The homeowners were none too pleased with the “extremely noxious and offensive odors and gases” that impeded their enjoyment of their home; so they sued the pig farmer for, among other things, creating a nuisance. The farmer turned to its insurer to defend arguing there was covered property damage – the homeowners’ loss of the use and enjoyment of their property (i.e., loss of use of tangible property that is not physically injured) arising from an occurrence.

Overturning part of the ruling of the trial court in favor of the insurance company, the Minnesota Court of Appeals held that the choice to locate the manure lagoon, while deliberate, resulted in an occurrence. Wakefield Pork, Inc. v. RAM Mut. Ins. Co., (Minn. App. May 15, 2007). The lagoon was in compliance with state environmental regulation and zoning ordinances. As a result the Minnesota court reasoned: “it would be inconsistent for this court to acknowledge, on the one hand, that appellant’s hog operation is legally operated and fully compliant with all applicable regulations, but to conclude, on the other hand, that appellant acted with a willful disregard or intent to harm its neighbors.” Slip op. Reasoning that the insurance company would have known at the time of underwriting that pig farms produced noxious gases, the court was reluctant to hold that the ordinary operations of the farm was uninsurable.

Nevertheless, the court held that the policy did not provide coverage because of the pollution exclusion, which barred coverage for liability on account of “fumes.” Because foul odors – or porcine odors – were gases released from the decomposition process, the Minnesota court held these were plainly encompassed within the pollution exclusion. As a result, the insurer had no duty to defend.