In recent times people increasingly strive to become more “green.” The auto industry continually competes to produce more gasoline-efficient vehicles or utilize hybrid technology. People are encouraged to “think before they print,” considering how it will affect the environment. Tax incentives are given to homeowners to consider energy-efficient improvements to their property.
With this global mantra of “going green,” it is no surprise that the category of what Americans consider to be “pollution” is ever-expanding. This is a good thing, right? People are wasting less. They are being considerate of the environment. They are embracing green! While this attitude seems good for Mother Nature, insurance companies are capitalizing on this movement and using it to reject legitimate claims under commercial general liability (“CGL”) policies based on an exclusion contained in almost all policies – the “Pollution Exclusion.”
If you have a CGL policy, you are encouraged to take a very close look. More than likely, you will find a provision that says something like (if not exactly) this:
Pollution Exclusion: This insurance does not apply to:
Pollution – “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.
Being a diligent policyholder, you then turn to the definitions portion of your policy to determine what “pollutants” actually means, and you find something that reads like this:
“Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
Think about this for a minute. Under this exclusion, and the definition of “pollutants,” that policy exception could include virtually everything, right? Insurance companies certainly think so. Insurers constantly litigate with policyholders in an attempt to convince courts that whatever injury has occurred, occurred because of a “pollutant” – and then have grounds to reject the claim.
With the pollution exclusion spiraling out of control, and this exception becoming more powerful than the policy itself, courts are finally beginning to step in. Just days ago, the Eastern District of Missouri handed down a decision in United Fire & Casualty Company v. Titan Contractors Service, Inc., 2013 WL 316060 (E.D.Mo. Jan. 28, 2013) ruling for the policyholder and against the insurance company on this very issue.
In this case, Titan Contractors was a company whose business involved, in large part, the cleaning and sealing of concrete. In its operation, Titan routinely used a floor-sealant called “TIAH.” On this sealant’s label, the manufacturer warned to “avoid prolonged breathing of vapors which can cause dizziness or suffocation. Avoid prolonged contact with skin as contact may irritate or burn skin and eyes. . . Fire may produce irritating or poisonous gasses. Runoff from fire control or dilution water may cause pollution.”
In Titan’s use of TIAH to a seal concrete, three people in an office next-door were exposed to these vapors causing dizziness, disorientation, severe headaches, wheezing, irritation, and one person was diagnosed which chemical-pneumonitis. Because of this, these individuals sued Titan, who, in turn, submitted a claim to its insurance company. Not surprisingly, the insurer denied coverage based on the terms of the policy’s Pollution Exclusion. Seems logical, right? The chemical being used by Titan states on its label that it “may cause pollution.” Despite the label warning, Titan went head-to-head with its insurer in court – and won.
The court’s analysis was guided by several factors. First, a common-sense approach to determine if the specific substance is a “pollutant.” Second, a fact-intensive inquiry to determine if the substance qualifies as a “pollutant.” Finally, and very importantly, the court said “the insurer is entitled to characterize the allegedly polluting substance in a manner consistent with the insured’s daily activities, particularly if the alleged pollutant belongs in the environment in which the insured routinely works.”
In reviewing these factors, the court found that it was reasonable for Titan – a concrete sealing company – to expect that its work in sealing concrete floors would be covered by its commercial general liability policy, and that TIAH would not be deemed a “pollutant” in that situation. The Court analogized this to a 1999 Missouri case, where a gasoline station’s underground tank failed, releasing 2,000 gallons of gasoline into the ground which then seeped into adjoining lands. The insurer took the position that the gasoline that contaminated the neighboring properties constituted a “pollutant.” In using common sense, the court disagreed, stating that “it would be an oddity for an insurance company to sell a liability policy to a gas station that would specifically exclude that insured’s major source of liability” – the gasoline itself.
This ruling demonstrates how courts can limit an insurance company’s attempt to extend the pollution exclusion to such an extent that it could be used to deny virtually any claim. While this is only one decision in favor of the policyholder amid many, many others holding for the insurance company, it speaks volumes. Consider it, despite the “green” attitude of Americans, a court found that a chemical that describes itself as a “pollutant” on its label, not to be a “pollutant” as far as the CGL policy is concerned. Policyholders are reminded that it is imperative to ensure they coverage they purchase will actually cover the risk.
Frank Cragle is a trial lawyer and a member of Hirschler Fleischer’s Insurance Recovery Team. He handles a variety of commercial business disputes, including insurance recovery and policyholder claims. Frank also devotes a substantial portion of his time to business tort litigation and intellectual property claims. For more information, contact Frank at 804.771.9515 or firstname.lastname@example.org.
Stephanie A. Hood