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Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

REGIONAL BANK OF COLORADO, N.A. 

Plaintiff-Appellee, 

v. 

ST. PAUL FIRE AND MARINE 

INSURANCE COMPANY, 

Defendant-Appellant. 

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FILED 

UnH.ed States C~urt of Appet.ls 

Tenth Cii·":d~ 

AUG 2 5 1994 

No. 93-1235 

Appeal from the United states District Court 

for the District of Colorado 

(D.C. No. 91-M-461) 

Scott J. Mikulecky of Dufford & Brown, Denver, Colorado (Russell L. 

George of Stuver & George, Rifle, Colorado, with him on the brief), 

for Plaintiff-Appellee. 

John R. Mann (Frank R. Kennedy on the brief), of Cooper & Kelley, 

Denver, Colorado, for Defendant-Appellant. 

Before KELLY and BA.~ETT, Circuit Judges, and O'CONNOR, Senior 

District Judge.* 

O'CONNOR, Senior District Judge. 

* The Honorable Earl E. O'Connor, Senior United States District 

Judge for the District of Kansas, sitting by designation. 

Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 1 
Appellant St. Paul Fire and Marine Insurance Company 

("St. Paul") appeals from a grant of summary judgment in favor of 

appellee Regional Bank of Rifle ("Regional Bank"). 

jurisdiction pursuant to 28 u.s.c. § 1291 and affirm. 

We exercise 

Regional Bank, the insured, filed an action for a 

declaratory judgment with respect to coverage and duty to defend on 

a claim for carbon monoxide poisoning under the comprehensive 

general liability ("CGL") insurance policy issued by St. Paul's. 

The policy contained a "pollution exclusion" clause. The case was 

submitted on cross motions for summary judgment with the following 

stipulated facts: 

1. At all times relevant hereto plaintiff 

[Regional Bank] had in effect a policy of 

insurance issued by defendant [St. Paul's] . 

2. On January 27, 1988, Debra Seibert rented 

an apartment for occupancy by herself and her 

minor son from plaintiff. At that time, Debra 

Seibert was pregnant with her daughter, Brandy 

Loague. At the time, plaintiff owned this 

apartment. 

3. After sleeping in the above-referenced 

apartment on the night of January 29, 1988, 

Ms. Seibert and her son were taken to the 

Hospital suffering from inhalation of carbon 

monoxide allegedly emitted from a faulty wall 

heater in the apartment. 

4 . As a result of their carbon monoxide 

inhalation, Ms. Seibert and her son filed 

civil Action No. 89-CV-291 against the 

plaintiff herein in the Garfield County 

District Court {the "Garfield Action"). This 

case remains pending. 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 2 
5. The parties hereto agree that the sole 

issue to be decided in this case is whether 

[the subject policy] provides, up to its 

applicable limits, coverage to the plaintiff 

for the damages and injuries allegedly 

suffered by Ms. Seibert, her son and daughter 

in the Garfield Action. More specifically, 

the issue before the Court is whether [the 

subject policy's] Pollution Exclusion 

(Insuring Agreement 36, pp. 6 and 7 of 13) 

excludes coverage for the injuries and damages 

allegedly caused by Ms. Seibert, her unborn 

daughter and her son's carbon monoxide 

inhalation. This Exclusion reads, in 

pertinent part, as follows: 

Exclusions - What This Agreement 

Won't cover 

Pollution. We won't cover bodily injury, 

property damage or medical expenses that 

result from pollution at or from: 

- your premises; 

- a waste site; or - your work site 

* * * * 

Pollution means the 

threatened discharge, 

escape of pollutants. 

actual, alleged 

dispersal, release 

or 

or 

Pollutants mean any solid, liquid, gaseous, or 

thermal irritant or contaminant, including: 

-smoke, vapors, soot, fumes; 

-acids, alkalis, chemicals; and 

-waste 

Your premises means any premises 

rent, lease or occupy. It also 

premises you no longer own, rent, 

occupy. 

Aplt. App. at 7-8. 

you own, 

includes 

lease or 

We review the district court's grant of summary judgment 

de novo, Anaconda Minerals Co. v. Stoller Chemical Co., 990 F.2d 

1175, 1177 (lOth Cir. 1993), using the same legal standard employed 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 3 
below, Fed. R. civ. P. 56(c). Applied Genetics Int'l. Inc. v. 

First Affiliated Sec •. Inc., 912 F.2d 1238, 1241 (lOth Cir. 1990). 

We must follow Colorado law and interpret the policy as a Colorado 

court would. See Erie R.R. Co. v. Tompkins, 304 u.s. 64 (1938); 

Broderick Inv. Co. v. Hartford Accident & Indem. Co., 954 F.2d 601, 

606 (lOth Cir. 1992), cert. denied, 113 s. Ct. 189 (1992). 

Under Colorado law, absent an ambiguity, "an insurance 

policy must be given effect according to the plain and ordinary 

meaning of its terms. " Terranova v. State Farm Mut. Auto. Ins. 

Co., BOO P.2d sa, 60 (Colo. 1990); see also Chacon v. American 

Family Mut. Ins. Co., 788 P.2d 748 (Colo. 1990); Northern Ins. Co. 

v. Ekstrom, 784 P. 2d 320, 322 (Colo. 1989) . "A court may not 

rewrite an unambiguous policy nor limit its effect by a strained 

construction. A policy term is ambiguous if it is reasonably 

susceptible to more than one meaning." Terranova, BOO P.2d at 60. 

Insurance contracts are not to be technically construed, but are to 

be "construed as they would be understood by a person of ordinary 

intelligence." State Farm Mut. Auto. Ins. Co. v. Nissen, 851 P.2d 

165, 167 (Colo. 1993). 

In Davis v. M.L.G. Corp., 712 P.2d 985, 989 (Colo. 1986), 

the court referred to the "general rules of construction" of "true" 

insurance contracts as follows: 

If there remains any doubt, the terms should 

be read in the sense which the insurer had 

reason to believe they would be interpreted by 

the ordinary reader and purchaser. The test 

to be applied is not what the insurer intended 

by his words, but what the ordinary reader and 

purchaser would have understood them to mean. 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 4 
The scope of an agreement is not to be determined in a vacuum. Id. 

at 990. Rather, the court looks to the reasonable expectations of 

an ordinary policyholder to give effect to the ordinary and popular 

meaning of words. Id. "The interpretation which makes a contract 

fair and reasonable is selected over that which yields a harsh or 

unreasonable result." Id. 

Moreover, "to benefit from an exclusionary provision in 

a particular contract of insurance the insurer must establish that 

the exemption claimed applies in the particular case, and that the 

exclusions are not subject to any other reasonable interpretation. 

Broderick Investment Co., 954 F.2d at 606 (applying Colorado law); 

Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1090 

{Colo. 1991) (interpreting an exclusion for sudden and unexpected 

pollution). 

In construing the policy to provide coverage, the 

district court did not expressly find the policy ambiguous, but 

held that the policy did not exclude coverage for injuries 

sustained by tenants of the Bank who were exposed to carbon 

monoxide emitted from a faulty heater. The court looked to what 

coverage a reasonable person in the position of the policyholder 

would have expected and held that "a reasonable policyholder would 

expect a CGL policy to give him complete comprehensive coverage, 

including coverage for home accidents such as this." Aplt. App. at 

92. The court reasoned that the broad interpretation of the 

exclusion urged by st. Paul's was unreasonable because it would 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 5 
exclude coverage for inhalation of smoke (an irritant) caused by a 

fire on the premises, but not for burns resulting from that same 

fire. 

We need not determine whether the policy is ambiguous in 

the sense that it is subject to two reasonable interpretations 

because, regardless of ambiguity, we would reach the same result, 

i.e., that the incident was covered. If the policy is ambiguous, 

it is to be construed in favor of coverage. Broderick Investment 

Co., 954 F.2d at 606. 

If the policy is not ambiguous, it is to be applied 

according to the plain and ordinary meaning of its terms, the 

meaning of which are to be determined in light of the reasonable 

expectation of an ordinary policyholder. Applying this standard, 

we conclude that the carbon monoxide emission at issue here was not 

excluded by the pollution exclusion clause in the policy. 

Colorado recognizes the reasonable expectation doctrine 

in insurance contract interpretation. See, ~' Nissen, 851 P.2d 

at 167-168 (applying the reasonable expectations doctrine in 

interpreting uninsured motorist exclusion); Chacon, 788 P.2d at 752 

(construing exclusior, for intentional acts in homeowner's insurance 

policy); Davis v. M.L.G. Corp., 712 P.2d at 989-91 (interpreting 

waiver in automobile rental insurance policy in light of reasonable 

expectation of insured); Peters v. Boulder Ins. Agency. Inc., 829 

P.2d 429, 433 (Colo. ct. App. 1991) (The rule of reasonable 

expectations applies if "there is a dispute as to the existence of 

insurance coverage."); State Compensation Ins. Fund v. Wangerin, 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 6 
736 P.2d 1246, 1248 (Colo. Ct. App. 19S6) (reasonable expectation 

doctrine is applicable to "determine the continuing existence of 

insurance coverage."); Sanchez v. Connecticut Gen. Life Ins. Co., 

681 P.2d 974, 977 (Colo ct. App. 1984) (adopting rule of reasonable 

expectations in determining coverage under temporary life insurance 

policy); Leland v. Travelers Indem. Co., 712 P.2d 1060, 1064-65 

(Colo. Ct. App. 1985) (Rule of reasonable expectation applies to 

disputes regarding "the existence of insurance coverage."). Thus, 

the plain and ordinary meaning of the terms of the policy is to be 

construed in light of the reasonable expectation of an ordinary 

policyholder. 

St. Paul's argues that the application of the reasonable 

expectation doctrine is only appropriate to interpret ambiguous 

policies or where estoppel and waiver, Sanchez, 681 P.2d 974, or 

unconscionability, Davis v. M.L.G. Corp., 712 P.2d 985, are 

involved. We do not read these cases so narrowly. Although 

Sanchez was in the context of a temporary life policy, the court's 

holding was not couched in terms of estoppel or waiver, but focused 

on what a "lay-applicant would think he was buying in exchange for 

the premium." Sanct&ez, 681 P. 2d at 977. Similarly, the Davis 

court did not require unconscionability to apply the reasonable 

expectation doctrine, but described the doctrine of 

unconscionability as "buttressing" the application of the 

reasonable expectation doctrine. Davis, 712 P.2d at 991. 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 7 
We believe that the Colorado supreme court would apply 

the rule of reasonable expectations in construing the terms of the 

policy here, regardless of whether or not the policy was found to 

be ambiguous. See Nissen, 851 P.2d at 168; Chacon, 788 P.2d at 

7 52; Sanchez, 681 P. 2d at 977; but see, Ohio Casualty Ins. v. 

Imperial Contractors. Inc., 765 P.2d 1060, 1062 (Colo. App. 1988) 

(inferring, without citation to any authority, that the reasonable 

expectation doctrine does not apply absent an ambiguity). 

In Nissen, the Colorado Supreme Court quoted Robert E. 

Keeton, Basic Text on Insurance Law§ 6.3(a), at 351 (1971): "The 

objectively reasonable expectations of applicants and intended 

beneficiaries regarding the terms of insurance contracts will be 

honored even though painstaking study of the policy provisions 

would have negated those expectations." 851 P. 2d at 168. In 

Chacon, the court interpreted an unambiguous policy in light of 

what "a reasonable person would have understood the contract to 

mean. 11 Similarly, the Colorado Court of Appeals cited Collister v. 

Nationwide Life Ins. Co., 388 A.2d 1346, 1353 (Pa. 1978), with 

approval in Sanchez, 681 P.2d at 977. The court in Collister, 388 

A. 2d at 1353, stated, "(R] egardless of the ambiguity, or lack 

thereof, inherent in a given set of insurance documents (whether 

they be applications, conditional receipts, riders, policies, or 

whatever), the public has a right to expect that they will receive 

something of comparable value in return for the premium paid." 

St. Paul's argues that the plain and ordinary meaning of 

the terms used in the pollution exclusion clause excludes coverage 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 8 
for the event in question here, i.e., personal injuries caused by 

exposure to carbon monoxide emissions. There is little doubt that 

if the heater malfunction had caused a fire and injured the 

tenants, there would have been coverage. However, St. Paul's urges 

that because the malfunction caused carbon monoxide emissions, 

coverage is excluded by the "absolute" pollution exclusion clause 

of the policy. St. Paul's argues that carbon monoxide is a gaseous 

irritant and thus, bodily injury caused by exposure to it on the 

insured's "premises" was excluded from coverage. 

The interpretation purported by St. Paul's stretches the 

plain meaning of the policy exclusion. When viewed in isolation, 

the terms "irritant" and "contaminant" are "virtually boundless, 

for 'there is no substance or chemical in existence that would not 

irritate or damage some person or property.'" Pipefitters Welfare 

Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1043 (7th 

Cir. 1992) (a reasonable policyholder would expect discharge of 

PCB-laden oil to be excluded by the pollution exclusion clause) 

(quoting Westchester Fire Ins. Co. v. City of Pittsburg, 768 F. 

Supp. 1463 (D. Kan. 1991)). The Pipefitters court stated: 

Without some limiting principle, the pollution 

exclusion clause would extend far beyond its 

intended scope, and lead to some absurd 

results. To take but two simple examples, 

reading the clause broadly would bar coverage 

for bodily injuries suffered by one who slips 

and falls on the spilled contents of a bottle 

of Drano, and for bodily injury caused by an 

allergic reaction to chlorine in a public 

pool. Although Drano and chlorine are both 

irritants or contaminants that cause, under 

certain conditions, bodily injury or property 

damage, one would not ordinarily characterize 

these events as pollution. 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 9 
976 F.2d at 1037. In a similar vein, the court in Westchester Fire 

Ins. Co. v. City of Pittsburg, 768 F. Supp. 1463, 1470 (D. Kan. 

1991}, observed, "[t)he terms 'irritant' and 'contaminant' ... 

cannot be read in isolation, but must be construed as substances 

generally recognized as polluting the environment." They must 

occur in a setting such that they would be recognized as a toxic or 

particularly harmful substance in industry or by governmental 

regulators. Id. 

The pollution exclusion at issue here excludes coverage 

for bodily injury and medical expenses caused by pollution on the 

insured's premises. "Pollutant" is defined as "any solid, liquid, 

gaseous, or thermal irritant or contaminant, including: smoke, 

vapors, . ' fumes; II The terms "irritant" and 

"contaminant" are not defined in the policy. Webster's New 

International Dictionary 1197 (3d ed. 1986) defines "irritant" as 

"tending to produce irritation or inflammation; something that 

irritates or excites; an agent by which irritation is produced." 

This somewhat circular definition begs the question. A reasonable 

policy holder would not understand the policy to exclude coverage 

for anything that irritates. "Irritant" is not to be read 

literally and in isolation, but must be construed in the context of 

how it is used in the policy, i.e., defining "pollutant." 

While a reasonable person of ordinary intelligence might 

well understand carbon monoxide is a pollutant when it is emitted 

in an industrial or environmental setting, an ordinary policyholder 

would not reasonably characterize carbon monoxide emitted from a 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 10 
. . residential heater which malfunctioned as "pollution." It seems 

far more reasonable that a policyholder would understand the 

exclusion as being limited to irritants and contaminants commonly 

thought of as pollution and not as applying to every possible 

irritant or contaminant imaginable. 

AFFIRMED. 

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Appellate Case: 93-1235 Document: 01019290958 Date Filed: 08/25/1994 Page: 11