Coal mining is a dirty business, and it's certainly not considered to be one of the safer career options. Because of this, the Department of Labor's Mine Safety and Health Administration (MSHA) limits the concentration of coal dust that can be in the air in a mine, and requires continual monitoring and periodic reporting checkups of dust levels in an effort to prevent miners from contracting black lung disease. Failing to follow MSHA regulations, or a mine found to be too dusty, can result in the agency halting production and assessing fines.
The employees of one mine, Armstrong Coal Company, were apparently not satisfied with the company's safety standards and so decided to take matters into their own hands by [allegedly] falsifying the coal dust samples for the purpose of showing the company to be in violation of safety standards and potentially halt production.
However, the employees' actions were caught and questioned, and in 2018, a federal grand jury indicted eight employees of Madisonville, Kentucky-based Armstrong Coal Co. Inc. on one count of conspiracy to defraud the United States for allegedly conspiring to falsify coal-dust samples.
To cover their defense costs, the employees looked to Armstrong's D&O and liability insurer Arch Insurance Company believing their defense costs would be covered on the basis of criminal proceedings resulting from an employee's wrongful act. In response, Arch denied coverage due to a policy exclusion that barred coverage for any claim "arising from, based upon, or attributable to" any discharge (or threat of discharge) of any "pollutant" or any "direction, request or voluntary decision" to test for or monitor any "pollutant". In applying the exclusion, Arch determined that the coal dust was a "pollutant" and that the criminal proceedings arose from a direction to monitor and test for such coal dust.
The employees then filed suit against Arch, charging breach of contract and bad faith. However, the U.S. district court in Owensboro, Kentucky, sided with the insurer and granted summary judgment.
The employees appealed, but through review of the policy language, the triggers, and the pollution exclusion, the three-judge appeals court affirmed the district court's judgment and found in the insurer's favor. The ruling said, "Because coal dust contaminates and irritates, and because it is regulated by Armstrong, it fits comfortably within the (pollution) exclusion's intended scope." The panel also concluded that "the criminal proceedings arose from a direction to test for or monitor a pollutant, and the pollution exclusion bars coverage for the criminal proceedings."
As such, the employees themselves will be on their own in pursuing and paying for a defense in criminal court.