SOME COURTS CONTINUE TO LIBERALLY INTERPRET CLAUSE IN INSURED’S FAVOR
Forgive my absence Dear Readers. Certainly you have missed our regular insurance lessons in this blog, yes? Humor me please. I have just come off two big trials since January. One 6 day trial here in Omaha (defense verdict for our client!), and another trial which was to start in Oakland, CA for 6-8 weeks. That case settled just before trial. However I had moved out to Oakland for weeks to prepare. The demands of my trial practice had inadvertently slowed down these lessons.
But fear not Dear Readers!! I have returned from California. We are together again, back in the insurance saddle (side for me, western for you), and ready to learn more. I won’t leave you again for so long. I promise. Clients do come first; but you are my second loves.
Today’s lesson reinforces a repeat rule. You must remember our prior blogs reviewing how the courts have treated the absolute pollution exclusion clause as a semi-absolute rule in CGL policies?
Ugh. You say. And Ugh. I say. (Probably for different reasons.)
I say “Ugh” because the ISO pollution exclusion form is consistent, but the interpretation of it is not. How is an insured, or an insurer, to know what pollution coverage they are actually buying and selling when there are such inconsistencies from jurisdiction to jurisdiction? You talk to me, that is how. We will look at today’s cases together to give us some guidance.
The insurance industry group adopted the absolute pollution exclusion in the CGL ISO Form in 2001. “The crux of the first part (f.(1)) of the 2001 CGL pollution exclusion is quite simple—there is no coverage, subject to the exceptions noted below, for any injury or damage arising out of a ‘pollutant.’ What is considered a “contaminant or irritant” is often an open question.” IRMI https://www.irmi.com/articles/expert-commentary/the-cgl-pollution-exclusion
The word “pollutant” is defined in the policy form as:
“Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalize, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
It is primarily here – within the definition of “pollutant” – that the courts have occasionally found ambiguity; and therefore, coverage.
Let’s look together at some examples of contradictory interpretations:
ANIMAL SMELLS OR WASTE
Insurer had a duty to defend a claim for loss arising out of noises and smells from a hog operation. See, Country Mutual Ins. Co. v. Bible Pork Inc., 42 N.E.3d 958 (Ill App. Ct. 5th Dist. 2015).
Insurer had NO duty to defend or indemnify a claim for loss from hog manure that had spilled on a road. See, Weber v. IMT Ins. Co., 462 N.W.2d 283, 286 (Iowa 1990) (“…(M)anure falls within the definition of waste material as set forth in the pollution exclusion.”).
Insurer had a duty to defend a claim for loss arising out of the smell of cat urine in a condo complex. See, Mellin v. Northern Security Ins. Co., 167 N.H. 544 (N.H. 2014).
Insurer had NO duty to defend a claim for loss from manure runoff which had contaminated several nearby drinking water wells. See, Wilson Mutual Ins. Co. v. Falk, 2014 Wis. 136 (Wis. 2014).
Insurer had a duty to defend a claim for injury resulting from bacteria found in spa water. See, Westport Ins. Corp. v. VN Hotel Grp., LLC, 513 F. App’x 927, 932 (11th Cir. 2013) (definition of “pollutant” does not exclude damage or injury due to bacteria in water).
Insurer had NO duty to defend claim for injury due to a caustic substance in sewer water. See, City of Salina, Kan. v. Maryland Cas. Co., 856 F. Supp. 1467, 1477 (D. Kan. 1994).
Insurer had a duty to defend and indemnify a loss arising out of sewage water which had flooded a home. See, Minerva Enterprises, Inc. v. Bituminous Cas. Corp., 312 Ark. 128, 851 S.W.2d 403 (1993).
Insurer had NO duty to defend claim for loss arising out of waste water sludge contaminates which had migrated to neighbor’s property. See, Cas. Indem. Exch. v. City of Sparta, 997 S.W.2d 545, 546 (Mo. Ct. App. 1999).
TAKE AWAY RULE
Before purchasing your CGL policy, know how your jurisdiction interprets the pollution exclusion clause. Always err on the side of caution. Buy an endorsement to cover the types of exposure that you expect in your operations. And call a lawyer.