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Pollution Exclusion cases have become so abundant, and similar, that I’ve taken to limiting my discussion of them in Coverage Opinions to the ones that are truly unique. (See CO, __ (trust me)). Mellin v. Northern Security Insurance Co., No 2014-020 (N.H. Apr. 24, 2015) is in the unique category, [enhanced version available to lexis.com subscribers]. The New Hampshire court addressed whether cat urine is a pollutant. This was a national case of first impression. That explains why I had no Meeeemory of ever seeing it. The issue in Mellin arises under the property section of a homeowner’s policy. But the case and analysis is just as applicable to a dispute under a liability policy. [Not that that matters since this is the first, and probably last, time that the issue will arise.]
At issue was coverage for homeowners who sustained damage to their condominium on account of the smell of cat urine emanating from a downstairs neighbor’s condo. The affected homeowners claimed that they could not rent the condo (a tenant had in fact moved out) and they ultimately sold it for significantly less than it was worth (presumably to cat owners or someone with a habitually stuffed nose).
The homeowners sought coverage for their damages and the case made its way to the New Hampshire Supreme Court. There were three principal issues before the court. Did the claim satisfy the policy’s requirement that the unit “experienced a direct physical loss” as a result of the cat urine odor? Did the pollution exclusion bar recovery? Was the cat urine odor caused by any of the enumerated perils against which the policy insured? I’ll skip this last issue.
The court held that “physical loss may include not only tangible changes to the insured property, but also changes that are perceived by the sense of smell and that exist in the absence of structural damage. These changes, however, must be distinct and demonstrable. Evidence that a change rendered the insured property temporarily or permanently unusable or uninhabitable may support a finding that the loss was a physical loss to the insured property.” [This general issue, whether odor can qualify as physical loss, arises with some regularity.] Turning to the pollution exclusion, following a lengthy analysis, the court held that it did not apply. In general, the court interpreted the pollution exclusion narrowly, despite how broadly it may read on its face.
The court stated: “Applying these definitions in a ‘purely literal interpretation ... surely stretch[es] the intended meaning of the policy exclusion,’ ‘contrary to any reasonable policyholder’s expectations.’ For example, ‘[t]aken at face value, the policy’s definition of a pollutant is broad enough that it could be read to include items such as soap, shampoo, rubbing alcohol, and bleach insofar as these items are capable of reasonably being classified as contaminants or irritants.’” (citations omitted). In general, the New Hampshire Supreme Court limited the pollution exclusion’s applicability to traditional environmental pollution: “Although an insured may have reasonably understood that the pollution exclusion clause precluded coverage for damages resulting from odors emanating from large-scale farms, waste-processing facilities, or other industrial settings, these circumstances are distinguishable from those before us, which involve an odor created in a private residence by common domestic animals. See Western Alliance Ins. Co., 686 N.E.2d at 999, [enhanced version available to lexis.com subscribers], (recognizing that ‘an insured could reasonably have understood the provision at issue to exclude coverage for injury caused by certain forms of industrial pollution, but not coverage for injury allegedly caused by the presence of leaded materials in a private residence’ (quotation omitted)).”
But, like Morris the Cat, the court was finicky and the decision was not unanimous. The opinion includes a lengthy dissent: “Because the term ‘pollutant” is unambiguously defined within the policy in clear language, I would not look beyond the policy language in determining that the plaintiffs’ claims are precluded by the pollution exclusion clause. This approach is in keeping with the rulings of many courts, which likewise interpret pollution exclusion clauses by looking to the plain meaning of the terms as defined in the text of such clauses.” The dissenting Justice also had this to say on the way out: “I share the view of the Supreme Court of Minnesota that if the pollution exclusion clause is regarded as overly broad, the remedy must be found in the market place or through legislative action rather than through creative judicial construction of clear policy language.”
Coverage Opinions is a bi-weekly (or more frequently) electronic newsletter reporting or providing commentary on just-issued decisions from courts nationally addressing insurance coverage disputes. Coverage Opinions focuses on decisions that concern numerous issues under commercial general liability and professional liability insurance policies. For more information visit www.coverageopinions.info.
The views expressed herein are solely those of the author and not necessarily those of his firm or its clients. The information contained herein shall not be considered legal advice. You are advised to consult with an attorney concerning how any of the issues addressed herein may apply to your own situation. Coverage Opinions is gluten free but may contain peanut products.
Randy Maniloff is Counsel at White and Williams, LLP in Philadelphia. He previously served as a firm Partner for seven years and transitioned to a Counsel position to pursue certain writing projects including Coverage Opinions . Nonetheless he still maintains a full-time practice at the firm. Randy concentrates his practice in the representation of insurers in coverage disputes over primary and excess obligations under a host of policies, including commercial general liability and various professional liability policies, such as public official’s, law enforcement, educator’s, media, computer technology, architects and engineers, lawyers, real estate agents, community associations, environmental contractors, Indian tribes and several others. Randy has significant experience in coverage for environmental damage and toxic torts, liquor liability and construction defect, including additional insured and contractual indemnity issues. Randy is co-author of “General Liability Insurance Coverage - Key Issues In Every State” (Oxford University Press, 2nd Edition, 2012). For the past twelve years Randy has published a year-end article that addresses the ten most significant insurance coverage decisions of the year completed.
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