Insurer Doesn’t Have to Cover Wastewater Company’s Explosion

(CN) – A California appellate court ruled on Wednesday in favor of an insurance company in its battle with a wastewater facility that was storing hazardous materials on its site when a major explosion occurred there in 2014.

A three-judge panel of California’s Second Appellate District unanimously affirmed a lower court ruling that held Allied Insurance was within its rights when it withheld $2.5 million in a payout to Santa Clara Waste Water and its subsidiary trucking company, Green Compass Environmental Solutions.

“All that Allied had to establish was the probability that their policy did not cover the damages,” wrote Justice Martin Tangeman on behalf of the panel in a 12-page opinion. “Allied did so by showing that the 11 noncompliance policy exclusion applied and that SCWW and GCES misrepresented and concealed material facts.”

Allied paid Santa Clara $2.5 million, less than half of the policy’s limit, because it said the company violated the policy by concealing the fact it was illegally harboring hazardous materials on site.

The wastewater company then sued the insurance company in Ventura County Superior Court, where it lost.

Santa Clara Waste Water is a private wastewater processing company based in Santa Paula, California, a small town located in the fertile Santa Clara River Valley in Ventura County.

In 2014, a huge explosion at the plant resulted in injuries to several of the plant’s employees and three firefighters, prompting criminal charges and civil lawsuits.

Several of the criminal charges related to the company’s storage of barrels and drums of sodium hydroxide, a chemical known as “Petromax,” on its facility site.

Santa Clara Waste Water contends the chemical is not a hazardous material, particularly in the form it was found on the site.

Nevertheless, members of its executive staff, including CEO William Mitzel, pled no contest to misdemeanor charges relating to a failure to inventory hazardous materials.

Furthermore, Santa Clara Waste Water recently lost a civil trial, again in the Second Appellate District, relating to its attempt to prevent the County of Ventura Environmental Health Division from declaring the Petromax found on site a hazardous material.

The panel in that case sided with the county, saying any attempt to prevent it from declaring something it perceived as hazardous represented an infringement on its First Amendment free speech rights.

In the present case, Allied issued Santa Clara Waste Water two insurance policies, totaling $7 million, that covered environmental damage emergency response costs arising from a pollution incident.

The wastewater company submitted a bill for clean-up costs related to a chemical spill and fire, but Allied did not pay the claim. Instead, it agreed to a mediated settlement of $2.5 million, but Santa Clara Waste Water sued for the full amount.

Allied said the storage of hazardous materials and the subsequent attempt by the company to conceal it constituted unjust enrichment and meant it did not have to pay the full amount.

An appeal to the California Supreme Court remains a possibility.

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