Florida courts historically have given broad application to the pollution exclusion, refusing to draw a distinction between traditional and non-traditional environmental pollution. Deni Assocs. v. State Farm Fire & Cas. Ins. Co., 711 So. 2d 1135 (Fla. 1998). The recent decision by the United States District Court for the Middle District of Florida in Auto-Owners Ins. Co. v. Am. Bldg. Materials, 2011 U.S. Dist. LEXIS 52837 (M.D.Fla. May 17, 2011), held that an absolute pollution exclusion did not bar coverage for an underlying Chinese drywall claim not on the basis of whether the drywall-related gases were a “pollutant,” but rather on the basis of the insured’s operations.
The insured, American Building Materials (“ABM”) was sued for having provided a developer with Chinese-manufactured drywall that subsequently was installed in several homes throughout Florida. ABM sought coverage for this suit under a commercial general liability policy issued by Auto-Owners. Auto-Owners agreed to provide ABM with a defense under a reservation of rights, but commenced a declaratory judgment action, arguing, among other things, that its policy’s absolute pollution exclusion precluded coverage for the underlying suit. The exclusion barred coverage for:
f.(1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:
(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations:
(i) if the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor . .
The court held that this exclusion did not apply where the sole allegation against ABM was that it supplied the defective drywall. Citing to Scottsdale Insurance Company v. American Safety Indemnity Co., No. 1:10-cv-0445-WS-N, at *10-12 (S.D. Ala. Nov. 10, 2010), another matter considering the application of an absolute pollution under identical circumstances, the court concluded that the phrase “performing operations” is unequivocally stated in the “present tense,” requiring that the pollution event happen while the insured is performing operations, not after. As a supplier of the drywall, the court explained, the insured’s operations were complete upon delivery of the drywall and the pollution event necessarily happened thereafter. Thus held the court, the exclusion was not applicable to the claim against ABM.
The Auto-Owners decision is the second major Chinese drywall-related decision issued by a Florida federal court this year. In General Fidelity Ins. Co. v. Foster, No. 09-80743 (S.D.Fla. March 24, 2011), the United States District Court for the Southern District of Florida held that the total pollution exclusion applied to a Chinese drywall claim brought against a contractor. In General Fidelity, the issue before the court was whether the emissions from the defective drywall constituted a “pollutant” in the first instance. The Auto-Owners court, by contrast, addressed a different aspect of the pollution exclusion specific to the absolute pollution exclusion, namely, whether the pollution event resulted from the insured’s operations. Thus, while Auto-Owners is not inconsistent with General Fidelity and the established body of Florida case law holding that pollution exclusions are not limited to traditional environmental pollution, the Auto-Owners decision nevertheless shows that the nature of the insured’s work may influence coverage, at least for the purpose of an absolute pollution exclusion.