News & Insights

Pollution Exclusion Precludes Coverage For Carbon Monoxide Damages

Last week, the District of Oregon became the latest court to rule on the pollution exclusion that appears in almost every general liability policy. The court in Colony Insurance Company v. Victory Construction LLC, 2017 WL 960024 (D. Or. Mar. 9, 2017), concluded Colony had no duty to defend or indemnify its insureds for two bodily injury lawsuits arising from the release of carbon monoxide from a pool heater.

The Colony Policy excluded coverage for “bodily injury, property damage, or personal advertising injury which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of hazardous materials at any time.” “Hazardous materials” were defined to include “pollutants,” which were defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” The court’s analysis turned on whether carbon monoxide was an “irritant” or a “contaminant.”

The court began by applying the general rule that policy provisions should be enforced as written. Courts must “begin with the wording of the policy, applying any definitions that are supplied by the policy itself and otherwise presuming that words have their plain, ordinary meanings.” The court examined dictionary definitions of “irritant” (something causing irritation, specifically tending to produce inflammation) and “contaminant” (something making unfit for use by the introduction of unwholesome or undesirable elements) and concluded that carbon monoxide is a pollutant.

After making the determination that the carbon monoxide is a pollutant based on unambiguous policy language, the court rejected the insured’s alternative arguments that Colony should have covered the loss. It declined to predict that the Oregon Supreme Court would only apply the exclusion to traditional environmental pollution. The court also declined to apply the doctrine of reasonable expectations based on the principle of Oregon law that contracts of insurance should be construed according to the terms and conditions of the policy.

Oregon is now the latest jurisdiction in which courts apply the pollution exclusion without regard to the type of pollution at issue. See, e.g., QBE Ins. Corp. v. Estes Heating & Air Conditioning, 2012 WL 413968 (S.D. Ala. Feb. 8, 2012) (applying Alabama law and concluding pollution need not be environmental in nature for pollution exclusion to preclude coverage).