed that both defendants contributed to their injuries.

Ted Wiens turned to its insurance company seeking a defense.  However, the insurance company denied the claim based on a Pollution Exclusion in the policy.  Because the claim was denied, Ted Wiens defended itself and was eventually able to get out of the suit on summary judgment.

However, Ted Wiens brought suit against its insurance, Universal Underwriters Ins. Co., seeking to recover the costs of its defense.  In its Complaint, Ted Wiens alleged breach of contract, contractual breach of the implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing, violation of Nevada’s Unfair Claims Settlement Practices Act (NRS § 686A.310), and declaratory relief.

When served with the suit, Universal Underwriters Ins. Co. immediately filed a Motion to Dismiss.  The parties agree that three independent portions of the policy, the Garage Insurance, the General Liability Insurance, and the Umbrella Insurance were important for consideration.  In Nevada, the insurer has the duty to defend where facts in the complaint give rise to potential liability under the policy.  United Natl Ins. Co. v. Frontier Ins. Co., 120 Nev. 678, 99 P.3d 1153, 1158 (Nev. 2004).  However a duty to defend is not absolute.  Id.  See Mike Mills’ Nevada Duty to Defend DRI Compendium Here.

In its opinion, S. Nev. TBA Supply Co. v. Universal Underwriters Ins. Co., No. 2:15-cv-00046-GMN-NJK, 2015 U.S. Dist. LEXIS 107284 (D. Nev. Aug. 13, 2015), the court pointed to pollution exclusions in each of the three policy sections.  The court determined that whether the spill happened on the Wiens property or on the Al Phillips property or both, there was no coverage.  The court dismissed Ted Wiens’ Complaint.  The court reiterated its position, denying the Wiens’s Motion to Reconsider.  S. Nev. TBA Supply Co. v. Universal Underwriters Ins. Co., No. 2:15-cv-00046-GMN-NJK, 2015 U.S. Dist. LEXIS 166253 (D. Nev. Dec. 11, 2015).

If you have questions about Insurance Coverage in Nevada, please call Mike Mills at 702-240-6060×114 or contact him via email at