Why it matters
A new opinion from a divided panel of the Eighth U.S. Circuit Court of Appeals asks the familiar question: What is a pollutant? Reviewing the absolute pollution exclusion of a commercial general liability policy for a company that provides construction cleanup services, in a 2-1 decision the court held that an acrylic concrete sealant product constituted a pollutant under the policy. The dissenting member of the panel reached a different conclusion, noting the nature of the insured’s business. “[A] reasonable policyholder would expect that a liability insurance policy issued to a contractor in the business of cleaning and sealing concrete floors would cover injuries suffered as a result of exposure to the products used in cleaning and sealing floors.” Significantly, although the majority reversed a district court order that the insurer must provide a defense, it remanded the case for consideration of whether the underlying complaint alleged the “discharge” or “release” as required by the policy and further whether the harm itself was in the nature of the alleged “pollutant” or some other form of harm.
Titan Contractors Service provides construction cleanup services, including the cleaning and sealing of concrete floors. In 2009 the company was sued in Illinois state court. The plaintiffs claimed that Titan applied TIAH, an acrylic concrete sealant, to the floor in a portion of the office park where they worked and failed to properly ventilate the worksite. As a result, plaintiffs alleged they were exposed to TIAH and developed significant physical problems, such as chemically induced asthma and vocal cord dysfunction.
Titan notified insurer United Fire & Casualty Company of the suit. United commenced defense with a reservation of rights and then filed a declaratory action in federal court, arguing that an absolute pollution exclusion in the policy precluded coverage.
The policy defined “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Coverage is excluded for any 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.”
A federal district court sided with Titan, but a split panel of the 8th Circuit reversed and remanded to the court below for further proceedings.
The majority wrote, “This case turns . . . on whether an ordinary person of average understanding purchasing the policy would consider TIAH to fall unambiguously within the policy’s definition of ‘pollutant,’” and concluded such person would.
The definition included an “irritant,” and the court found “little doubt that TIAH falls within that definition.” The material safety data sheet for TIAH warns that the substance “may produce irritation to the nose, throat, respiratory tract, and other mucous membranes” and may be “irritating” to the eyes and skin. TIAH is toxic, and promotional materials from the manufacturer caution that vapors can “result in transient central nervous system depression.”
The majority limited its decision, noting that, even though the incident involved a “pollutant,” the exclusion would not apply if the alleged resulting harm was not pollution in nature. As applied here, although the TIAH technically fit the pollution definition encompassing “irritants,” the harm complained of was not itself necessarily an “irritant.” Further, the exclusion applies only to harm caused by the “discharge, dispersal, seepage, migration, release or escape” of a pollutant and will not apply if it did not propagate in one of those enumerated ways.
On remand, the court stated that the district court should consider whether the underlying state court case alleged the appropriate propagation. Titan claimed the complaint failed to do so, which would render the absolute pollution exclusion inapplicable.
The dissenting member of the panel emphasized that the TIAH was not a pollutant in Titan’s eyes. “Rather, TIAH ‘belongs in the environment in which [Titan] routinely works’ and ‘in that environment, [TIAH] is not a pollutant,’” he wrote. “Furthermore, in that environment, with ordinary ventilation, the product can be used safely. If any uncertainty exists as to whether the policy’s ‘pollution’ definition excludes TIAH, the policy must be ambiguous.”
To read the decision in United Fire & Casualty Co. v. Titan Contractors Service, click here.