Opinion ID: 185543
Heading Depth: 2
Heading Rank: 2

Heading: History of the Pollution Exclusion Clause.

Text: 13 The pollution exclusion clause that appears in REO's insurance policy is part of a standard form commercial comprehensive general liability policy. The clause's history is wellknown. Before 1966, the standard comprehensive general liability form provided coverage for property damage and bodily injury caused by accident. Jeffrey W. Stempel, Interpretation of Insurance Contracts § T1.1, at 826 (1994). Courts often interpreted the standard policy to cover injuries related to environmental pollution. Am. States Ins. Co. v. Koloms, 687 N.E.2d 72, 79 (Ill. 1997) (detailing the history of the pollution exclusion clause). The insurance industry responded by changing the policy to cover occurrences and attempting to define occurrences to exclude long-term environmental pollution. See id. at 79-80. Courts nonetheless continued to interpret the policy to cover damages resulting from such pollution. Id. at 80 (citing New Castle County v. Hartford Accident & Indem. Co., 933 F.2d 1162, 1197 (3d Cir. 1991)). 14 Beginning in 1970, insurers began adding an endorsement to the standard-form policy excluding coverage for damage 15 arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water. Stempel, supra, § T1.1, at 826-27 (citation omitted). The clause contained an exception for discharges that were sudden and accidental. Id. at 826. The clause was incorporated into the standard comprehensive general liability policy itself in 1973. Koloms, 687 N.E.2d at 80. Much litigation ensued over the meaning of the sudden and accidental exception. See generally Stempel, supra, § T1.2 (describing the litigation). 16 Insurance companies responded to the litigation by adopting a new version of the exclusion in the mid-1980s, known as the absolute or total pollution exclusion clause. See Koloms, 687 N.E.2d at 81. This version is virtually identical to the one that appears in the REO insurance policy. The new version eliminated the sudden and accidental exception and the requirement that the discharge be into or upon land, the atmosphere or any water course. Stempel, supra, §§ T1.1, T1.3, at 826, 828-29 (quoting both versions). The amended clause was intended by the insurance industry to bar coverage for the costs of environmental cleanups. See W. Am. Ins. Co. v. Tufco Flooring E., Inc., 409 S.E.2d 692, 699 (N.C. Ct. App. 1991), overruled on other grounds by Gaston County Dyeing Mach. Co. v. Northfield Ins. Co., 524 S.E.2d 558, 565 (N.C. 2000); see also Essex Ins. Co. v. Tri-Town Corp., 863 F. Supp. 38, 39-40 (D. Mass. 1994) ([T]he insurance industry reacted with lightning speed to the possibility that ... it could find itself indemnifying industries facing the staggering retroactive pollution clean-up costs imposed by the 1980 enactment of the Comprehensive Environmental Response Compensation and Liability Act [citation omitted].).