In Arrowood Indemnity Company v. Oxford Cleaners & Tailors, LLC, No. 1:13-12298, 2014 WL 4104169 (D. Mass. Aug. 15, 2014), the United States District Court for the District of Massachusetts, applying Massachusetts law, granted summary judgment to a liability insurer, holding that under the policy’s pollution exclusion the insurer had no duty to defend or indemnify the policyholder for alleged contamination of a neighboring property. Id. at *1.
The policyholder, a drycleaning business, had been sued for negligent trespass and private nuisance after an investigation of environmental contamination at a neighboring real estate business revealed elevated levels of solvents in groundwater samples. See id. at *1-2. In particular, it was alleged that the policyholder, “‘through the historical, continued and periodic releases, and migration of hazardous materials, impermissibly and wrongfully entered into . . . [Plaintiff’s] Property causing substantial property damages including but not limited to requiring the Plaintiff to vacate its premises to protect inhabitants from Imminent Hazard conditions,’” and “‘materially impair[ed] [Plaintiff’s] reasonable use and enjoyment of the property.’” Id.
Relying on the policy’s pollution exclusion, the insurer sought a declaratory judgment that it did not owe a duty to defend or indemnify “because the underlying claim . . . involves the unintentional release and migration of pollutants, for which the policy’s pollution exclusion forecloses coverage.” Id. at *5; see also id. at *3. The policyholder did not dispute that the pollution exclusion barred coverage under the Property Damage provision of the policy. However, it argued that there nevertheless was coverage under “the Personal Injury provision of the insurance policy, which states that the insurer will defend and indemnify the insured for a claim or suit alleging . . . ‘wrongful entry into or eviction of a person from a room, dwelling or premises the person occupies.’” Id. at *5.
The court first considered “whether an unintentional wrongful entry triggers the coverage for personal injury.” Id. at *7-8. It acknowledged that the Massachusetts Appeals Court previously held that “wrongful entry and trespass are equivalent under Massachusetts law.” Id. at *7 (citing Dilbert v. Hanover Ins. Co., 825 N.E.2d 1071, 1077 (Mass. App. Ct. 2005)). However, it noted that Dilbert “did not address the import of the policy provision’s context,” which in that case “had the term ‘wrongful entry’ embedded in a similar listing of intentional torts.” Id. at *8. In contrast, the policy section defining “personal injury” in the present policy “list[ed] wrongful entry alongside a host of other torts which all require intent: malicious prosecution, false imprisonment, libel, slander, and invasion of privacy.” Id. Applying the “contract interpretation canon of noscitur a sociis”—that “the meaning of a word is or may be known by the words accompanying or surrounding it”—the court concluded that “only intentional torts are covered by the personal injury provision.” Id. (internal quotation marks omitted); see also id. at *6-7 (distinguishing First Circuit case law finding coverage for “what was essentially a pollution claim under the policy’s personal injury provision,” because those policies covered not just “wrongful entry” but also “other invasion of the right of private occupancy,” and finding persuasive a pre-Dilbert First Circuit case that “expressly held that the wrongful conduct that triggered personal injury coverage ‘amounts to an intentional tort under Massachusetts law’”) (citations omitted). Thus, for the policy in question, “[a] claim of negligent trespass [wa]s insufficient to trigger coverage under the personal injury provision.” Id. at *8.
The court then considered “whether the pollution exclusion in Part One of the policy trumps the coverage for personal injury for wrongful entry in Part Two, when the alleged injury is caused by the migration of pollutants.” Id. at *7-8. It concluded that, “[i]n situations involving unintentional releases of pollutants, the more persuasive appellate authority disfavors allowing an insured to use a policy’s personal injury provision to circumvent the pollution exclusion and obtain coverage for chemical releases.” Id. at *9. It reasoned that, considering the “context of the entire contract, . . . an insured would have to do a pretzel-twist logically to believe on the one hand that [it] was not entitled to coverage under the ‘bodily injury’ and ‘property damage’ sections of the policy because coverage is barred by the pollution exclusion, yet on the other hand believe [it] should receive coverage for the same risk under the personal injury liability coverage afforded by the policy.’” Id. “To do so,” the court continued, “would render . . . the pollution exclusion a dead appendage to the policy.” Id. (internal quotation marks omitted).
In sum, “in light of the policy’s pollution exclusion and the personal injury provision’s delineated application to intentional torts,” the court found that “the term ‘wrongful entry’ is not reasonably susceptible of an interpretation that would cover the unintentional migration of contaminants . . . . An objectively reasonable insured would have expected the pollution exclusion to bar coverage for [the suit], and would not have anticipated coverage of that same claim by the personal injury provision.” Id. at *10. Thus, the court held that summary judgment for the insurer was proper. Id.
The Arrowood decision is important because it demonstrates the broad application of a policy’s pollution exclusion to bar pollution-related claims.