The Chittenden Solid Waste District is suing its insurance carrier, the Vermont League of Cities and Towns, for $500,000 to recover losses it suffered from the sale of contaminated compost.
Horse manure was the source of herbicide contamination that damaged the gardens and crops of 451 Green Mountain Compost customers last year. It turned out that horses had eaten feed treated with products containing the aminopyralid. The chemical passed through the animals, contaminating hay that was eventually used in the district’s compost.
More details on the contamination can be found in this VTDigger story from June 10.
The Vermont League of Cities and Towns provides insurance to more than 300 municipalities and public entities through its Property and Casualty Intermunicipal Fund (PACIF).
VLCT denied the waste district’s damage claim, citing a pollution exclusion in the insurance agreement. The pollution exclusion reads: “This Coverage shall not apply to loss, damage, costs, fines, penalties or expenses directly or indirectly consequent upon seepage or pollution or contamination from any cause whatsoever.”
CSWD argues that the incident shouldn’t be considered the result of pollution.
“Aminopyralid (which was found in the compost) and clopyralid are both registered with the U.S. Environmental Protection Agency and are chemicals that we are exposed to,” said Tom Moreau, general manager for the district. “They are not pollution, but are things that can be there or are expected to be there.
“With that in consideration, our legal representative has advised us to move forward with this claim,” Moreau said.
In court documents, CSWD cites correspondence with the Vermont League of Cities and Towns in 2011 that gave the district the impression that it would be covered if it sold defective products, such as the contaminated compost.
“When CSWD launched the Green Mountain Compost brand, CSWD again asked VLCT PACIF whether CSWD would be covered if it sold defective compost products,” lawyers for the district wrote in the court filing. “On or about July 13, 2011, VLCT PACIF stated that CSW would be covered in the event it sold defective compost products and that there was ‘no exclusion for third party claims arising out of the sale of defective products.’ VLCT PACIF interprets The Policy broadly as covering claims for losses from the sale of defective products, regardless of the cause of the defect.”
When CSWD realized it had sold a defective product, the district bought back Green Mountain Compost from a dozen resellers in Vermont and neighboring states. The compensation to customers together with the internal cleanup has amounted to more than $520,000. Moreau estimates the total cost will be in the $750,000 to $825,000 range when all bills are paid.
The Vermont League of Cities and Towns says that the Chittenden Solid Waste District was, or should have been, aware of the pollution exclusion clause.
“If they were fully aware of the pollution exclusion they wouldn’t be suing us,” said Steven Jeffrey, executive director at Vermont League of Cities and Towns. “And that’s what this lawsuit is all about.”
No court date has been set for the trial, and the parties are still collecting documentation.
“I think we have somewhere like 10,000-15,000 emails we have to go through,” Moreau said.
