How Absolute is the “Absolute Pollution Exclusion?”
Most comprehensive general liability insurance policies include an “absolute” (or “total”) pollution exclusion. Courts across the country have struggled with the issue of just how “absolute” that exclusion really is. The Nevada Supreme Court is the latest court to grapple with the issue in a May 29, 2014 decision. Century Surety Co. v. Casino West, Inc., 2014 WL 2396085 (Nev. 2014). In that case, four people died from carbon monoxide poisoning while sleeping in a room above a pool heater in the Casino West Motel. Casino West sought coverage from its liability insurer, Century Surety Company, for the death claims but Century denied coverage based upon the absolute pollution exclusion in its policy. That exclusion bars coverage for bodily injury or property damage “arising out of the actual, alleged or threatened discharge, disbursal, seepage, migration, release or escape of ‘pollutants’.” The policy defined a “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.” The Nevada Supreme Court observed that “it is reasonable to categorize carbon monoxide as a pollutant because it is a gaseous element that contaminates the air, making it dangerous and sometimes deadly to breath.” However, Casino West argued that the exclusion only applies to “traditional environmental pollution,” and the Court also found that interpretation to be reasonable. The pollution exclusion was thus ambiguous and the Court construed it in favor of coverage. The Court held that Casino West had coverage notwithstanding the absolute pollution exclusion.
The Nevada Supreme Court joined a number of other courts that have held that an absolute or total pollution exclusion did not bar coverage for carbon monoxide poisoning. American States Ins. Co. v. Koloms, 177 Ill. 2d 473, 687 N.E.2d 72 (Ill. Sup. Ct. 1997); Andersen v. Highland House Co., 757 N.E.2d 329 (Ohio Sup. Ct. 2001); Motorists Mut. Ins. Co. v. RSJ, Inc., 926 S.W.2d 679 (Ky. Ct. App. 1996); American National Property & Casualty Co. v Wyatt, 400 S.W.3d 417 (Mo. Ct. Ap. 2013). The Wisconsin Court of Appeals has also held that coverage was not barred by the absolute pollution exclusion in a case where one apartment resident was killed and another was seriously injured by carbon monoxide poisoning. Langone v. American Family Mut. Ins. Co., 2007 WI App 121, 300 Wis. 2d 742, 731 N.W.2d 334.
Nationwide, courts are split on how to interpret the absolute pollution exclusion. See, e.g., Apana v. TIG Ins. Co., 574 F.3d 679, 682-683 (9th Cir. 2009). Some courts apply the exclusion literally because they find the terms to be unambiguous, while other courts have limited the exclusion either because they find the terms of the exclusion to be ambiguous or because the exclusion contradicts the policyholders’ reasonable expectations. Courts in the second category have expressed concerns that the pollution exclusion, if read literally, is overly broad, unfair and contrary to the reasonable expectations of policyholders. They reason that the nearly limitless scope of the language renders application of the exclusion absurd in some cases and yields results that no one would reasonably expect. In addition to carbon monoxide, those cases deal with a wide variety of substances that, if viewed in isolation, might be considered to be a “contaminant” or “irritant” but which, in context, the courts held did not fall within the scope of the absolute pollution exclusion. Those substances include pesticides, poisonous gas, paint fumes, solvent fumes, trichloroethylene, diesel fuel, and refinery wastewater.
Wisconsin appellate courts have held that the absolute pollution exclusion did not bar coverage for carbon monoxide poisoning, Langone, or high levels of carbon dioxide in an office building that made occupants sick. Donaldson v. Urban Land Interests, Inc., 211 Wis. 2d 224, 564 N.W.2d 728 (1997). On the other hand, the Wisconsin Supreme Court has held that the absolute pollution exclusion barred coverage for bodily injuries from ingestion of lead paint chips in an apartment building, Peace v. Northwestern National Ins. Co., 228 Wis. 2d 106, 596 N.W.2d 429 (1999), and for property damage due to bat guano in the walls of a home. Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, 338 Wis. 2d 761, 809 N.W.2d 529.
The Wisconsin Supreme Court currently has two cases pending before it that deal with the absolute pollution exclusion. In one case, the Wisconsin Court of Appeals held that coverage was not barred for damages allegedly resulting from groundwater contamination due to the spreading of manure on farm fields for fertilizer. Wilson Mut. Ins. Co. v. Falk, 2014 WI App 10, 352 Wis. 2d 461, 844 N.W.2d 380. In the other case, a different district of the Court of Appeals held that coverage was barred by the absolute pollution exclusion for damages allegedly arising from the spreading of septage on a farm field as fertilizer. Preisler v. Kuettel’s Septic Service, LLC, 2014 WI App 24 (unpublished). The briefing in the two cases is nearly complete, but they have not yet been scheduled for oral argument.
About the Author
Ronald Ragatz is an attorney practicing out of our Madison office. He is a member of the Environmental Law and Litigation practice groups. Contact Ron by email or by phone at 608-252-9351.
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