A Practical Approach to Pollution Exclusions

The Supreme Court of Vermont recently demonstrated in Whitney v. Vermont Mutual Ins. Co., 2015 VT 140, 2015 WL 8540432 (filed Dec. 11, 2015) a practical approach to the application of an absolute pollution exclusion. The case facts involved a situation where a foster care provider noticed bedbugs in the home after a new foster child was placed with them. The Vermont Department of Children recommended that the house be sprayed with a pesticide in order to eradicate the bedbugs. The pest control company did in fact spray the house, corner to corner, wall to wall, including the foster care providers’ personal effects within the home, the oven and the duct work of the forced hot air heating system of the home. When the foster care parents returned to the home after the spraying operation, they noticed that the walls and surfaces of the home were visibly dripping with pesticide.

The pesticide company used the pesticide Chlorpyrifos. Chlorpyrifos is a known toxin that can cause “nausea, dizziness, confusion, and, in very high exposures, respiratory paralysis and death.” The substance has been banned for residential use by the Federal EPA and the spraying of foster home with the chemical violated both federal and state law. Testing revealed that there were high levels of the pesticide in the home.

The claim was submitted to the foster care family’s homeowner policy. The claim was denied by the insurance company, Vermont Mutual Insurance Company, because the homeowner policy contained an absolute pollution exclusion.

The Court began its analysis by recognizing there were two divergent lines of cases that had construed the absolute pollution exclusion. In one line of cases, courts had construed pollution exclusions very narrowly and had concluded that they were inherently ambiguous and that the purpose of the exclusion was to address liability arising from traditional environmental pollution and not the ordinary acts of negligence involving harmful substances. Citing MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635, 3 Cal.Rptr.3d 228, 73 P.3d 1205, 1216 (2003). In a second line of cases the courts had concluded that the pollution exclusion, by its plain language, excluded all injuries that occurred from pollutants. Citing Quadrant Corp. v. American States Ins. Co., 154 Wash.2d 165, 110 P.3d 733 (2005). However, the Court in Whitney found that pollution exclusions are not presumed, as a class, to be ambiguous or to be limited in their application to traditional environmental pollution. Rather, the exclusion should be construed in the same way as any other insurance contract provision. In that regard, the Court’s goal was to interpret the pollution exclusion so as to ascertain and carry out the parties’ intent.

Turning to the pollution exclusion in question, the policy excluded from coverage any loss caused by “discharge, dispersal, seepage, immigration, release, or escape of pollutants.” The term “pollutant” was defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

Turning to the facts of the case, it was beyond question that the dousing of the foster home with Chlorpyrifos constituted a “discharge, dispersal, seepage, immigration, release, or escape” of the substance. Therefore the question was whether Chlorpyrifos qualified as a pollutant. The Court found that Chlorpyrifos was in fact a pollutant because it could cause nausea, dizziness, and confusion, and at very high exposure, respiratory paralysis and death. The chemical had been banned for residential use. Use of the chemical in the foster home was a violation of EPA regulations and both state and federal law. Concentration levels found in the home were consistently high relative to the EPA “action level” at which point the EPA has determined that the cleaning of the house units was required. Therefore, it was not hard for the Court to conclude that in the context of the case, the concept of pollutant encompassed the Chlorpyrifos sprayed throughout the home.