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)).