In what appears to be a case of first impression, the United States District Court for the District of South Carolina has held in NGM Insurance Co. v. Carolina’s Power Wash & Painting LLC, 2010 WL 146482 (D.S.C. Jan. 12, 2010) that the “absolute pollution exclusion” does not apply to injuries which are alleged to result from paint fumes at a work site, and should be limited in its application to traditional environmental pollution.
The NGM court acknowledged what it deemed to be a “clear” split of authority throughout the nation “regarding: (1) whether ‘absolute pollution exclusions’ bar coverage for incidents outside of traditional environmental pollution (e.g., contamination of groundwater over a long period of time), and (2) whether ‘absolute pollution exclusions’ are unambiguous.” Id. at *4.
The court found the reasoning set forth in the New York Court of Appeals case Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 763 N.Y.S.2d 790, 795 N.E.2d 15, 16 (N.Y.2003) “to be the most common-sense-based approach to the issue before the court.” The Belt court, while noting that insurers may “understandably rel[y] on the policy definition of ‘pollutants’ as ‘any solid, liquid, gaseous, or thermal irritant or contaminant including * * * fumes,’” ultimately rejected the argument that this definition includes paint fumes. Belt at 20 (original emphasis). Such an interpretation, the Belt court found, would render “any ‘chemical,’ or indeed, any ‘material to be recycled,’ that could ‘irritate’ person or property would be a ‘pollutant.’” Id. (emphasis added). The court emphasized its “reluctan[ce] to adopt an interpretation that would infinitely enlarge the scope of the term ‘pollutants,’ and seemingly contradict both a ‘common speech’ understanding of the relevant terms and the reasonable expectations of a business person.” Id.
Moreover, the Belt opinion recognized that the pollution exclusion only applies if the underlying injury is caused by ‘discharge, dispersal, seepage, migration, release or escape’ of the fumes” and thus does not “unambiguously appl[y] to ordinary paint or solvent fumes that drifted a short distance from the area of the insured’s intended use and allegedly caused inhalation injuries to a bystander.” Id. Relying heavily on the Belt decision, the South Carolina District Court ultimately held that the “absolute pollution exclusion,” was ambiguous under the circumstances, and thus, under South Carolina law, had to be “construed liberally in favor of the insured and strictly against the insurer.” NGM at *6. Accordingly, the exclusion was found to be inapplicable to the policyholders’ claims for coverage.