In its recent decision in United Fire & Cas. Co. v. Titan Contrs. Serv., 2014 U.S. App. LEXIS 8879 (8th Cir. May 13, 2014), the United States Court of Appeals for the Eighth Circuit, applying Missouri law, had occasion to consider the application of a pollution exclusion to non-traditional environmental pollution.
United Fire insured Titan Contractors under a general liability policy with a total pollution exclusion. Titan was sued by several individuals concerning Titan’s application of TIAH, an acrylic concrete sealant, to a floor in an office park in which plaintiffs worked. Plaintiffs alleged that Titan failed to properly ventilate the workspace, thus exposing them to TIAH fumes and causing them to suffer various bodily injuries. United Fire provided Titan with a defense under a reservation of rights, and subsequently commenced a coverage action against Titan seeking a declaration that it had no duty to defend or indemnify on the basis of its policy’s pollution exclusion. The district court granted summary judgment in favor of Titan based on its reasoning that TIAH does not qualify as a “pollutant” as that term is defined in a standard form commercial general liability policy.
On appeal, the Eighth Circuit observed that under Missouri law, an insurance policy must be interpreted according to how a person of average understanding would understand the policy language. Looking to the policy definition of “pollutant,” which includes the terms “irritant” and “contaminant,” the court reasoned that a person of average understanding would conclude that TIAH qualifies as an “irritant,” explaining that:
TIAH's material safety data sheet warns that the substance "may produce irritation to the nose, throat, respiratory tract, and other mucous membranes"; may be "irritating" to the eyes and skin; is "toxic"; and can cause serious injury, including "permanent brain and nervous system damage." Similarly, promotional materials from TIAH's manufacturer caution that TIAH can "cause irritation of the eyes and/or skin" and that TIAH vapors might "result in transient central nervous system depression." This evidence shows clearly that TIAH produces irritation. An ordinary insurance purchaser would conclude from this that TIAH constitutes an irritant and, in turn, a pollutant under the absolute pollution exclusion.
In so concluding, the court considered the Missouri Court of Appeals decision in Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510 (Mo. Ct. App. 1999), in which the court found an ambiguity as to whether the pollution exclusion applied to a release of gasoline. Central to the Hocker court’s decision was that the policy involved was issued by the carrier’s “gasoline” unit to an insured that primarily sold gasoline. Under the circumstances, the concluded that the insured reasonably could have expected coverage that gasoline would be considered a “product it sold” rather than a “pollutant,” thus raising a question as to whether the pollution exclusion should apply to claims involving the spills or releases of gasoline.
The Eighth Circuit disagreed with Titan’s reliance on Hocker, noting that the decision represented was a minority position when decided and that it has not since been adopted or even cited by the Missouri Supreme Court. The court also concluded that Hocker was distinguishable since sealing floors constituted only 25% of Titan’s business, and in any event, TIAH was not the only sealant used by Titan. As such, explained the court, “Titan faces a wide range of liability risks unrelated to TIAH, and many of those risks would fall within the policy's coverage.”