Owners, contractors, and subcontractors, etc. need to understand the liability insurance coverage they maintain so that in event of a claim relating to bodily injury or property damage they know whether there is potential coverage for the claim. Not only does this include understanding the exclusions in the policies, but also understanding endorsements that may further restrict or modify coverage.
CGL policies contain a pollution exclusion that excludes environmental pullutants / contaminants (as it has been referred to as an absolute pollution exclusion). If an entity requires the type of insurance to cover potential environmental liabilities, there is pollution liability insurance that can be procured, but this is separate from the CGL policy.
Although not a construction dispute, the recent case of Endurance American Specialty Ins. Co. v. Savits-Daniel Travel Centes, Inc., 2014 WL 2600071 (S.D.Fla. 2014), illustrates the general application of the pollution exclusion in a personal injury situation. In this case, a woman was at a bar and was exposed to pepper spray causing her to fall and fatally hit her head. Her estate sued the owner of the premises and the owner tendered the claim to its CGL carrier. The carrier denied coverage and an action for declaratory relief ensued to determine whether the CGL carrier was responsible for a duty to defend and indemnify. The issue in the case was whether the pepper spray constituted a pollutant; if it was a pollutant, then bodily injury arising out of the pepper spray pollutant was excluded from coverage.
The policy contained the following language (common to CGL policies):
2. Exclusions This insurance does not apply to:
* * * *
(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.
* * * *
* * * *
15. “Pollutants” mean 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.
In addition, there was an endorsement that further restricted coverage known as the “Mold, Fungus, Bacteria, Virus, and Organic Pathogen Exclusion:”
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE FORM
MOLD, FUNGUS, BACTERIA, VIRUS AND ORGANIC
It is hereby agreed that this policy shall not apply:
1. to “bodily injury”, “property damage”, or “personal and advertising injury”;
2. to damages for devaluation of property or for the taking, use or acquisition or interference with the rights of others in property or air space;
3. to any loss, cost or expense, including but not limited to fines and penalties, arising out of any governmental direction or request, or any private party or citizen action, that an insured test for, monitor, clean up, remove, contain, treat, detoxify or neutralize “organic pathogens”; or
4. to any “suit” or administrative or regulatory procedure or process in which an insured may be involved as a party;
arising, directly or indirectly, or in concurrence or in any sequence out of or in any way relating to actual, alleged or threatened existence, discharge, dispersal, release or escape of “organic pathogens,” whether or not such actual, alleged or threatened existence, discharge, dispersal, release or escape is sudden, accidental or gradual in nature.
This insurance shall not apply to any “bodily injury”, “property damage”, “personal and advertising injury”, loss, cost or expense arising out of or in any way related to any form of “organic pathogens,” whether or not such actual, alleged or threatened existence, discharge, dispersal, release or escape is intentionally caused, or whether or not such injury, damage, devaluation, cost or expense is expected or intended from the standpoint of the insured.
“Organic pathogen” means any organic irritant or contaminant, including but not limited to mold, fungus, bacteria or virus, including but not limited to their byproducts, such as mycotoxins, mildew, or biogenic aerosols.
The Southern District agreed with the CGL insurer based on the exclusionary pollution language in the policy that pepper spray was a pollutant excluded from coverage.
Check your CGL policy and corresponding endorsements. You will see the pollution exclusion. During construction, there are certainly pollution / environmental risks that would require a contractor to obtain such insurance to cover and address these risks. The objective is know the risks you need covered and the policies you have in place to ensure you are being covered for those risks.
Please contact David Adelstein at firstname.lastname@example.org or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.