CLEARING THE AIR : WHY THE ABSOLUTE POLLUTION EXCLUSION SHOULD NOT BAR COVERAGE FOR CHINESE DRYWALL CLAIMS. By Barry I. Buchman.

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1 CLEARING THE AIR : WHY THE ABSOLUTE POLLUTION EXCLUSION SHOULD NOT BAR COVERAGE FOR CHINESE DRYWALL CLAIMS I. Introduction By Barry I. Buchman May Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results. [For example], 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 and contaminants that cause, under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as pollution. 1 This concept, which Maryland s highest court reiterated as recently as 2006, serves as a useful reminder to insurance companies today, as they decide how to respond to the dramatic rise of product liability claims related to Chinese drywall. As the Ohio Supreme Court noted in ruling that the so-called absolute pollution exclusion does not bar coverage for claims arising from the release of carbon monoxide inside a residence: We would be remiss... if we were to simply look to the bare words of the exclusion, ignore its raison d etre, and apply it to situations which do not remotely resemble traditional environmental contamination. 2 Insurance companies, however, already are arguing that the absolute pollution exclusion, which appears in most post-1985 comprehensive general liability ( CGL ) policies, bars coverage for Chinese drywall product liability claims. Insurance companies have engaged in similar efforts in response to other, analogous types of product liability claims, including lead paint claims, asbestos claims, and, most recently, benzene claims and welding fumes claims. These claims, like Chinese drywall claims, typically arise in a traditional product liability context: the claims typically allege localized individual exposure to, and/or property damage from, a toxic substance, and the alleged injury and/or damage usually results from the ordinary and intended use of the substance and/or a product containing the substance. 1 Barry Buchman is a partner in the Washington, D.C. office of Gilbert LLP. Mr. Buchman represents policyholders on a wide variety of insurance issues, including disputes over insurance coverage for property damage claims and bodily injury claims related to the presence of lead paint and asbestos in buildings. This article first appeared in the December 22, 2009 edition of HarrisMartin s Chinese Drywall Litigation Report. The author has updated portions of the article based on subsequent developments. The views expressed in this article are solely those of the author, and do not necessarily reflect the views of Gilbert LLP or any of its clients. This article also does not constitute or provide legal advice. Mr. Buchman can be reached at [email protected].

2 In these other product liability contexts, insurance companies have tried to extend the scope of the absolute exclusion and its predecessor, the qualified pollution exclusion, beyond their original, intended purpose, which was to bar coverage for claims arising out of traditional environmental contamination (such as discharges of hazardous waste from a manufacturing plant into a stream). Due to these insurance company efforts, the scope of the pollution exclusion in standard CGL policies has been [o]ne of the most hotly litigated insurance coverage questions of the past twenty years. 3 During this time period, a useful body of case law has developed interpreting the scope of the qualified and absolute versions of the pollution exclusion. The majority of these cases have rejected insurance company efforts to extend the exclusion s reach to traditional product liability claims. 4 Consistent with this case law, the first court to address the scope of the pollution exclusion in the context of Chinese drywall has rejected application of the exclusion. In a decision rendered just a few weeks ago, a Louisiana state trial court ruled that a pollution exclusion in a homeowners insurance policy did not bar coverage for property damage to a home. 5 Companies that are facing, or that may face, Chinese drywall claims need to be aware of the major issues and decisions so that they do not forfeit their rights. Toward that end, this article provides an overview of (a) the explosion of Chinese drywall claims and the corresponding importance of insurance; (b) the evolution of the pollution exclusion in standard CGL policies; (c) the case law that largely has rejected insurance company efforts to extend the scope of the pollution exclusion to traditional product liability claims; and (d) some pointers to help policyholders navigate around the minority of decisions that are unfavorable on this issue. II. The Dramatic Rise Of Chinese Drywall Product Liability Claims And The Corresponding Importance Of Insurance As the media has widely reported, there has been an explosion of legal claims related to Chinese drywall since the end of The crux of the claims is that when Chinese drywall is exposed to high heat and humidity, it releases sulfur-based compounds, which are highly corrosive to electrical systems and other property within affected homes and which also can cause adverse health effects. 7 These claims have left many domestic companies in the home construction industry, including suppliers, developers, contractors, and subcontractors, facing potentially enormous losses. The costs of removing and replacing the drywall in each affected house, and addressing associated damage within the house, could be one-third or more of each home s value. 8 Estimates also indicate that there may be over 100,000 affected homes nationwide. 9 Moreover, some homeowners are claiming that they have suffered injury from exposure to drywall fumes, or that they are at increased risk of injury. 10 A recent article estimated that the total economic cost of the Chinese drywall morass could reach as high as $25 billion. 11 Other estimates suggest that the number could even be in the hundreds of billions of dollars. 12 Litigation costs likely will account for a substantial portion of the total 2

3 figure. 13 Thus, even if companies ultimately succeed in avoiding liability, they may incur significant litigation costs to defend Chinese drywall claims. Due to the huge stakes involved, Chinese drywall claims raise critical insurance coverage considerations for companies facing such claims. CGL insurance policies may help protect companies from dramatic financial losses by covering the costs of defending Chinese drywall lawsuits and by covering any liabilities that these companies may incur as a result of judgments and settlements. As one Florida newspaper recently noted: It may not be the sexiest of topics, but the intricacies of insurance policies may prove to be paramount in deciding who winds up footing the bill for the tainted drywall Insurance companies already have begun drawing battle lines, by denying claims and preemptively initiating coverage litigations. As of late April 2010, there were nearly 40 insurance coverage litigations around the country related to Chinese drywall; most of these cases involve coverage under CGL policies, but there also are several cases involving homeowners policies, including some class actions. 15 Commentators have noted that the absolute pollution exclusion could play a very significant role in disputes over coverage for drywall-related losses. 16 As noted, the scope of the pollution exclusion in the context of emerging toxic torts, such as drywall-related claims, has been [o]ne of the most hotly litigated insurance coverage questions of the past twenty years. 17 Further, the exclusion affects the availability of coverage not only under CGL policies, but also under homeowners policies, which often have pollution exclusions that are similar to those found in CGL policies. 18 When considering the potential application of the absolute pollution exclusion, it is important to remember that Chinese drywall lawsuits have a critical feature in common; they typically involve localized, residential exposure to, and/or damage from, a product that was used legally for its intended purpose. The claims typically do not arise out of a widespread release or other discharge of sulfur-based compounds into the environment. III. Evolution Of The Pollution Exclusion In Standard-Form CGL Insurance Policies Beginning in 1970, in response to environmental disasters like the one at Love Canal, and the corresponding increase in civil lawsuits and government regulation related to environmental pollution, the insurance industry inserted the qualified pollution exclusion into its standardform CGL policies as a mandatory endorsement. 19 That standard exclusion provides: This policy shall not apply... to any liability of any insured arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, solids, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water unless such discharge, dispersal, release or escape is sudden and accidental. 20 This exclusion is referred to as the qualified pollution exclusion, or the sudden and accidental pollution exclusion, because it contains an exception allowing coverage for sudden and accidental discharges. 3

4 In incorporating this qualified pollution exclusion into standard CGL policies, the insurance industry stated that the exclusion was intended to preclude coverage only for intentional environmental polluters. 21 The insurance industry explained that accidental pollution continued to be insured under a CGL policy, but deliberate polluters would remain uncovered, unable to use insurance to avoid the financial consequences of their acts. 22 This qualified exclusion was used throughout the 1970s and early 1980s. But by the mid- 1980s, environmental liabilities of corporate policyholders had increased significantly, and the insurance industry was frustrated by what it viewed as courts overly broad interpretation of the sudden and accidental exception to the qualified exclusion. 23 These circumstances caused the insurance industry to incorporate the so-called absolute pollution exclusion into standard CGL policies beginning in That standard exclusion provides: This Insurance does not apply to: f. (1) Bodily Injury or property damage which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time. * * * Pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste includes material to be recycled, reconditioned or reclaimed. 25 Consistent with the impetus for its adoption, the new exclusion removed the sudden and accidental exception that was contained in the qualified exclusion. 26 The new exclusion also removed the language regarding the discharge of pollutants into or upon land, the atmosphere or any watercourse or body of water. 27 Shortly after drafting the absolute exclusion, the insurance industry represented to state regulatory agencies that the exclusion still applied only to traditional environmental pollution. For example, in a February 1985 filing by the Insurance Services Office ( ISO ) with the Texas State Board of Insurance, ISO wrote that the absolute exclusion did not bar coverage for product liability claims: This endorsement introduces a total pollution exclusion for bodily injury and property damage arising from the discharge of pollutants. The exclusion does not apply to damages arising out of products or completed operations nor to certain off-premises discharges of pollutants. 28 Despite this drafting history, the insurance industry has repeatedly tried to extend the pollution exclusion to traditional product liability claims. As discussed below, those efforts have been largely unsuccessful. 4

5 IV. Case Law Addressing The Pollution Exclusion In The Context Of Product Liability Claims A. Overview of Favorable Case Law The majority of courts addressing the scope of the qualified and absolute versions of the pollution exclusion have rejected insurance company efforts to extend the exclusion s reach to traditional product liability claims. 29 One of the more recent and instructive of these cases is the Maryland Court of Appeals decision in Clendenin Brothers, Inc. v. United States Fire Insurance Co. 30 In that case, Maryland s highest court ruled that the absolute pollution exclusion was not as absolute as the insurance company contended, and did not bar coverage for product liability lawsuits involving occupational exposure to welding fumes. 31 In reaching that decision, the court relied on the fact that the underlying claims for which the policyholder sought coverage were traditional product liability lawsuits: The plaintiffs in the underlying suits are individuals who allege that proper use of the Insureds welding products produced harmful localized fumes containing manganese which caused bodily harm and neurological damage. 32 The court noted that products, despite their toxic nature, are not pollutants or contaminants when used intentionally and legally. 33 Applying that principle, the court ruled that, [t]he form taken of the manganese used here, as used in the ordinary course of the particular business involved, would not be considered by a reasonably prudent person to be excluded through a pollution exclusion provision. 34 Consistent with this rationale, most courts to decide the issue have ruled that the pollution exclusion does not bar coverage for product liability claims involving allegations of bodily injury and/or property damage due to the presence of lead-based paint. 35 Several courts likewise have held that the pollution exclusion does not bar coverage for product liability claims involving allegations of bodily injury and/or property damage due to the presence of asbestos-containing products, such as insulation. 36 In addition, many courts have ruled that the pollution exclusion does not bar coverage for claims arising from numerous other substances, such as paint and solvent fumes, pesticides, and carbon monoxide, where the exposures are localized and where the substances are associated with products that are used as intended. 37 Courts similarly have held that when edible products, such as consumer beverages, are contaminated with bacteria or faulty ingredients, the pollution exclusion does not bar coverage for property damage or bodily injury claims arising out of that contamination. 38 In all of these decisions, the courts have based their rulings on a combination of the terms of the qualified and absolute exclusions themselves, the origin and limited purpose of the exclusions as reflected in their drafting history, and a commonsense understanding of what most people think of as a pollutant. When addressing the exclusionary language, for example, several courts have stressed that if insurance companies want to exclude claims arising from a 5

6 particular product or substance, insurance companies easily can do that by including provisions in their policies that specifically exclude coverage for that particular product or substance. 39 Indeed, most post-1985 CGL policies have asbestos exclusions, and some post-1985 policies contain lead exclusions (though these exclusions are less common than asbestos exclusions). Further, in relying on the original, limited purpose of the pollution exclusion, courts have noted that the insurance industry changed from the qualified to the absolute version of the exclusion only to eliminate the qualified exclusion s exception for sudden and accidental discharges. The insurance industry did not intend to broaden the pollution exclusion s scope beyond the context of traditional environmental contamination: [T]he 1986 amendment to the exclusion was wrought, not to broaden the provision s scope beyond its original purpose of excluding coverage for environmental pollution, but rather to remove the sudden and accidental exception to coverage which, as noted above, resulted in a costly onslaught of litigation. 40 Finally, in relying on a commonsense understanding of a pollutant, courts have expressed a reluctance to adopt an interpretation that would infinitely enlarge the scope of the term pollutants, and seemingly contradict both a common speech understanding of the relevant terms and the reasonable expectations of a businessperson. 41 Consequently, a majority of courts have interpreted the pollution exclusion as being limited to irritants and contaminants commonly thought of as pollution and not as applying to every possible irritant or contaminant imaginable. 42 B. Application To Chinese Drywall Product Liability Claims The rationale of the decisions discussed above applies equally to Chinese drywall claims. Chinese drywall claims typically allege localized exposure to, and/or damage from, sulfur-based compounds, which come from a product Chinese drywall that was used legally for its intended purpose. In this regard, for purposes of analyzing the scope of the pollution exclusion, Chinese drywall claims are analogous to product claims that allege injury and/or damage due to the presence of lead-based paint or asbestos-containing insulation products. All of these claims arise in a traditional product liability context. Moreover, applying the pollution exclusion would be even less appropriate where a Chinese drywall claim alleges that the mere presence of the drywall has caused property damage without even releasing any sulfur-based compounds. Similar mere presence allegations have been made in the context of property damage claims related to lead paint and asbestos. As noted earlier, consistent with these principles, a Louisiana state trial court very recently ruled that a pollution exclusion in a homeowners policy did not bar coverage for property damage to a home. 43 As the case law discussed above demonstrates, substances such as asbestos, lead, manganese fumes, and sulfur-based fumes might be considered, in and of themselves, to be irritants or contaminants when viewed in isolation. 44 But these substances do not implicate the pollution exclusion when they are legally incorporated into a product and then emitted during the 6

7 ordinary and intended use of that product. Therefore, companies facing Chinese drywall claims should be prepared to fight contentions by their insurance companies that the pollution exclusion bars coverage for such claims. V. Pointers For Navigating Around Unfavorable Case Law Despite the case law discussed above, some courts have held that the pollution exclusion extends beyond the context of traditional environmental contamination. 45 These decisions are at odds with the majority rule limiting the scope of the exclusion. 46 Nonetheless, companies that are defending Chinese drywall claims may have to address this unfavorable case law, depending on which jurisdiction s law applies to their insurance coverage dispute. Fortunately, some of these unfavorable decisions are distinguishable; they do not arise in the context of traditional product liability claims that, like Chinese drywall claims, involve localized exposure to a product that was used legally for its intended purpose. Instead, some of the cases involve accidental, widespread, and/or industrial releases of a substance, even though the releases occurred in a relatively confined space such as a building. 47 Further, the unfavorable decisions typically address the standardized, 1985 version of the absolute pollution exclusion. More recent CGL policies, however, sometimes have favorable variations on this standardized version, including express exceptions for product liability claims. Even in an unfavorable jurisdiction, an insurance company will have difficulty arguing that such a pollution exclusion bars coverage for Chinese drywall claims. Companies also should review evidence regarding the underwriting of their particular CGL policies. For example, such evidence may reveal that the insurance company considered using language that would have more clearly excluded Chinese drywall claims, but then used the standard form of the pollution exclusion instead. Such evidence should make it difficult for the insurance company to now argue that it intended for the standard pollution exclusion to apply to Chinese drywall claims. For all of these reasons, it is important that companies closely review their policy language, their underwriting evidence, and the facts and allegations underlying the particular Chinese drywall claims at issue. In addition to reviewing their own files for underwriting evidence and other policy information, companies that are in coverage litigation should demand that kind of information from their insurance companies as part of the pre-trial discovery process. VI. Conclusion The insurance industry likely will rely on the absolute pollution exclusion in post-1985 CGL policies in an effort to avoid providing coverage for defense costs and potential liabilities associated with Chinese drywall claims. The insurance industry s previous, similar efforts in response to asbestos-related lawsuits and lead paint lawsuits have been largely unsuccessful. The case law that has developed in these and other contexts gives policyholders strong ammunition to fight insurance company efforts to extend the absolute pollution exclusion to Chinese drywall claims. Companies dealing with such claims should not take coverage denials from their insurers at face value, and instead should aggressively pursue their rights to coverage under their CGL policies. 7

8 1 Clendenin Bros., Inc. v. U.S. Fire Ins. Co., 889 A.2d 387, 396 (Md. 2006) (emphasis added) (quoting Sullins v. Allstate Ins. Co., 667 A.2d 617, 621 (Md. 1995)). 2 Andersen v. Highland House Co., 757 N.E.2d 329, 334 (Ohio 2001) (citation omitted); see also Bosserman Aviation Equip., Inc. v. U.S. Liab. Ins. Co., No , 2009 WL (Ohio App. June 1, 2009) (absolute pollution exclusion did not bar coverage for claims involving occupational exposure to aircraft fuel) (citing Andersen). 3 See Clendenin Bros., 889 A.2d at 394 (citation omitted). In addition to the absolute pollution exclusion, there is a similar, so-called total pollution exclusion in some recent CGL policies. With possible rare exceptions that are beyond the scope of this article, both exclusions raise the issue of whether the pollution exclusion s reach should extend to claims involving localized exposure to a product that has been used for its intended purpose. 4 See MacKinnon v. Truck Ins. Exch., 73 P.3d 1205, 1209 n.2 (Cal. 2003) (noting that the narrower interpretation of the pollution exclusion appears to be in the majority ); see also Cont l Cas. Co. v. Advance Terrazzo & Tile Co., No. Civ MJDJSM, 2005 WL , at *6 (D. Minn. Aug. 11, 2005) (expressing hope that Minnesota Supreme Court will have occasion to revisit 1990s decision adopting broader interpretation of pollution exclusion, in light of more recent, majority trend limiting exclusion), aff d, 462 F.3d 1002 (8th Cir. 2006); Auto-Owners Ins. Co. v. Reed, 649 S.E.2d 843, 847 (Ga. App. 2007) (Ellington, J., dissenting) ( I would find, as a majority of other jurisdictions have done, that a reasonable business person would understand that an accidental carbon monoxide leak that originates and remains confined within the insured property would be covered under the standard CGL policy. ), aff d, 667 S.E.2d 90 (Ga. 2008). 5 See Finger v. Audubon Ins. Co., No (La. Dist. Ct., Orleans Parish, Mar. 22, 2009). A copy of this decision is on file with the author. 6 See, e.g., M.P. McQueen, The Prisoners of Drywall, Wall St. J., Aug. 7, 2009, available at 76.html; Melissa Maleske, Drywall drama: toxic Chinese drywall claims have homeowners suing, InsideCounsel, Aug. 1, 2009, available at ( Maleske ); Barry I. Buchman and Leon Kellner, Legal, Insurance and other Strategic Considerations: Chinese Drywall, Florida HomeBuilder (July/August 2009), available at Rachel Boles and Ronald Kozlowski, Economic Losses from Chinese Drywall Could Reach $25 Billion, Insurers Warned, National Underwriter, July 27, 2009, available at casualty.com/issues/2009/july /pages/economic-losses-from-chinese-drywall-could-reach- 25-Billion-Insurers-Warned.aspx ( Boles and Kozlowski ); Rodney J. Taylor and Howard M. Tollin, Solving the Chinese Puzzle of Contaminated Drywall, Owners and Builders Seek Redress for Defective Drywall Installed in Homes, Bloomberg Law Reports: Insurance Law, Vol. 3, No. 21, May 26, 2009 ( Taylor and Tollin ); Jeff Casale, Drywall disputes trigger lawsuits, Business Insurance, May 11, 2009, available at Jason Hanna, Chinese-Made Drywall Ruining Homes, Owners Say, CNN, Mar. 18, 2009, available at 7 See supra note 6. 8 See Boles and Kozlowski, supra note 6; Taylor and Tollin, supra note 6. 9 See supra note See supra note 6. 8

9 11 See Boles and Kozlowski, supra note See Nirvi Shah, Curse of defective drywall forces Florida families to flee homes, The Miami Herald, May 31, 2009, available at 13 See Boles and Kozlowski, supra note See Policies may not cover the drywall, Herald Tribune, June 6, 2009, available at see also Drywall Problems Could Produce a Host of Insurance Coverage Issues, National Underwriter, May 18, 2009, available at 15 A detailed list of insurance coverage litigations related to Chinese drywall is on file with the author. 16 See Christie Smythe, Drywall Cases Could Hinge On Pollution Clause, Insurance Law360 (June 29, 2009), available at see also Maleske, supra note 6 ( Pollution exclusions are emerging as a key issue in insurance litigation surrounding Chinese drywall. ). 17 See Clendenin Bros., 889 A.2d at 394 (citation omitted). 18 See Maleske, supra note 6 (although detailed language may vary somewhat by policy, pollution exclusions are standard in corporate general liability and homeowners coverage. ). 19 See MacKinnon, 73 P.3d at See, e.g., Insurance Services Office, Inc., ISO Policy Forms, Form Number CG See Richardson v. Nationwide Mut. Ins. Co., 826 A.2d 310, 318 (D.C. 2003), vacated pursuant to settlement, 844 A.2d 344 (D.C. 2004). 22 Id. (citation omitted). 23 See Am. States Ins. Co. v. Koloms, 687 N.E.2d 72, 81 (Ill. 1997). 24 See Richardson, 826 A.2d at ( insurers were distressed by judicial decisions holding that the [qualified] exclusion did not preclude coverage for gradual but unintentional pollution. (citation omitted)). 25 See Clendenin Bros., 889 A.2d at 390 & n.1 (quoting standard absolute pollution exclusions that were at issue, and noting that [t]he relevant language of the total pollution exclusions contained in the [pertinent policies] and [sic] indistinguishable for our purposes ); see also Commercial General Liability Coverage Form 1.2.f (ISO Properties, Inc. 2003). 26 See MacKinnon, 73 P.3d at 1210 (citing Koloms, 687 N.E.2d at 79-81). 27 See id. (quoting Koloms, 687 N.E.2d at 81). As discussed below, most courts have rejected the view that the deletion of this language extends the reach of the absolute exclusion to traditional product liability claims. 28 Record of Official Action of the State Board of Insurance, Feb. 19, 1985 (emphasis added). ISO is the insurance industry organization that promulgates forms for use in preparing standard-form CGL policies. 29 See supra note A.2d 387 (Md. 2006). 31 See id. at See id. (citation omitted). 9

10 33 See id. at 396 (emphasis in original) (quoting Sullins, 667 A.2d at 621 (lead-based paint not a pollutant ), and citing W. Am. Ins. Co. v. Tufco Flooring E., Inc., 409 S.E.2d 692, 698 (N.C. Ct. App. 1991) (styrene resin used to resurface floor was not pollutant, but rather raw material used in normal business activity of resurfacing floors), overruled on other grounds by Gaston County Dyeing Mach. Co. v. Northfield Ins. Co., 524 S.E.2d 558 (N.C. 2000)). 34 See Clendenin Bros., 889 A.2d at See, e.g., Porterfield v. Audubon Indem. Co., 856 So. 2d 789 (Ala. 2002); Lititz Mut. Ins. Co. v. Steely, 785 A.2d 975 (Pa. 2001); Westview Assocs. v. Guar. Nat l Ins. Co., 740 N.E.2d 220 (N.Y. 2000); Sullins, 667 A.2d 617; Atl. Mut. Ins. Co. v. McFadden, 595 N.E.2d 762 (Mass. 1992); Byrd v. Blumenreich, 722 A.2d 598 (N.J. Super. Ct. App. Div. 1999); Ins. Co. of Ill. v. Stringfield, 685 N.E.2d 980 (Ill. App. Ct. 1997); Wood v. Auto-Owners Mut. Ins. Co., No (Ohio Ct. Com. Pl. Oct. 18, 2000); Danbury Ins. Co. v. Novella, 727 A.2d 279 (Conn. Super. Ct. 1998); Glidden Co. v. Lumbermens Mut. Cas. Co., No. CV (Ohio Ct. Com. Pl. May 26, 1993); see also A-1 Sandblasting & Steamcleaning Co. v. Baiden, 632 P.2d 1377 (Or. Ct. App. 1981) (pollution exclusion not applicable where claims were not for pollution to environment but rather for property damage to cars caused by paint spraying conducted by bridge painter). 36 See, e.g., Essex Ins. Co. v. Avondale Mills, Inc., 639 So. 2d 1339 (Ala. 1994); Cont l Cas. Co. v. Rapid- Am. Corp., 609 N.E.2d 506 (N.Y. 1993); U.S. Fid. & Guar. Co. v. Wilkin Insulation Co., 578 N.E.2d 926 (Ill. 1991); Owens-Corning Fiberglas Corp. v. Allstate Ins. Co., 660 N.E.2d 746 (Ohio Ct. Com. Pl. 1993); In re Asbestos Ins. Coverage Cases, Judicial Council Coordination Proceeding No. 1072, Statement of Reasons for Decision Concerning Phase IV Issues, slip op. at (Cal. Super. Ct., S.F. County, Jan. 24, 1990), aff d in part, rev d in part on other grounds sub nom. Armstrong World Indus. v. Aetna Cas. & Sur. Co., 52 Cal. Rptr. 2d 690 (Ct. App. 1996). A copy of this unreported decision is on file with the author s office. 37 See, e.g., NAV-ITS, Inc. v. Selective Ins. Co. of Am., 869 A.2d 929 (N.J. 2005) (absolute pollution exclusion did not bar coverage for claim arising out of exposure to fumes from floor coating/sealant); Belt Painting Corp. v. TIG Ins. Co., 795 N.E.2d 15 (N.Y. 2003) (absolute pollution exclusion did not bar coverage for bodily injury arising from inhalation of paint and solvent fumes); MacKinnon, 73 P.3d 1205 (absolute pollution exclusion did not bar coverage for claim arising out of spraying of pesticides inside apartment building); Richardson, 826 A.2d 310 (absolute pollution exclusion did not bar coverage for claims arising from carbon monoxide emitted inside building); Gainsco Ins. Co. v. Amoco Prod. Co., 53 P.3d 1051 (Wyo. 2002) (absolute pollution exclusion did not bar coverage for claim arising from exposure to hydrogen sulfide gas while delivering oil to tank by truck); Andersen v. Highland House Co., 757 N.E.2d 329 (Ohio 2001) (absolute pollution exclusion did not bar coverage for claims arising from carbon monoxide emitted inside building); Koloms, 687 N.E.2d 72 (same); W. Alliance Ins. Co. v. Gill, 686 N.E.2d 997 (Mass. 1997) (same); Langone v. Am. Family Mut. Ins. Co., No. 2006AP1332, 2007 WL (Wis. Ct. App. Mar. 14, 2007) (same); Bosserman Aviation Equip., Inc WL , at *8 (absolute pollution exclusion did not bar coverage for bodily injury sustained by employee exposed to aircraft fuel while conducting tasks within the normal course of his job duties and in the confines of his workplace). 38 See, e.g., Pepsico, Inc. v. Winterthur Int l Am. Ins. Co., 788 N.Y.S.2d 142 (App. Div. 2004). 39 See Clendenin Bros., 889 A.2d at 398 n.4 ( [T]o ensure that localized, non-environmental workplace manganese welding fumes were excluded through the total pollution exclusion, the drafter of the insurance contract [i.e., the insurance company] could have included explicitly a provision doing so. ); Sullins, 667 A.2d at 624 n.3 ( To be sure that lead paint poisoning claims were excluded from coverage, Allstate could have included a provision... explicitly excluding such claims. ); see also Nat l Union Fire Ins. Co. of Pittsburgh, Pa. v. Am. Re-Ins. Co., 351 F. Supp.2d 201, (S.D.N.Y. 2005) (noting 10

11 that if absolute pollution exclusion clause was as broad as insurance company argues, it would not have been necessary for insurance company to include separate asbestos exclusion in addition to pollution exclusion). This rationale is consistent with the principle that if, at the time of contracting, an insurance company was aware of policy language that would have made an exclusion or limitation clear, a court will not find such an exclusion or limitation by implication later. See Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, (2d Cir. 1974). 40 See Koloms, 687 N.E.2d at 81. Not surprisingly, therefore, courts likewise have ruled that the absolute exclusion s deletion of the language regarding the discharge of pollutants into or upon land, the atmosphere or any watercourse or body of water does not broaden the pollution exclusion s scope beyond the context of traditional environmental contamination. See id. (citation omitted). Among other things, because most absolute exclusions still contain the environmental terms discharge, dispersal, seepage, migration, release or escape, the removal of the other language simply removes a redundancy in the exclusion. See Belt Painting, 795 N.E.2d at 20-21; see also Koloms, 687 N.E.2d at Belt Painting, 795 N.E.2d at 20; see also Clendenin Bros., 889 A.2d at 396 (the terms irritant and contaminant, when viewed in isolation, are virtually boundless,... [and thus] [w]ithout some limiting principle, the pollution exclusion clause would... lead to some absurd results (citations omitted)). 42 MacKinnon, 73 P.3d at (emphasis in original) (citations omitted) (noting that insurance company s interpretation would cut[ ] a broad and arbitrary swath through CGL [insurance] protections ). 43 See Finger v. Audubon Ins. Co., No (La. Dist. Ct., Orleans Parish, Mar. 22, 2009). In a decision rendered just three weeks later, another Louisiana trial court ruled in favor of an insurance company that had moved for summary judgment based on several exclusions in a homeowners policy, including the pollution exclusion. See Ross v. C. Adams Constr. & Design, LLC, et al., No (La. Dist. Ct., Jefferson Parish, Apr. 14, 2010). (A copy of this ruling is on file with the author.) The ruling does not give any reasons for granting the insurance company s motion, and thus it is unclear whether the ruling was based, in whole or in part, on the pollution exclusion; the insurance company had argued that any one of the exclusions referenced in its motion was sufficient, by itself, to preclude coverage. To the extent that the ruling is based on the pollution exclusion, it is inconsistent with Louisiana law, which has confined application of the exclusion to traditional environmental contamination. See Doerr v. Mobil Oil Corp., 774 So. 2d 119 (La. 2000); West v. Board of Commissioners of the Port of New Orleans, 591 So. 2d 1358, 1360 (La. Ct. App. 1991); Thompson v. Temple, 580 So. 2d 1133, 1135 (La. Ct. App. 1991) (pollution exclusion in homeowner s policy did not bar coverage for injuries arising from release of carbon monoxide). 44 See Clendenin Bros., 889 A.2d at See, e.g., Cont l Cas. Co. v. Advance Terrazzo & Tile Co., No. Civ MJDJSM, 2005 WL , at *6 (D. Minn. Aug. 11, 2005) (although cases limiting scope of pollution exclusion to context of traditional environmental contamination represent majority view, court was compelled to follow Minnesota Supreme Court decision adopting minority view (citing Bd. of Regents v. Royal Ins. Co., 517 N.W.2d 888 (Minn. 1994))), aff d, 462 F.3d 1002 (8th Cir. 2006); Peace v. Nw. Nat l Ins. Co., 596 N.W.2d 929 (Wis. 1999) (absolute pollution exclusion barred coverage for lead paint claim); Deni Assocs. of Fla., Inc. v. State Farm Fire & Cas. Ins. Co., 711 So.2d 1135, 1138 (Fla. 1998) (absolute pollution exclusion barred coverage for claims arising from indoor air contamination caused both by ammonia spill and by accidental spraying of insecticide); Nautilus Ins. Co. v. Country Oaks Apartments Ltd., 556 F.3d 452, 458 (5th Cir. 2009) (absolute pollution exclusion barred coverage for claim alleging injury from carbon monoxide emitted from furnace inside residence); Reed v. Auto-Owners Ins. Co., 667 S.E.2d 90, 92 (Ga. 2008) (same). 11

12 46 See Advance Terrazzo, 2005 WL , at *6 (expressing hope that Minnesota Supreme Court will have opportunity to readdress pollution exclusion issue and adopt majority view in light of more recent precedent). 47 See, e.g., id. at *1 (pollution exclusion barred coverage for carbon monoxide claim where carbon monoxide was released widely, as gaseous exhaust and byproduct of propane-powered floor grinders used in constructing addition to school building); Deni Assocs. of Fla., Inc., 711 So.2d at 1138 (absolute pollution exclusion barred coverage for claims arising from indoor air contamination caused both by ammonia spill and by accidental spraying of insecticide). 12