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Vol. 5, Iss. 7
June 22, 2016

Federal Court: So Just What Is “Traditional Environmental Pollution?”


You know the issue. Everyone does. Pollution exclusion decisions, especially the initial ones in a state, involve a debate over which ideological camp the court should join. One camp limits the exclusion to “traditional environmental pollution” and the other applies the exclusion as written -- to include a vast array of hazardous substances.

If a court determines to apply the pollution exclusion as written, it will frequently conclude that it bars coverage, given the broad definition of the term “pollutant,” often defined as any “solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.” This is likely so even if the substance at issue has a useful purpose in the course of business or around the house. On the other hand, if a court concludes, fundamentally, that the pollution exclusion should be interpreted narrowly, and limited solely to “traditional environmental pollution,” it will likely conclude that the exclusion does not bar coverage for this wide array of hazardous substances.

It is not unusual for a court to expend significant effort to resolve this fundamental ideological debate at the center of the pollution exclusion. And, when it’s finished, while not everyone will agree with the result, the opinion probably cannot be criticized for lack of reasoning. Not to mention, it may even point to a case or two from other states that reached the same conclusion when presented with similar or even identical facts.

But while courts usually do a thorough job of interpreting the pollution exclusion, many that determine to limit its applicability to “traditional environmental pollution” skimp on just what that term means. A popular mantra is that, because the pollution exclusion was purportedly adopted by the insurance industry in response to the passage of environmental laws, traditional environmental pollution is “industrial pollution” or the conditions that motivated these laws, especially CERCLA or Superfund, enacted in 1980.

The California Supreme Court, despite issuing a unanimous opinion in Mackinnon v. Truck Insurance Exchange, 73 P.3d 1205 (Cal. 2003), that the absolute pollution exclusion is limited to traditional environmental pollution, recognized this precise problem when it stated: “To be sure, terms such as ‘commonly thought of as pollution,’ or ‘environmental pollution,’ are not paragons of precision, and further clarification may be required.” MacKinnon at 1218. See also Connecticut Specialty Insurance Company v. Loop Paper Recycling, Inc., 824 N.E. 2d 1125, 1138 (Ill. Ct. App. 2005) (“[W]e are not satisfied, nor is it helpful, to have a ‘We-know-it-when-we-see-it’ standard for what constitutes traditional environmental pollution.”).

In Cincinnati Insurance Co. v. Roy’s Plumbing Inc., No. 13-1000 (W.D.N.Y. June 10, 2016), a New York federal court took on this issue. The court addressed coverage for Roy’s Plumbing, a company in the business of plumbing, heating and cooling, for claims for bodily injury and property damage, sustained by three families living in the vicinity of Love Canal.

Specifically, the families alleged that Roy’s negligently performed inspections and construction work at homes near the Love Canal site...in connection with “a multiyear program of sewer refurbishment in the Love Canal area, which includes sewer replacement, root and debris removal, trenching, pipelining, manhole rehabilitation, leaky joint grouting, cross connection identification and removal, and sewer line upgrading. Specifically, Defendant or [its] agents, employees, representatives or contractors—working on Colvin Boulevard within 250 feet of the northern boundary of the Love Canal containment area—recklessly, negligently, and/or carelessly disturbed, exposed, and discharged a substantial amount of contaminated sediment. These alleged actions resulted in the discharge of myriad hazardous chemicals onto and into the property and homes of the [Underlying Plaintiffs], causing exposure to highly dangerous chlorinated organic compounds, halogenated hydrocarbons, and certain ‘signature’ Love Canal contaminants, including but not limited to non-aqueous phase liquids (‘NAPL’), a toxic chemical ‘stew.’” The families alleged that Roy’s knew, or should have known, of the possibility of the presence of dangerous chemicals within the sewers and/or otherwise in proximity to its work, but failed to exercise due care to prevent the possibility of the escape of such chemicals and failed to adequately warn area residents.

Cincinnati Insurance Company disclaimed coverage to Roy’s Plumbing, on the basis of its pollution exclusion, and filed an action seeking a declaration that its policies provided no coverage.

The text of the pollution exclusion at issue contained nothing out of the ordinary and the New York federal court set out to analyze its applicability under controlling New York law, which is governed by the 2003 Court of Appeals decision in Belt Painting. Under New York law, the pollution exclusion is limited to cases where the damage is “truly environmental in nature.”

The court held that the pollution exclusion precluded a defense obligation, despite noting that “[d]efendant, who is in the plumbing, heating, and cooling business, does not necessarily fit the mold of a traditional industrial polluter, and the actions that led to Defendant’s inclusion in the Underlying Litigation were part of Defendant’s ordinary business of repairing sewer systems.” Nevertheless, the court concluded that the allegations in the underlying complaint fell “squarely within the context of environmental pollution,” as “the injuries alleged include the severe health issues and property devaluation that arise from exposure to toxic chemicals.”

The fact that the court held that the toxic chemicals at issue here were environmental pollutants is not surprising. The better take-away from the case is the court’s finding that the pollution exclusion applied, even though the insured, in the plumbing, heating, and cooling business, did “not necessarily fit the mold of a traditional industrial polluter.” This could be a factor raised by an insured, in arguing that a pollution exclusion should not apply to it, despite the substances at issue being environmental pollutants.


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