In its recent decision in Church Mut. Ins. Co. v. Clay Ctr. Christian Church, 2014 U.S. App. LEXIS 5450 (Mar. 25, 2014), the United States Court of Appeals for the Eighth Circuit, applying Nebraska law, had occasion to consider whether a bodily injury claim for indoor exposure to carbon monoxide was barred by a pollution exclusion.

Church Mutual insured the Clay Center Christian Church under an integrated policy that included, among other things, general liability and umbrella liability coverage parts.  During the policy period, the Church’s pastor and his wife, while residing at the Church’s parsonage, were exposed to carbon monoxide fumes.  The pastor died as a result of the exposure and his wife was seriously injured.  A personal injury suit was brought against the Church, and the Church in turn, sought coverage for the lawsuit from Church Mutual.  

The Church Mutual policy’s general liability coverage part and the umbrella liability coverage part both contained a pollution exclusion barring coverage for:

g.   (1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants:

    (a) At or from any premises, site, or location which is or was at any time owned or occupied by, or rented or loaned to, any insured[.]

Both coverage parts defined the term “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes materials to be recycled, reconditioned, or reclaimed.”

Church Mutual denied coverage based on the application of the pollution exclusion.  Church subsequently settled with the claimants and assigned its rights under the policies.  In the ensuing coverage litigation, the United States District Court for the District of Nebraska concluded that carbon monoxide was a pollutant, and that as such, the exclusion applied to bar coverage for the underlying claim.

On appeal, the underlying claimants argued that the district court erred in concluding that carbon monoxide was an irritant or contaminant for the purpose of the policies’ definition of “pollutants,” since these terms were ambiguous.  In considering this argument, the Eighth Circuit looked to the decision by the Nebraska Supreme Court in Cincinnati Insurance Co. v. Becker Warehouse, Inc., 635 N.W.2d 112 (Neb. 2001), where the Court concluded that the pollution exclusion is unambiguous and not necessarily limited to matters involving traditional environmental pollution.  The Eighth Circuit predicted that by having found the exclusion to be unambiguous, the Nebraska Supreme Court would reject the claimants’ argument that the terms “irritant” and “contaminant” are ambiguous. 

With this in mind, the court considered whether carbon monoxide could be considered a “pollutant.”  Finding that carbon monoxide is a gas that can render air unfit for use if introduced at high levels, and that the exclusion is not limited to traditional environmental pollution under Nebraska law, the court it concluded this question in favor of Church Mutual