Developer faces runoff lawsuit – and its insurer wants out

A legal fight in Georgia underscores how quickly pollution exclusions can derail coverage when construction runoff reaches neighboring properties. Auto‑Owners Insurance Company filed a declaratory judgment action on August 5, 2025 seeking to avoid defending or indemnifying Barrow Investment Group, a developer, in a stormwater runoff lawsuit. Neighbors near the Stone Haven project in Winder claim that sediment‑laden stormwater from the 70‑acre site flowed into Sarah’s Creek and onto their land during heavy rains between 2022 and 2024, causing streambank erosion and discolored water. They sued the developer in July 2024, seeking damages and an order to stop the runoff.

Although Auto‑Owners issued Barrow a commercial general liability (CGL) policy with a $1 million per‑occurrence limit, the insurer argues that several policy exclusions and conditions bar coverage. In its complaint, Auto‑Owners claims Barrow failed to provide notice of the runoff or the lawsuit until August 2024, more than two years after the first alleged runoff event. The CGL policy requires notice “as soon as practicable,” so the insurer says the delay prevented an early investigation and resolution. Auto‑Owners also points to the policy’s pollution exclusion, which defines sediment, silt and soil as pollutants and therefore excludes coverage for the alleged runoff damage. Additionally, the insurer contends that clearing, grading and excavating are deliberate acts and not an “occurrence,” and that the expected or intended injury exclusion and known‑loss doctrine apply. A summary published by Real News Hub emphasises the same arguments and notes that the policy covers property‑damage claims only—not injunctive relief or attorneys’ fees.

The developer has not yet responded, and the court has not ruled on the coverage dispute. However, the case highlights common pitfalls in relying solely on a standard CGL policy for environmental exposures.

Why sediment runoff is considered pollution

Many business owners assume that their general liability policy will respond to claims of property damage from runoff or spills. Yet modern CGL forms typically exclude “pollutants,” a term broadly defined to include sediment, silt, soil, chemicals and other contaminants. Insurers often argue— as Auto‑Owners does here— that stormwater laden with soil particles constitutes a pollutant and therefore falls under the exclusion. Even if a claim appears to involve only dirt or construction sediment, it may still be treated as a pollution event.

Late reporting also compounds coverage problems. Policies usually require prompt notice of occurrences and lawsuits; failure to comply can allow the carrier to deny defense and indemnity. In the Georgia case, the insurer argues that the insured’s delay prevented timely investigation and remediation.

Implications for business owners without pollution insurance

1. Coverage gaps can lead to uninsured losses. Pollution exclusions in general liability policies mean that runoff or contamination claims may not be covered. Without contractors pollution liability (CPL) or environmental impairment liability policies, business owners could bear the full cost of defending lawsuits, settling claims and remediating contamination. Seven‑figure settlements are possible in cases involving sediment‑heavy runoff; Auto‑Owners’ complaint notes that neighbors demanded a settlement in the million‑dollar range.

2. Fines and injunctive relief are typically not covered. Even if a general liability policy pays for property damage, it often does not cover regulatory penalties or court‑ordered cleanup and injunctive relief. Specialized pollution policies can extend to these costs.

3. Unknown or ongoing pollution could void renewal coverage. Insurers may invoke the known‑loss doctrine if the insured was aware of an ongoing pollution problem before renewing a policy. Buying dedicated environmental coverage with continuous pollution triggers can help avoid disputes about known conditions.

4. Premiums and contracts may be affected. Following high‑profile disputes, insurers may tighten policy language, raise premiums or require more robust risk controls. Developers might also face stricter contractual requirements from lenders and project owners to carry pollution insurance.

Risk‑management takeaways

• Adopt robust erosion and sediment controls. Designing and maintaining silt fences, sediment basins and vegetative buffers can reduce runoff and minimize liability. Regular inspections and prompt repairs are essential.
• Report incidents promptly. Notify your insurer as soon as you discover a potential runoff or contamination event, and document communications and response actions.
• Review policy language. Work with an insurance advisor to understand pollution exclusions, notice requirements and definitions of an “occurrence.” Consider adding contractors pollution liability coverage to fill gaps.
• Develop a stormwater pollution prevention plan (SWPPP). A SWPPP outlines how a site will manage runoff, maintain controls and respond to sediment discharges. A documented plan demonstrates diligence and may help in both preventing and defending claims.

The Georgia stormwater lawsuit is still unfolding, but it already offers an important lesson: businesses engaged in land development or construction cannot assume that standard liability insurance will protect them from pollution‑related lawsuits. Securing specialized environmental coverage and implementing proactive risk controls can prevent costly coverage disputes and protect against unforeseen liabilities.