Courts in a number of American states, notably California, have found that pollution exclusions in first-party policies are “inherently ambiguous” and that the purpose of such provisions is “to address liability arising from traditional environmental pollution, and not ‘ordinary acts of negligence involving harmful substances.’ ” On December 11th, the Vermont Supreme Court unanimously refused to follow that line of jurisprudence in Whitney v. Vermont Mut. Ins. Co., 2015 VT 140, 2015 Vt. LEXIS 120, 2015 WL 8540432 (Vt., Dec. 11, 2015), holding instead that a standard form pollution exclusion was unambiguous in nature and clearly operated to bar coverage after the spraying of a pesticide chased the policyholders out of their home.

The insureds had a house in Rutland, and they served as foster parents for the state’s Department of Children and Families (DCF).  In April 2013, a new foster child infected their home with bed bugs, and the DCF arranged for an exterminator to treat the residence.  Unfortunately, the exterminatoir employed a pesticide known as chlorpyrifos – toxin that can cause “nausea, dizziness, confusion, and, and, in very high exposures, respiratory paralyses and death.”  The substance is banned for residential use by the Federal EPA.  To make matters worse, the exterminator sprayed “corner to corner, wall to wall,” including even “the inside of the oven and the ductwork of the forced hot air heating system,” leaving walls and surfaces “visibly dripping with the pesticide.” 

Testing revealed levels of chlorpyrifos as high as 650 times the amount that triggered an EPA cleanup requirement, and the structure was rendered uninhabitable as a result.  The policyholders’ subsequent insurance claim was denied in reliance in a garden variety pollution exclusion that banned coverage for a loss caused by “discharge, dispersal, seepage, immigration, release or escape of pollutants;” the term “pollutant” was then defined to mean “any solid, liquid, gaseous, or thermal irritant or contaminate, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

The insureds filed suit, and the trial court granted their motion for summary judgment, holding that the pollution exclusion was ambiguous and applied only to traditional environmental pollution in reliance on the leading California case.  On appeal, however, Vermont’s highest court reversed and directed the lower court to enter summary judgment in favor of the carrier instead.  The 5-0 decision, which was handed down last Friday, was authored by Justice Beth Robinson.

The court began by noting that it had confronted the same issue – the applicability of a similarly-worded pollution exclusion – earlier in 2015 in the context of a commercial CGL policy.  What it called “the main lesson” of that case, Cincinnati Specialty Underwriters Ins. Co. v. Energy Wise Homes, Inc., 2015 VT 52 (Vt. 2015), was “that pollution exclusions are not presumed, as a class, to be ambiguous or to be limited in their application to traditional environmental pollution.”  Instead, the court in Cincinnati had held that they should be examined individuallyand construed in the same way as any other insurance contract provision; the judicial role was to ascertain and carry out the parties’ intentions and to interpret the policy language according to its “plain, ordinary and popular meaning.”

Justice Robinson then proceeded to do this, holding that it was “clear” that what she called “the dousing” of the policyholders’ residence constituted “discharge, dispersal, seepage, immigration, release or escape” of the chlorpyrifos.  In addition, the members of the panel explained that “[w]e do not find it hard to conclude that, in the context of this case, the terms ‘irritant’ ‘contaminant’ and ‘pollutant’ plainly and unambiguously encompass the chlorpyrifos” given its extreme toxicity and the fact that it had been banned for residential use.