In a new article for Insurance Day, Goldberg Segalla’s Thomas F. Segalla, David L. Brown, and James D. Macri explain how different courts across the U.S. are reacting to the “pollution exclusion” in insurance policies.
Courts grapple with the exclusion, they write, “on a near-daily basis … Yet even when courts from different states face substantially similar facts, the application differs.” These courts consistently disagree on “whether an exclusion is ambiguous, whether a substance qualifies as a pollutant, whether the pollution exclusion has been triggered, and whether any exception to the exclusion applies.” It is imperative that employers, then, “understand the varying applications so they can implement, interpret, and apply the proper policy exclusions and defend against claims should a coverage dispute arise.”
Tom, David, and James go on to examine recent cases from Alabama and New York exhibiting similar scenarios and fact patterns but resulting in drastically different rulings.
“It is not enough to simply understand past case law regarding existing exclusions, however,” they warn. “Insurers and their counsel need to understand how courts are reacting to recent developments by insurance companies in response to longstanding case law, so new policy developments can be properly executed.” For examples, Tom, David, and James point to recent court interpretations of exclusions that developed out of the pollution exclusion, such as the “indoor air exclusion” at issue in Siloam Springs Hotel V Century Sur Co.
Given these developments, “the inclusion of the appropriate exclusion provision can be critical,” they write. “Similarly, recent case law establishes it is important to understand, from an underwriting perspective, the nature of the product being manufactured or service being provided by the insured. Tom, David, and James point to the recent development of “nano” exclusions, which remain untested, and “may have a drastic and far-reaching impact in the future of the pollution control, food, pharmaceuticals, engineering, and construction industries, among others.” This places a further burden on insurers and their counsel to stay on top of court decisions in the coming years. “A failure to do so may result in an insurer attempting to exclude coverage based on the application of an outdated or inapplicable exclusion.”
“Although it may not be possible to draft an all-encompassing, perfect pollution exclusion,” they write, “maintaining an up-to-date knowledge of case law around the country will prepare insurers and their counsel to defend any situation.”