Many property policies provide that losses caused by the discharge, dispersal, seepage, migration, release or escape of pollutants are excluded losses. The term “pollutant” is typically defined in first party policies to include any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste, although the specific policy definition varies.
In property insurance cases, the parties rarely dispute whether there was a “discharge,” “seepage,” or “migration.” Whether the pollution exclusion is applicable usually depends on the court’s interpretation of the definition of “pollutant.” There are very few jurisdictions that have interpreted the definition of pollutant in the first party context. In the third-party liability insurance context, a minority of courts have concluded, typically based on either a judicially-created public policy or a finding of ambiguity in particular policy language, that pollution exclusions in liability policies should only apply to industrial or “traditional” environmental pollution (like, for instance, a benzene leak from an industrial facility), and not indoor hazards (like asbestos or paint fumes). Jurisdictions considering the applicability of pollution exclusions in the first party context generally find that the loss is excluded regardless of the “traditional environmental” / nontraditional indoor hazard distinction seen in liability cases. See, e.g., The Villa Los Alamos Homeowners Assn. v. State Farm General Ins. Co., 198 Cal. App. 4th 522 (Cal. App. 1st Dist. 2011) (finding pollution exclusion in first party policy excluded coverage for indoor asbestos release).
The applicability of the pollution exclusion to indoor hazards has most recently arisen in the context of imported corrosive or “Chinese” drywall. Courts have generally held that the definition of “pollutant” includes gases emitted by Chinese drywall. See, e.g., Ross v. C. Adams Constr. & Design, LLC, 70 So. 3d 949 (La. Ct. App. 2011); Travco Ins. Co. v. Ward, 715 F. Supp. 2d 699, 717 (E.D. Va. 2010), question certified, 468 Fed. Appx. 195 (4th Cir. 2012) (the certified question was accepted by the Virginia Supreme Court, which determined that the pollution exclusion applied to gases emitted by corrosive Chinese drywall (Travco Ins. Co. v. Ward, 284 Va. 547 (2012)).
In May 2014, Nevada became the latest state to interpret the breadth and applicability of the pollution exclusion contained within a third-party general liability policy. Although many states have considered this question, those courts have reached diametrically opposite conclusions, leading to confusion and uncertainly, particularly with respect to states that have yet to address the … Continue Reading
When faced with the impending application of an exclusion that negates any coverage for a claimed loss, an insured may sometimes resort to far-fetched or implausible arguments to contend that the exclusion does not apply, or that an exception to the exclusion has the effect of reviving coverage. The insured in Woodcliff Lake Board of … Continue Reading
In insurance fraud cases involving actual or alleged destruction of evidence by the insured, an issue often arises regarding whether an adverse inference instruction is appropriate, and, if so, what form it should take. The Second Circuit recently approved a “light” form of adverse inference instruction that allowed the jury to make an adverse inference … Continue Reading
CASE RESULTS DEPEND UPON A VARIETY OF FACTORS UNIQUE TO EACH CASE. CASE RESULTS DO NOT GUARANTEE OR PREDICT A SIMILAR RESULT IN ANY FUTURE CASE UNDERTAKEN BY THE LAWYER. Today the Virginia Supreme Court, in answering a certified question from the federal Fourth Circuit, held unanimously that a homeowners’ insurance policy did not provide … Continue Reading
While the pollution exclusion has generated extensive litigation under liability insurance policies, few property insurance cases address it. In what appears to be the first state supreme court decision on the pollution exclusion in a property policy, the Virginia Supreme Court has upheld the exclusion as unambiguous. In PBM Nutritionals, LLC v. Lexington Ins. Co., 2012 … Continue Reading