Pork giant Murphy-Brown battling insurers over who should pay for hog nuisance verdicts

Pork giant Murphy-Brown battling insurers over who should pay for hog nuisance verdicts

- in Environment, Top Story

If you drive through eastern North Carolina some days, especially in the wet heat of a summer afternoon, you might become immersed in the stench of hog waste. Many farmers hail it as the smell of money. Some neighbors of the industrialized swine operations denounce it as the foul air of misery.

But for pork producing giant Murphy-Brown and ten of its insurance companies, the odor represents nearly $100 million in damages and legal fees from hog nuisance lawsuits that, as it stands today, somebody will have to pay.

The insurance companies, though, have refused to pay Murphy-Brown’s claims. They argue in part that the policies don’t cover damages related to hog waste because of a “pollution exclusion clause.” Murphy-Brown is now suing the companies (see the complaint at the bottom of this story), accusing them of breach of contract.

The insurance case is being heard in North Carolina’s Business Court.

Although the court filings are byzantine, the case could set a legal precedent in North Carolina on the question of whether animal waste from industrialized livestock operations is considered “pollution.” Scientists classify waste and its attendant bacteria and viruses as pollutants; but insurance law — which determines who pays for damages and cleanup — is less clear.

As is frequently routine with respect to ongoing and pending litigation, attorneys for Murphy-Brown and the insurance companies did not respond to emails seeking comment.

Corporate insurance policies usually have pollution exclusion clauses. The exact language varies by policy, but in general, these clauses allow insurers to decline to reimburse companies for damage claims, including defense attorney costs, for pollution that occurs as part of normal business operations — such as hog farming.

Accidents and unintentional releases of pollutants, though, are often covered. However, during the original nuisance trials, Murphy-Brown didn’t argue that the odor was accidental or unintentional, but rather, that it was typical for farms that raise thousands of hogs and use an open-lagoon and spray field system.

Donald Thomas Hornstein is the Aubrey L. Brooks Professor of Law. Photo: Steve Exum 

“North Carolina takes a relatively broad view of pollution exclusion,” said Don Hornstein, professor at UNC Chapel Hill School of Law and a member of the UNC Institute for the Environment. “But we’ve never determined whether it extends to animal waste.”

Hornstein is not involved in any of the Murphy-Brown litigation.

Over the last year and a half, the world’s largest pork producer has lost all five nuisance cases that have been heard in U.S. District Court. Juries awarded 34 plaintiffs a total of $97.9 million in compensatory and punitive damages, determining the stink of the waste lagoons, mist of manure from nearby spray fields, as well as flies, buzzards and truck traffic had deprived them of their “use and enjoyment of their property.”

Murphy-Brown is appealing the verdicts to the Fourth Circuit Court of Appeals in Richmond, Virginia. The company doesn’t have to pay the damages until the cases are resolved. Meanwhile, another 20 lawsuits have yet to be scheduled for trial pending the outcomes of the appeals.

In court filings related to the insurance dispute, Murphy-Brown argues that it purchased policies to protect it from the very liabilities associated with raising hogs. And, Murphy-Brown says, none of the damages in the hog nuisance lawsuits come from “man-made or naturally occurring pollutants.”

The insurers disagree. Among their principal arguments is that Murphy-Brown’s waste management practices — the open lagoon and spray field system — prompted the lawsuits and caused the damage. The insurers are claiming the waste is ordinary pollution and thus they don’t have to pay the claims.

Nationwide, pollution exclusion clauses have historically applied to traditional pollutants, such as hazardous and toxic chemicals emitted by industry. In 2018, the Morrison Mahoney law firm, based in the Northeast, issued a 50-state survey of environmental insurance lawsuits, including those involving pollution exclusion.

Some states, such as Illinois, have stuck to a traditional definition of pollutants. The Arkansas Supreme Court did as well, ruling insurance companies had to pay claims in a suit involving “odors, fumes and particulate” from a poultry processing plant, even though the insurers considered it an “industrial polluter.”

But over time, some state courts have expanded the definition of pollution to include other noxious substances, including animal waste.

The Minnesota Court of Appeals ruled that “pollution exclusion clauses” allowed insurers to refuse to pay claims involving a pig farm that had created “extremely noxious and offensive odors and gases” that caused or exacerbated the plaintiffs’ health problems, diminished their quality of life and curtailed the use and enjoyment of their property.”

Even cat urine has been the subject of litigation in this area. New Hampshire’s Supreme Court ruled in a split decision that insurers must pay to cover the lost value of an apartment because of residual urine odor (which, cat owners can attest, creates a miasma of ammonia) from a previous tenant’s pet. Two judges disagreed, arguing the cat urine is indeed a “contaminant” that should not be covered by insurance.

Individual hog farmers also are becoming entangled in Murphy-Brown’s insurance litigation. Although the original nuisance suits were against Murphy-Brown, not the individual farmers, the insurers claim the farmers’ policies should kick in.

“Their argument is that under the ‘other insurance ‘ clauses in the policies, they don’t have to pay anything until the other insurance has been accounted for,” Hornstein explained. “There’s tens of millions of dollars of liability out there.”

Hornstein said the insurers also argue that Murphy-Brown’s contracts with its farmers were so strict that the farmers had to secure their own insurance. In case of a claim, the farmers’ insurance companies would have to reimburse Murphy-Brown for damages.

If the court finds this is true, it underscores the immense control Murphy-Brown has over its growers — one of the arguments presented in the nuisance cases.

It’s possible the insurers and Murphy-Brown could reach a settlement. A judge could issue a ruling based strictly on the legal arguments, which could favor the insurers. Murphy-Brown, though, is requesting a jury trial, which would put the insurance companies at a disadvantage. “Insurers don’t like getting to juries,” Hornstein said.