Last Friday, New Hampshire’s highest court unanimously held that the pungent aroma of cat urine could constitute physical loss or damage under a property policy. In Mellin v. Northern Security Ins. Co., 2015 WL 1869572, 2015 N.H. LEXIS 32 (N.H., Apr. 24, 2015), it split on whether such a loss was barred by standard pollution exclusion language, however. Three of the five justices (including a specially-appointed retiree) held that the exclusion was ambiguous in nature. The Chief Justice and another member of the court disagreed, labeling the provision “plain and unambiguous” and clearly applicable to preclude coverage for a pervasive cat odor problem.
On the TV show “Friends,” Phoebe Buffay used to entertain patrons at the Central Perk coffee shop with her song “Smelly Cat” (“Smelly cat, smelly cat, what are they feeding you, . . . “). The lyrics would have resonated with Doug and Gayle Mellin, the owners of a condominium in Epping, New Hampshire. After they moved in, the Mellins noticed a cat urine odor coming from a downstairs neighbor’s unit through an open plumbing chase in the kitchen wall. The stench was so severe that the town building inspector directed the couple to relocate temporarily and have the unit professionally remediated, but efforts to do that were unsuccessful. The policyholders vacated permanently after living there only three months.
The insureds made claim under their homeowner’s policy in December of 2010. The carrier denied, and they then brought suit. The trial court granted summary judgment to Northern Security, and an appeal followed. On April 24th, a divided state Supreme Court reversed and remanded the matter. The contract of insurance “insure[d] against risk of direct loss to property . . . only if that loss is a physical loss to property,” and the threshold question was thus whether the odor was physical loss or damage. Speaking for all five members of the court, Justice Carol Conboy concluded that it could be. The court held “that physical loss may include not only tangible changes to the insured property, but also changes that are perceived by the sense of smell and that exist in the absence of structural damage” so long as those changes were “distinct and demonstrable.” In the words of the opinion, “[e]vidence that a change rendered the insured property temporarily or permanently unusable or uninhabitable may support a finding that the loss was a physical loss[.]” The justices therefore remanded the matter to the trial court for application of the legal standard that they had adopted.
What split the court was the pollution exclusion, which excluded loss by “[d]ischarge, dispersal, seepage, migration, release or escape of pollutants.” The term was defined as follows:
Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.
The trial judge had concluded that the foregoing language barred coverage. Three of the five justices disagreed, however, and they held “that the pollution exclusion clause is ambiguous when applied to the facts of this case and, as such, does not preclude coverage for the plaintiffs’ claims.” The majority noted that the court had found similar language to be ambiguous in a 1996 case involving the spread of lead paint chips because it did not define the terms “discharge, dispersal, release or escape.” In addition, Justice Conboy was troubled because she felt that the words “irritant or contaminant” were “too broad to meaningfully define ‘pollutant.’ “ Finally, the majority stated that the definition’s reference to “smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste” brought to mind “products or byproducts of industrial production that may cause environmental pollution or contamination” rather than “injuries or damage resulting from everyday activities gone slightly, but not surprisingly, awry.” In effect, the opinion thereby found ambiguity residing in literally each and every word in the exclusion!
The majority also concluded that the fact in other jurisdictions had disagreed over whether similar language is confined to instances of traditional environmental pollution meant that “two parties can reasonably disagree about the meaning of the pollution exclusion clause, rendering it ambiguous.”
The two dissenters would have affirmed. In Justice Robert Lynn’s opinion, the majority was relying on “dubious” precedent and “ignor[ing] the plain language of the policy and creat[ing] ambiguity where none exists.” In the words of his opinion:
The cat urine at issue in this case fits squarely within the plain and ordinary meaning of contaminant, and is thus a “pollutant” as defined in the pollution exclusion clause. The cat urine was described as “a chemical smell similar to ammonia;” “a noxious odor;” and a “persistent, pervasive odor” that resulted in “toxic contamination” of the apartment.
The dissenters noted that a host of other courts around the country had interpreted pollution exclusion clauses “by looking to the plain meaning of the terms as defined in the text of such clauses,” citing to decisions from eight other jurisdictions. They also pointed out that neither the fact that an exclusion is broad nor the fact it is potentially subject to differing interpretations ipso facto operates to render it ambiguous. In Justice Lynn’s words, the term “pollutant” was “clearly defined in the policy, making it improper to set aside the policy’s language in order to redefine the term using outside sources.”