"Pollutant" Exclusions in Property Insurance Policies, Part 3

While the word “pollutant” may be defined by an English dictionary, the meaning of the term is frequently litigated in cases where coverage is denied under a policy’s “pollutant” exclusion clause. Some believe that the clause provides an absolute exclusion for damages caused by any sort of pollutant, including asbestos, lead, or fumes from Chinese drywall. Others maintain that the exclusion only applies to certain kinds of pollution, like industrial waste or environmental pollutants. To make matters more complicated (or interesting, depending on how you look at it), “courts across the nation are hopelessly divided over whether the clause is ambiguous[.]”1

The majority of court opinions which have addressed the applicability of the “pollutant” exclusion involve cases where a comprehensive general liability (CGL) insurance policy was at issue. These policies often include a similar, if not identical, pollution exclusion clause as the ones found in many homeowner or commercial property insurance policies. For example, in Nationwide Mutual Insurance Company v. Richardson,2 the CGL policy stated, in relevant part:

This insurance does not apply to: ... f. Pollution (1) “Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants.... Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.

In Richardson, United States District Court Judge Ricardo M. Urbina provides a great overview of the several “different approaches” courts have taken in pollution exclusion cases.

A number of courts have found the provision ambiguous and have construed it in favor of insured parties in cases that do not involve typical forms of environmental pollution. Some have done so because the clause uses words, such as “dispersal,” “discharge,” “irritant,” and “contaminant,” that are recognizable as terms of art in environmental law . . . Other courts have found that the clause's general purpose – shielding insurers from the costs of environmental cleanups – prevents it from barring coverage for everyday industrial and residential accidents . . . Some courts have reasoned that the pollution exclusion clause must be ambiguous if so many courts have given it conflicting interpretations . . .

Other courts have found that a strictly literal reading of the provision could yield absurd results. The Seventh Circuit, in an oft-quoted case, analyzed the problem as follows:

The terms “irritant” and “contaminant,” when viewed in isolation, are virtually boundless, for “there is virtually no substance or chemical in existence that would not irritate or damage some person or property.” . . . Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results. To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries suffered by one who slips and falls on the spilled contents of a bottle of Drano, and for bodily injury caused by an allergic reaction to chlorine in a public pool. Although Drano and chlorine are both irritants or contaminants that cause, under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as pollution.

* * *

On the other hand, a number of courts have found the pollution exclusion provision to be unambiguous and to bar coverage for incidents like the one underlying this suit. At least one court has specifically found that the clause's language does not reflect the specialized language of environmental law. In other cases, courts have focused on the clause's broad language, which does not explicitly exempt nonenvironmental damage.3

The reasoning behind the different approaches to the “pollutant” exclusion clause is crucial to understanding whether a type of loss is covered. This is especially true considering the drastically different outcomes one would reach from state to state. The upcoming blog entries in this series will address each of these approaches in more detail, so keep following my posts to learn more!


1 Nationwide Mut. Ins. Co. v. Richardson, 270 F.3d 948, 954 (D.C. Cir. 2001).
2 Nationwide Mut. Ins. Co. v. Richardson, 270 F.3d 948 (D.C. Cir. 2001).
3 Id. (Internal citations omitted).

 

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