"Pollution Exclusion” clause in insurance policy bars coverage for death of employee at hog confinement facility

The defendant, a designer and builder of hog confinement facilities constructed a facility in Ida County. During construction, the defendant installed a propane power washer in the facility’s washroom. While using the toilet in the washroom, an employee was overcome by carbon monoxide fumes and died. The decedent’s widow sued for wrongful death, and the defendant requested that the plaintiff, its insurer, provide a legal defense and indemnification under two insurance policies. One of the policies contained language stating that it didn’t cover bodily injury or property damage which would not have occurred in whole or in part but for the “actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.”  “Pollutants” were defined as “any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”  The other policy contained a pollution exclusion clause with similar language. The plaintiff filed suit in federal court for a declaratory judgment that it had no duty to pay damages or provide a defense for the widow.    The federal court noted that the Iowa Supreme Court had never interpreted a pollution exclusion clause and, therefore, sent the case to the Iowa Supreme Court for a determination of whether the plaintiff had a duty to defend or pay damages under the policy.

The issue facing the Iowa Supreme Court was whether the policies excluded coverage for a death caused by the release of carbon monoxide fumes inside a hog confinement facility. In other words, the court had to determine whether carbon monoxide constituted a “pollutant” under the policies. The defendant argued that a reasonable policyholder would expect the pollution exclusions to prevent coverage for traditional hog confinement problems associated with pollution wastes and smells, and not wrongful death claims based on negligent design. But, that issue wasn’t squarely before the court. The only issue was a certified question as to whether carbon monoxide was a “pollutant.”  The Court noted that the policy language very broadly defined “pollutant,” and made no distinction between “traditional environmental pollution” and injuries arising from normal business operations. As such, carbon monoxide was included in the definition of “pollutant” under the pollution exclusion clauses.

The Court did note, however, that the issue of the reasonable expectations of the insured could be raised in federal court. Bituminous Casualty Corp. v. Sand Livestock Systems, Inc.,728 N.W.2d 216 (Iowa Sup. Ct. 2007).

Special Note:  The definition of “pollutant” for purposes of the absolute pollution exclusion for non-industrial activities in insurance policies has been defined various ways by court across the country. Most courts focus on the nature of the pollutant involved. Also, several courts have addressed the distinction between “industrial” or “industry-related” environmental activities, for which the pollution exclusion is available. On the other hand, pollution related to household or small business activities tends not to be covered by the exclusion. To be distinguished from the Iowa Supreme Court’s opinion in the case above, the Illinois Supreme Court has ruled that carbon monoxide poisoning is not covered by an absolute pollution exclusion clause under a policy that insured against only traditional environmental pollution. In American States Insurance Co. v. Koloms, 687 N.E.2d 72 (1997), the Court held that a reasonable person of ordinary intelligence could understand that carbon monoxide is a pollutant when it is emitted in an industrial or environmental setting, but would not reasonably characterize carbon monoxide emitted from a residential heater which malfunctioned (which is what happened in the case) as “pollution.”  Thus, the pollution exclusion did not apply and the insured was covered under the policy.

Alternatively, another court ruled against an insured by holding a contaminant to constitute pollution excluded by the policy’s pollution exclusion clause. In State Farm Fire & Casualty Insurance Co. v. Deni Associates of Florida, Inc., 678 So. 2d 397 (Fla. Ct. App. 1996), the court was faced with an accidental ammonia spill from a blueprint machine. The insured sought coverage under the policy on the basis that the pollution exclusion clause limited coverage only in the event of industry-related losses such as clean-up costs imposed by EPA. The court disagreed, noting that the policy language did not expressly limit the exclusionary clause to industrial pollution. So the pollution exclusion clause applied equally to pollution losses occurring in both industrial and non-industrial settings.

Similarly, under Minnesota law, an absolute pollution exclusion clause in a general liability policy has been held to be unambiguous as applied to pollutants occurring in the course of normal business activities. As a result, the insurers involved in the case had no duty to defend when an employee fell after breathing in carbon monoxide fumes from a propane-powered floor grinder. Continental Casualty Company v. Advance Terrazzo & Tile Company, Inc., 462 F.3d 1002 (8th Cir. 2006).

Can any pointers be made as a result of these various interpretations of pollution exclusion language in insurance policies?  Clearly, the key to any particular pollution exclusion clause is the actual wording of the clause. Both the insured and the insurer need to have a clear understanding of what particular words and phrases mean. From an insured’s standpoint, that may require a review of clause language by a lawyer with specific expertise in handling insurance cases involving pollution exclusion clauses.