In United Fire and Casualty Co. v. Titan Contractors Service, Inc., No. 13-1307 (8th Cir. May 13, 2014), the Eighth Circuit weighed in on just how broad the pollution exclusion in a commercial general liability insurance policy is under Missouri law – which is, according to the Eighth Circuit, rather broad. In doing so, the Eighth Circuit declined to adopt the more narrow interpretation previously applied by the Court of Appeals for the Southern District of Missouri.
United Fire’s insured, Titan, provided construction-cleanup services. Part of these services included applying TIAH, an acrylic concrete sealant. When three plaintiffs sued Titan claiming to have developed significant physical ailments as a result of Titan’s negligence in using this product, United Fire sought a declaration that the pollution exclusion in the liability policy it issued to Titan barred coverage for these claims.
The pollution exclusion in the policy removed coverage for certain damages arising caused at least in part by the “actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” “Pollutant” was defined to include “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”
Coverage hinged on whether TIAH, the product Titan used regularly as part of its business services, was a “pollutant.” Judge Gruender, writing for the majority, concluded it was.
Applying a textual interpretation of the policy – or looking to the plain meaning of the policy language – the Court opined that an ordinary person of average understanding would consider TIAH to be an irritant and, thus, a “pollutant.” Judge Gruender cited to Webster’s Dictionary to determine the meaning of the term “irritant” as used in the policy’s definition of “pollutant.” Irritant, the Court stated, is defined as “something that irritates” or “produce[s] irritation.” Under this definition, TIAH, which contains warnings that it “may produce irritation” or may be “irritating,” as well as cause certain physical injuries, clearly constitutes an “irritant” and, therefore, a “pollutant.”
That is, at least according to the Eighth Circuit. One factor that could have proved significant in this case is that TIAH is part of the insured’s business services. Interestingly, the Court of Appeals for the Southern District of Missouri had previously held in Hocker Oil Company, Inc. v. Barker-Phillips-Jackson, Inc. that the same exclusion was ambiguous where the insured’s liability arose out of the purported pollutant that was the insured’s product. 997 S.W.2d 510 (Mo. Ct. App. S.D. 1999). The insured in Hocker Oil was a gas station. Its liability in the underlying lawsuit arose out of damage due to gasoline – its main product. The Southern District concluded that in this context, the application of the pollution exclusion was ambiguous.
The Eighth Circuit rejected the Hocker Oil decision for two reasons. First, the Eighth Circuit expressed doubts that the Missouri Supreme Court would follow this approach, as this approach has been rejected in many other jurisdictions. The Court also noted that no other Missouri court had since adopted that approach. Second, the facts of Hocker Oil differed from those before the Eighth Circuit. Virtually all of the insured’s risk in Hocker Oil was related to gasoline. Moreover, the insurer’s “Gasoline Department” sold the policy to the insured. Under such circumstances, the Eighth Circuit noted that insured would be rather surprised to learn its policy excluded all liability related to gasoline.
While this interpretation allowed for a relatively broad reading of the pollution exclusion, the Eighth Circuit specifically stated that this exclusion is not without limits. The language of the exclusion itself limits its application to the “discharge, dispersal, seepage, migration, release or escape” of pollutants. If the pollutant is not disseminated in one of these ways, the exclusion on its face very well may not apply.
Whether those limits are the only limits the Missouri Supreme Court would attribute to this exclusion remains to be seen. In the meantime, figuring out whether this exclusion applies may be something of an irritant for insureds and insurers alike.