McCarter & English LLP on Limiting the "Absolute" Pollution Exclusion to "Traditional" Pollution

McCarter & English LLP on Limiting the "Absolute" Pollution Exclusion to "Traditional" Pollution

   By Louis A. Chiafullo & David C. Kane, McCarter & English, LLP

The scope of pollution exclusions has been in dispute for decades, centering first on the "sudden and accidental" pollution exclusion that appeared in the 1970s, and next on the so-called "absolute" pollution exclusions that became relatively standard in liability policies in the mid-1980s.  The latest battles have centered on whether claims arising out of "non-traditional" pollution -- that is, not the traditional property damage caused by hazardous waste -- come within the purview of the exclusion.

Carriers argue the "plain language" of the exclusion, when read broadly, includes both "traditional" and "non-traditional" pollution.  A growing number of courts, however, refuse to construe the breadth of pollution exclusions beyond "traditional" environmental pollution.  Those courts have found that pollution exclusions do not bar coverage for claims arising from exposure to painting and sealing fumes, toxic chemicals, carbon monoxide, and pesticides.  Courts generally reach this conclusion based on the originally stated purpose of the exclusion and policyholders' reasonable expectations, though some rely solely on the language of the exclusion.  Thus, although a split of opinion still exists on the application of the pollution exclusion to "non-traditional" pollution, broader consensus has emerged that the exclusion applies only to "traditional" environmental pollution.

After surveying a number of pertinent and recent court decisions, the authors conclude that: "Courts recognize that while the language of the exclusion may be broad, the purpose, as evidenced by the insurance industry's assurances, was to preclude coverage for 'traditional' pollution.  Furthermore, inclusion of 'non-traditional' pollution within the purview of the exclusion does not comport with the reasonable expectations of policyholders and often defies the text of the exclusion."

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Louis A. Chiafullo is a Partner and David C. Kane is an associate in the Insurance Coverage Litigation Group of McCarter & English, LLP.  The opinions expressed in this article represent those of the authors and not necessarily those of McCarter & English, LLP or its clients.

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