By: J. Kent Holland, Jr., Esq., ConstructionRisk Counsel, PLLC
A federal appeals court vacated a district court ruling and found that the pollution exclusion in a commercial general liability (CGL) policy precluded a contractor from seeking defense and indemnification from its insurer for bodily injuries resulting from its use of a type of concrete sealant. The appeals court—applying Missouri law—ruled that TIAH, an acrylic concrete sealant used by the contractor, unambiguously met the policy’s definition of “pollutant” under the pollution exclusion. The court rejected the contractor’s argument that TIAH was not a “pollutant” in this context because it was a product it regularly used in its services. United Fire & Casualty Co. v. Titan Contractors Service, Inc., 751 F.3d 880 (8th Cir. 2014).
Titan Contractors Services, Inc. is a provider of construction-cleanup services, which includes cleaning and sealing concrete floors. Three women filed a negligence suit against the contractor in 2009 in Illinois state court. They alleged significant physical injuries stemming from the contractor’s use of TIAH at an improperly ventilated worksite. The contractor sought defense and indemnification from United Fire and Casualty Company, an insurer that had provided contractor with a CGL policy.
The insurer filed an action in federal district court in Missouri seeking a declaration that it did not owe the contractor a duty to defend or indemnify because TIAH was a pollutant under the policy’s exclusion. The trial court sided with the contractor, and determined that this exclusion was not applicable.
The insurer successfully appealed to the U.S. Court of Appeals for the Eighth Circuit, which vacated the lower court’s holding in a divided decision. The appeals court looked to the language of the CGL’s pollution exclusion, where “pollutant” was defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” The court also considered basic descriptions on the properties of TIAH—including the manufacturer’s safety manual and federal environmental laws—and found that it unambiguously fell within the definition of pollutant.
The court then addressed the contractor’s argument that even if TIAH appeared to fall within the exclusion’s definition of pollutant, coverage was nonetheless required under relevant Missouri legal precedent. Specifically, the contractor cited to a Missouri appeals case, Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., where a pollution exclusion in a CGL did not apply to the insured gas station because in that context gasoline was a “product it sells” rather than a pollutant. The appellate court found that the cited case had little support in Missouri or elsewhere because it conflicts with the “deeply entrenched rule” of insurance contract interpretation, i.e., that a court may not “create an ambiguity in order to distort the language of an unambiguous policy.”
Moreover, the appellate court distinguished the current situation from that in Hocker Oil where if gasoline had been found to be a “pollutant,” that would have effectively eliminated coverage for the primary risks associated with operating a gas station. A reasonable insurance purchaser in unique context of a gasoline station owner, said the court, may not believe that gas was an excluded pollutant, especially since the CGL policy in that case was purchased through the insurer’s “Gasoline Department.”
In contrast, the contractor’s concrete sealing operations amounted to only about a quarter of its business, and TIAH was only one of several methods that the contractor used.
Interestingly, the dissenting opinion agreed with the logic of the Hocker Oil decision, and found more factual similarity with the concrete sealant. The dissent stated that the TIAH was not a pollutant in the context of the contractor’s routine business operations. The dissent further concluded that a reasonable policy holder in this line of business would expect the CGL policy to provide coverage for injuries associated with sealing concrete. Further, the dissent noted the legal maxim that any ambiguity would be resolved in favor of the insured over the insurer.
Comment: This case highlights the importance of understanding how the scope of a CGL pollution exclusion may be interpreted under a particular state’s law. The court acknowledged the concern that the scope of the pollution exclusion can be quite broad when the text is strictly applied. Companies that routinely handle substances that could fit the expansive definition of “pollutant” must be especially mindful of the extent to which the pollution exclusion in a CGL policy could eliminate coverage for its ordinary risks.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 17, No. 2 (February 2015).
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