(Article from Insurance Law Alert, November 2025)
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Holding
A policyholder is not entitled to insurance coverage for claims alleging damage caused by the flooding of water stemming from retention ponds because stormwater is an “irritant” or “contaminant” under the policies’ pollution exclusions. Auto-Owners Ins. Co. v. Tabby Place Homeowners Ass’n, 2025 U.S. Dist. LEXIS 171624 (S.D. Ga. Sept. 3, 2025).
Background
A residential subdivision contained a drainage system that utilized storm pipes and retention ponds to collect stormwater runoff. Property owners adjacent to the subdivision sued the Homeowners Association (“HOA”) of the subdivision, alleging that its design and use of the ponds and maintenance systems resulted in flooding and damage to their property. More specifically, the complaint alleged that the infiltration of storm water into the ground through the retention ponds caused high groundwater levels and consequential flooding. The flooding allegedly resulted in sewage site problems and the discharge of sediments and other materials onto the claimants’ property.
Auto-Owners, the HOA’s liability insurer, agreed to defend pursuant to a reservation of rights. Thereafter, Auto-Owners sought a declaration that it had no duty to defend or indemnify the underlying claims. Both parties moved for summary judgment and the court ruled in Auto-Owner’s favor.
Decision
The court ruled that coverage was barred by a pollution exclusion that applied to property damage “arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of” pollutants. Pollutant, in turn, was defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” The court agreed with Auto-Owners that allegations about flooding, ponding water, excess water and runoff involve “pollutants.”
While the definition of “pollutant” did not expressly include stormwater or groundwater, the court concluded that both were contaminants or irritants under the exclusion. With respect to stormwater, the court held that even if uncontaminated, stormwater is a pollutant. As to rising groundwater, the court stated:
The Court finds no meaningful distinction in the fact that the stormwater here is allegedly infiltrating through the ground and thus increasing the amount of groundwater on the adjacent properties, rather than there being a direct stormwater runoff onto the adjacent properties. It is ultimately the stormwater – a “pollutant” under Georgia law – creating the damage giving rise to the Underlying Action. Courts applying Georgia law have held that unambiguous language in pollution exclusions such as the ones here exclude all pollutants and do not exclude pollutants based on their source or location.
Comments
Courts in other jurisdictions have similarly concluded that stormwater and/or runoff water are pollutants within the scope of pollution exclusions. Additionally, while the origin of flooding or other water-related events may be relevant in the context of first-party policies (which often distinguish between covered and uncovered sources of water damage—e.g., interior pipe versus outdoor elements), the source of pollutants is typically irrelevant in applying a pollution exclusion in a third-party liability policy.