A wastewater treatment plant (WWTP) operated a trucking unit that transported wastewater. The business that owned the facility and trucking unit applied for insurance coverage. In their insurance application and related correspondence, the business represented that they did not accept, process, transport, or discharge hazardous waste. The insurance company issued a $2 million “Primary Environmental Liability Policy” and a $5 million umbrella policy. The policy covered “environmental damage” or “emergency response expenses” arising out of a “pollution incident.” The policy also contained an “intentional noncompliance” provision, which excluded coverage for damages resulting from the “intentional disregard of or deliberate willful or dishonest noncompliance” with law or regulations.
After obtaining coverage, a vacuum truck exploded at the WWTP when a truck driver mixed wastewater with a chemical (sodium chlorite). Chemical spillage from the explosion spontaneously combusted and caused a fire. The business submitted a claim to cover the cleanup costs. The insurance company did not pay the claim.