Insurance Law

Pollution Exclusion and Lead: Supreme Court Declines To Follow Some Others’ Lead

It has become difficult to find a pollution exclusion case that warrants discussion. In general, while each case is different, they also often have so many similarities. As a result I’ve resorted to discussing cases that address whether the pollution exclusion applies to seemingly peculiar substances, such as, recently, fireworks, ejaculate and deli odors and a few more.

But the Supreme Court of Nebraska recently bucked the trend and issued a decision in a pollution exclusion case that is worth a look. On one hand, the issue in State Farm Fire & Cas. v. Dantzler, No. S-12-1042 (Neb. Sept. 12, 2014), [enhanced version available to lexis.com subscribers], is pedestrian: the application of the pollution exclusion to exposure to lead paint by a minor-tenant in a rental property. Lots of courts have addressed this very issue. In one way Dantzler is even less important than some of these other cases. After all, here the parties themselves agreed that “lead found in paint” is a pollutant as defined by the pollution exclusion. At least in other cases that issue is disputed. So if the parties agreed that lead paint is a pollutant, what’s left to discuss?

While it wasn’t disputed that lead paint is a pollutant, the parties weren’t so quick to agree on the manner in which the minor-tenant was allegedly exposed to lead paint. In general, the pollution exclusion applied to “bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, spill, release or escape of pollutants . . . at or from premises owned, rented or occupied by [Dantzler].” Since lead paint was a pollutant, and the exposure to lead paint occurred on Dantzler’s rental property, the issue before the Nebraska high court was whether the child’s alleged injuries were caused by a “discharge, dispersal, spill, release or escape” of lead-based paint.

Some courts nationally have held that, when it comes to residential exposure to lead paint, it can take place without lead being discharged, dispersed, spilled, released or escaping. For example, the Supreme Court’s of Pennsylvania and Alabama have taken this approach. See Lititz Mut. Ins. Co. v. Steeley, 785 A.2d 975, 981–82 (Pa. 2001) (holding that lead paint is a “pollutant,” but exclusion not applicable because the process by which it degrades and became available for ingestion and inhalation does not involve a “discharge,” “dispersal,” “release,” or “escape”), [enhanced version available to lexis.com subscribers]; Porterfield v. Audubon Indem. Co., 856 So. 2d 789, 805 (Ala. 2002) (“reasonably prudent insured might have concluded in 1991 that the presence of lead-paint flakes, chips, and/or dust in a residential apartment would not qualify as a discharge, dispersal, release, or escape of a pollutant”), [enhanced version available to lexis.com subscribers].

But the Nebraska Supreme Court declined to follow this approach. Instead the Dantzler court held that “[b]ecause the above terms [discharge, dispersal, spill, release or escape] encompass the separation of lead-based paint that is inherent in every case of lead paint poisoning, the pollution exclusion is not ambiguous as applied to lead-based paint and a determination of the specific process of exposure in any particular case is not material to application of the exclusion. Regardless of how the lead-based paint is separated from the painted surface or what form it takes once it is separated, an individual’s exposure to and absorption of that lead-based paint results from the ‘discharge, dispersal, spill, release or escape’ of a pollutant. Thus, it is not necessary to differentiate between the processes by which exposure occurs. It is not material to application of the pollution exclusion to determine the manner in which the injured party was allegedly exposed to lead-based paint. The foregoing interpretation of pollution exclusions takes into account the realities of lead paint poisoning and is consistent with the broad interpretation we have given these exclusions. It avoids the practical difficulties of compelling the court hearing the declaratory judgment to make a finding as to the causation of the alleged injuries in the underlying personal injury case in order to determine whether a ‘discharge, dispersal, spill, release or escape’ had occurred. From a practical perspective, this would be problematic. The court’s ultimate finding as to the cause of the alleged injuries might be contrary to the findings of causation in the underlying personal injury case. For these reasons, we conclude that the manner of exposure was not a material fact that prevented summary judgment.”

It is possible that courts that have taken the other approach—that the process by which lead paint degrades and becomes available for ingestion and inhalation does not involve a “discharge,” “dispersal,” “release,” or “escape” – have been motivated by a desire to find coverage for a claim involving an injured child, by a substance that the court was constraned to find was a pollutant.

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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