absolute pollution exclusion and koloms

Our consideration of the Koloms case in class (p.472) and the fairly dramatic implications of how one reads the absolute pollution exclusion led me to this and the next essay. My thesis is that most courts at present will try to confine the absolute pollution exclusion to those losses which are traditional "environment" or "external" losses. Some, however, will read the provision literally and apply it broadly to a variety of contaminants such as carbon monoxide or lead paint--contaminants that would not have been included traditionally as environmental pollutants. The purpose of these mini-essays is to show how courts argue when they adopt one or the other approach to the question.

The Absolute Pollution Exclusion ("APE")

Though individual policies may have slightly different wording, a typical APE reads as follows: "This insurance does not apply to: (1) 'bodily injury' or 'property damage' arising out of actual, alleged or threatened discharge, dispersal, release or escape of pollutants..." The exclusion further defines pollutants as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."

Pro-Insured Construal--The Importance of History

Though most courts recognize the striking breadth of this formulation, courts who limit the meaning of the clause (and therefore are more pro-insured) will do so on two bases: (1) a strict confinement of the words to their literal meaning or (2) a long discussion on the historical reason for the addition of this exclusion in the mid-1980s. A case in point is Keggi v. Northbrook, 13 P3d 785 (Ariz App 2000). Keggi was a professional golfer who drank some fecally-contaminated tap water at the Desert Mountain resort in Scottsdale and became seriously ill. Northbrook insured Desert Mountain. After a settlement with Desert Mountain for $1.2 million, Keggi intervened in Desert Mountain's suit against its insurer to collect on the insurance proceeds. The insurer argued that the injury was not covered because of the pollution exclusion Specifically, it argued that the term "irritant" or "contaminant" in its policy would have included the fecally contaminated water. Summary judgment was awarded at trial to the insurer.

On Appeal

The Court of Appeals reversed. The court pursued two lines of argument. First, it said: "While the terms 'irritant' and 'contaminant' may be extraordinarily broad, we note that the Northbrook policies limit 'pollutants' to 'irritants' and 'contaminants' that are 'solid, liquid, gaseous or thermal.'" However, in this case, what was at issue was water-borne bacteria which was the alleged cause of Keggi's injury. That is, what was at issue was a "living, organic" irritant which defied description under the policy as 'solid,' 'liquid,' or 'gaseous.' In addition, an organic contaminant is not 'smoke, vapor, soot, fumes, etc...' Thus, the court refused to expand the meaning of these terms to include the harm that Keggi suffered.

The insurer argued that the water-borne bacteria was a "contaminant," and the court, while not agreeing with that analysis, did admit that such an explanation was plausible and would "at best render the clause ambiguous." Rather than running immediately to contra proferentem, however, the court decided to review some of the historical work performed by other courts (as did the Koloms court), and noted the following. (1) It observed that the terms "dispersal," and "release," for example appeared to be terms of art in environmental law and are generally used with reference to damage or injury caused by improper disposal or containment of hazardous waste. (2) Then the court further noted the "CERCLA-like" language of the exclusion (that the clause precludes coverage for any 'loss, cost or expense arising out of' a 'request, demand or order [presumably by the government] that any insured or others test for, monitor, clean up....the effects of pollutants.' Thus the court concluded that the provisions appeared to be intended to apply to traditional types of "environmental" pollution.

Thus, the Court of Appeals found coverage for Desert Mountain under its CGL policy for the contaminated water.

A different reading of the absolute pollution exclusion is in the case discussed in the next essay.