United States District Court Judge Susan C. Bucklew has recently issued an opinion holding that the pollution exclusion did not bar coverage for property damages associated with Chinese drywall. In Auto-Owners Ins. Co. v. Am. Building Materials, Inc. et al., Case No. 8:10-cv-313-T-24-AEP, the Court explained that the applicable pollution exclusion only applied to property damages caused by pollutants while the insured (or any contractors or subcontractors) “are performing operations”, meaning “at the time the work is being performed.” Because the insured was a supplier of Chinese drywall, the Court found that its “operations” ended when the materials were delivered, which was prior to any property damages caused by the alleged pollutants from the Chinese drywall. For a complete copy of the opinion, please click here.
To support this temporal limitation for the applicability of the policy’s pollution exclusion, the Court turned to an opinion from the Southern District of Alabama, which considered identical policy language in determining that the exclusion did not bar coverage. Notably, the Court implied that had the insured installed the drywall (and not simply supplied it), the insured's “operations” may have remained ongoing at the time the alleged “pollutants” caused property damages, possible resulting in the proper application of the pollution exclusion. However, because the insured was merely a supplier, the Court granted summary judgment in favor of the insured and against the insurer, holding that the insurer had a duty to defend and indemnify the insured for property damages caused by the Chinese drywall.
The language in the pollution exclusion at issue differed from that considered in an earlier Florida decision, as reported here that reached the opposite result, that the pollution exclusion barred coverage for Chinese drywall related damages.