Waste district sues insurer over contaminated compost claim

Waste district sues insurer over contaminated compost claim

Source: http://www.burlingtonfreepress.com, July 2, 2013
By: Matt Sutkoski

League of Cities and Towns says CSWD was aware of pollution-exclusion clause; district says it thought it was covered

The Chittenden Solid Waste District is suing its insurance carrier to help recover costs as it struggles back from last year’s infiltration of herbicides into the compost it had been selling.

The district’s product-liability policy is through the insurance arm of the Vermont League of Cities and Towns. But the league declined to pay, citing a pollution-exclusion clause in the policy.

According to court papers, the waste district was led to believe that “the policy provides broad coverage for all product liability risks, and that there is no exclusion applicable to product claims.” District officials say they were informed by VLCT’s insurance arm in 2011 that CSWD would be covered in the event it sold defective compost products.

The league denies the claims, arguing in the court papers: “The nature of insurance coverage was open and known to CSWD, its agents and attorneys. As such there could not be any misrepresentation as to the coverage.”

Last year, the district discovered it had unwittingly sold compost it produced under the brand name Green Mountain Compost that was laced with persistent herbicides. The herbicides were in a variety of materials the district collected to make the compost, especially horse manure.

The herbicide-laced compost killed or damaged plants in hundreds of gardens. The district took the compost off the market, compensated customers and has been implementing measures to prevent the problem from happening again before it resumes selling the material.

As costs associated with the situation skyrocketed into the hundreds of thousands of dollars, the district turned to the product liability section of its policy and sought a settlement.

When the League of Cities and Towns said no, the district tried to persuade the league to reconsider its decision, District Manager Tom Moreau said, but the insurer wouldn’t budge. The district filed a lawsuit in January, seeking at least $500,000 in damages.

Moreau said a resolution is several months away at least.

Officials with the League of Cities and Towns and the attorney handling the case did not return calls seeking comment.

According to papers on file at Chittenden Superior Court in Burlington, the waste district asked the league whether the compost enterprise was covered adequately by product-liability insurance when CSWD started producing and selling the product in 2008.

Court papers also indicate the district sought reassurances in July 2011 that it had adequate coverage.

The district contends VLCT never mentioned a pollution-exclusion clause and said the policy provided coverage for all product-liability risks.

CSWD officials say in the lawsuit they relied upon VLCT’s statements and did not buy any additional insurance to cover the sale of compost products.

According to the VLCT’s response to the lawsuit, the district was aware or should have been aware that there was a pollution-exclusion clause.

“The terms of the coverage document speaks for themselves; the description of the coverage by way of selective allegations is inaccurate or incomplete. Accordingly, the allegations are denied,” the VLCT says in court papers.

Tests indicate the herbicide got into the compost from a multitude of sources, including horse manure, food waste and discarded hay. The levels of herbicide were not enough to harm human health, as pollution might, but the herbicide was concentrated enough to harm broad leaf plants, including many species typically grown in backyard gardens, according to the waste district.

The district compensated 451 customers whose gardens and crops were damaged. According to financial documents Moreau provided, the herbicide expenses so far total more than $520,000.

The price tag includes $244,759 for refunds, damage payments to people who bought tainted herbicide and the cost of recalling the product.

Another $276,521 has been spent on internal costs, including inventory devaluation, loss of product sales, testing, research and legal costs. This figure is likely to rise further, Moreau said.

The district has covered the costs by borrowing from an internal fund set aside for planned improvements to a recycling facility. The district also is selling some land it owns on Flynn Avenue in Burlington to raise money, Moreau said. Some money also came from a rainy-day fund.

The weed killers that tainted the compost are called persistent herbicides because they can last for weeks or months in the material they come in contact with. Other herbicides, such as RoundUp or other products that are more readily available to the public than persistent herbicides, typically break down and disappear within hours or days.

Persistent herbicides do break down eventually. Moreau said he has received no reports of major problems in gardens this year in which the herbicide-laced compost was applied last year.

Moreau’s own Burlington garden was severely affected by the herbicide last summer. He said this week it was impractical to remove the compost from his garden, so he left it there. This year, he replanted and said his garden is thriving. Pea plants growing in what was affected soil are now 5 feet tall and vigorous, he said.

The district has started making compost again but has implemented strict controls, including extensive testing and a ban on accepting horse manure, said Dan Goossen, manager of Green Mountain Compost.

The district probably will start selling bulk compost again in spring 2014 and bagged compost about a year after that, Goossen said.

The district will have made enough compost to start marketing it again to the public next spring, Goossen said.

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