Continuing my breakdown of common all-risk insurance policy exclusions, I turn this week, to the smog, smoke, vapor or gas exclusion. While one might think that this type of exclusion would apply only to industrial or commercial properties, it can apply to homeowners’ claims as well, and it is important for all policyholders to understand.

One common issue that arises when this exclusion becomes relevant is how to define smoke, vapors or smog. Does the term smoke include harmful vapors? Do vapors differ from smoke, especially if they cannot be seen? A clear illustration of this is found in K & Lee Corp. v. Scottsdale Insurance Co., 769 F. Supp 870 (E.D. Pa. 1991).

In this case, employees of a wholesale grocery warehouse noticed a chemical smell and a chemical substance dripping from the floor above which was not under their control. Much of the inventory was destroyed by this chemical contamination and the grocery warehouse filed an insurance claim. The policy specifically stated that smoke damage was covered. However, the issue for the court was:

Whether coverage for ‘smoke’ damage encompasses contamination by chemical vapors.

Because it was unable to find any case law to provide direction on how to interpret the term “smoke,” the court turned to the dictionary and stated,

While smoke may result from some chemical reactions, the common usage of the term refers to the products of combustion and, more importantly, to matter that is visible.

Unfortunately for the grocery warehouse, the chemical vapors were invisible, so the court denied coverage for the claim.

Invisible chemical vapor is not ordinarily and commonly understood to be ‘smoke.’

Not all courts have reached the same conclusion. Laws vary in different jurisdictions. Next week, I will discuss a case that found vaporized chemicals fit within the definition of smoke.