In a case having broad implications given the wide mandatory recycling of restaurant waste cooking oil across the country, in a decision filed on April 29, 2019, a federal appeals court held that contaminated recycled fat could trigger the “pollution exclusion” in an insurance policy.

In Restaurant Recycling, LLC v. Employer Mutual Casualty Company,

Restaurant Recycling purchased used fat, like waste cooking oil from restaurants in mandatory commercial organics recycling programs and the like, and then processed and resold the substances to pork and poultry producers for blending with other ingredients in their animal feed.

From July to September 2014, Restaurant Recycling delivered several loads of its blended fats to New Fashion Pork. These fat products were contaminated with two substances, lasalocid and lascadoil. Lasalocid, a chemical agent, “is not generally recognized as safe and is known to cause deaths in horses, turkeys, and swine.” Lascadoil, a byproduct in the manufacture of lasalocid, “is not approved for consumption in humans or in animals and is not generally recognized as safe.” Lascadoil is an industrial waste product whose only approved use is as biofuel.

New Fashion Pork sued Restaurant Recycling for delivering defective shipments of recycled fat, which New Fashion Pork uses as an ingredient in its swine feed. Restaurant Recycling, in turn, sued Employer Mutual Casualty Company, seeking a declaratory judgment that the insurer had a duty to defend and indemnify Restaurant Recycling. Employer Mutual moved for judgment on the pleadings, citing a total pollution exclusion in its general commercial insurance policy that limited coverage in the case of property damage arising from dispersal of pollutants. Fatal to its case, Restaurant Recycling conceded that lascadoil is a “pollutant” such that these actions were within the scope of their insurance policy’s pollution exclusion.

The district court granted the motion, and Restaurant Recycling appealed. The Eighth Circuit concluded that the total pollution exclusion applies and affirmed the judgment.

This case highlights one of the real world implications of the use recycled products, mandatory and otherwise, which are widely blended with other ingredients before being reintroduced into the stream of commerce.