One Word: Plastics—two Words: Pollution Exclusion: Why Cgl Policies Should Cover Plastics-related Liabilities

• Publication year: 2021

Mikaela Whitman^*

Abstract: The escalation of plastic production and the emerging risks plastics pose to human health and the environment equates to greater liability exposure for any company that produces, uses, or disposes of plastic products. This increased risk is evident from the recent uptick in plastics-related litigation. As a result, companies should consider their potential exposures and consider insurance as a risk management tool for plastics-related liabilities. This article considers insurance coverage as a tool to combat the emerging risks of plastics-related liabilities and in particular addresses why the standard CGL policy should provide coverage and the pollution exclusion should not apply to plastics-related liabilities.

The generation and use of plastics has increased exponentially over the past few decades. According to a 2018 study from Oxford University, since the initial growth of plastic production in the 1950s, the annual global production of plastics has increased nearly 200-fold—to 381 million tons in 2015.¹ This is roughly the equivalent to the mass of two-thirds of the world's population.² Compounding the plastic production quagmire is the relatively recent discovery of microplastics (small plastic particles that result from the breakdown of man-made plastics, typically measuring less than 5 millimeters) and their seemingly omnipresent existence in our water and food supplies and, in effect, our human bodies.³

The escalation of plastic production and the potential hazards of plastic, including improper plastic disposal techniques and health risks to humans and animals, has led to an uptick in litigation concerning the use of plastics and related waste management practices.

To date, plastic litigation includes suits against consumer product manufacturers for introducing plastics into waterways and their associated harms to marine life and the public (e.g., Earth Island Inst. v. Crystal Geyser Water Co., et al., Case No. 20 CIV 01213 (San Mateo Cnty. Cal.), filed Feb. 26, 2020); suits against companies for violating environmental statutes for releasing plastic particles into the environment and failing to implement and manage plastic pollution control techniques (e.g., San Antonio Bay Estuarine v. Formosa Plastics Corp., Texas, et al., Case No. 6:17-cv-0047 (S.D. Tex.), filed June 27, 2019); and suits against the EPA and other government agencies for failing to regulate plastic pollution (e.g., Center for Biological Diversity, et al. v. EPA, et al., Case No. 1:20-cv-00056 (Dist. HI), filed Feb. 2, 2020).

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Suits like Earth Island warrant special attention as it is a departure from the traditional route of plaintiffs suing private and government entities for environmental and regulatory violations. Instead, plaintiff Earth Island sued consumer product manufacturers, including Coca-Cola, Clorox, Colgate-Palmolive, and the Procter & Gamble Company, for alleged violations of the California Consumers Legal Remedies Act, public nuisance, breach of express warranty, defective product liability, negligence, and failure to warn of the harms caused by their plastic packaging.⁴

The Earth Island complaint alleges that these major food, beverage, and consumer product businesses "created, contributed and/or assisted in creating conditions" that have caused plastic pollution, falsely warranted plastic products that were not recyclable, failed to warn about the dangers of plastic packaging, and failed to use recyclable products while knowing that they represented a danger to the environment and the public.⁵

If suits like Earth Island successfully advance plastic-related tort liability, any company that produces, uses, or disposes plastic products could face a substantial increase in liability exposure. This increase in exposure would be compounded by potential liability stemming from lawsuits like San Antonio Bay Estuarine and Center for Biological Diversity, which allege violations of environmental regulations.

Moreover, as more studies illuminate the effects of plastics and microplastics on human and marine health, the scale of potential liability for bodily injury from plastic exposure and/or ingestion could rapidly increase. A November 2019 report by the United Nations Environmental Programme recognized that additives in plastic are known to disrupt animals' hormonal systems and that the possible effects on human health include lung inflammation, carcinogenicity, and gene mutation.⁶ Indeed, the Center for Biological Diversity complaint alleges that:

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Plastic garbage, and in particular tiny pieces of plastic called "microplastics," are contaminating Hawaii's waters, damaging vulnerable marine ecosystems and threatening human health. Microplastics harm wildlife via ingestion and by exposing them to dangerous toxins, and those toxins are transferred throughout the food web.⁷

As more plastics-related lawsuits are filed, defendants will undoubtedly turn to their insurers for defense and indemnification under their Commercial General Liability (CGL) insurance poli-cies.⁸ CGL policies typically provide broad grants of comprehensive coverage that cover, among other things, "bodily injury" and "property damage." The alleged harms from torts such as nuisance and negligence typically satisfy the definitions of "bodily injury" or "property damage" (depending on the specific allegations) and any "bodily injury" alleged from plastic ingestion or exposure would clearly fall under the CGL policy grant.

CGL policies obligate the insurer to pay the amounts that the insured becomes legally obligated to pay as damages up to the policy's aggregate limit. They also generally impose on the insurer a duty to defend the insured against suits seeking those damages. For example, an insurer's duty to defend or to pay defense costs usually depends on the so-called "potential for coverage," meaning that allegations of injury (or even vagueness allowing for the possibility of...