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

Heading: The Pollution Exclusion Clause

Text: 19 1. District of Columbia Law Governs the Policy's Interpretation The District Court correctly determined that District of Columbia law governs the interpretation of the insurance policy. The District Court sat in diversity because the amount in controversy exceeded $75,000 and the parties were completely diverse. A federal court sitting in diversity jurisdiction applies the choice of law rules of the forum state (or district or territory).... Liberty Mut. Ins. Co. v. Travelers Indem. Co., 78 F.3d 639, 642 (D.C. Cir. 1996) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). District of Columbia courts apply the law of the state with the more substantial interest in the matter. Blair v. Prudential Ins. Co. of Am., 472 F.2d 1356, 1359 (D.C. Cir. 1972) (citing Fowler v. A & A Co., 262 A.2d 344, 348 (D.C. 1970)). In this case, the District of Columbia has the most substantial interest, since it is both the location where the underlying events occurred and the place of the insured's headquarters. See Greycoat Hanover F St. Ltd. P'ship v. Liberty Mut. Ins. Co., 657 A.2d 764, 768 (D.C. 1995); Potomac Elec. Power Co. v. Cal. Union Ins. Co., 777 F. Supp. 968, 973 (D.D.C. 1991). Thus, the insurance policy must be interpreted in accordance with District of Columbia law. 20 2. Legal Approaches to the Pollution Exclusion Clause The District of Columbia Court of Appeals has never directly addressed the scope of the pollution exclusion clause as applied to an event, such as residential carbon monoxide poisoning, that does not involve typical forms of environmental pollution. Under District of Columbia law, an insurance policy is a contract whose construction is based on its language. Cameron v. USAA Prop. &Cas. Ins. Co., 733 A.2d 965, 968 (D.C. 1999). The burden is on the insurer to spell out in terms understandable to the man in the street any provisions that would exclude coverage. Id. (quoting Holt v. George Washington Life Ins. Co., 123 A.2d 619, 621 (D.C. 1956)). Unless the language of such a provision is unambiguous, doubts are to be resolved in favor of the insured. Id. (citations omitted). This is because insurers draft the contracts, with the help of experts and lawyers. Id. (citing Hayes v. Home Life Ins. Co., 168 F.2d 152, 154 (D.C. Cir. 1948)). The doctrine of contra preferentum, however, does not permit forced constructions or otherwise strained readings in order to create obligations against insurers. See id. (citing Boggs v. Motors Ins. Corp., 139 A.2d 733, 735 (D.C. 1958)). Nor does mere disagreement among parties as to the meaning of a term constitute ambiguity. Byrd v. Allstate Ins. Co., 622 A.2d 691, 693-94 (D.C. 1993) (citations omitted). 21 Under District of Columbia law, where a provision in an insurance policy is unambiguous, it must be enforced as written unless contrary to public policy. See Smalls v. State Farm Mut. Auto. Ins. Co., 678 A.2d 32, 35 (D.C. 1996). Only when a provision's meaning is ambiguous is it interpreted in a manner consistent with the reasonable expectations of the insured. See id. This rule stands in contrast to the law in some other states, in which courts apply the doctrine of the insured's reasonable expectations to construe even unambiguous provisions in favor of the insured. See, e.g., Reg'l Bank of Colo., N.A. v. St. Paul Fire & Marine Ins. Co., 35 F.3d 494, 497 (10th Cir. 1994) (stating that, under Colorado law, even if an insurance policy is unambiguous, it is construed in light of the reasonable expectations of the ordinary policyholder). 22 The question, therefore, is whether the District of Columbia Court of Appeals would find the pollution exclusion clause ambiguous as applied to the facts of this case. In attempting to determine how the District of Columbia Court of Appeals would rule on this issue, the District Court gave some weight to the fact that the Fourth Circuit applied District of Columbia law in finding the pollution exclusion clause unambiguous when applied to the release of manganese fumes. Nationwide Mut. Ins. Co. v. Nat'l REO Mgmt., Inc., Civ. Action No. 99-1322, Mem. Op. at 14 (D.D.C. July 26, 2000) (citing Nat'l Elec. Mfrs. Ass'n v. Gulf Underwriters Ins. Co., 162 F.3d 821 (4th Cir. 1998)). While we take the Fourth Circuit's efforts to determine how the Court of Appeals would rule into account, we do not find its conclusion decisive in this case. The Fourth Circuit found the pollution exclusion provision to be unambiguous based on its plain language. Nat'l Elec. Mfrs. Ass'n, 162 F.3d at 825. It then considered whether to apply the reasonable expectations doctrine to restrict the provision to environmental pollution. Id. The court correctly found that District of Columbia law forbids application of the reasonable expectations doctrine to alter an otherwise clear policy provision. Id. We remain uncertain, however, whether the provision is, in fact, unambiguous under District of Columbia law, and the Fourth Circuit's determination on that point is not conclusive. 23 Courts across the nation are hopelessly divided over whether the clause is ambiguous as applied to carbon monoxide, other fumes, and substances such as lead paint. Because so many courts have addressed the issue, several approaches have emerged. A number of courts have found the provision ambiguous and have construed it in favor of insured parties in cases that do not involve typical forms of environmental pollution. Some have done so because the clause uses words, such as dispersal, discharge, irritant, and contaminant, that are recognizable as terms of art in environmental law. See, e.g., Nautilus Ins. Co. v. Jabar, 188 F.3d 27, 30 (1st Cir. 1999) (finding the provision ambiguous in a case involving fumes from roofing products, because it uses terms of art and because, if read literally, its scope would be virtually boundless); Kenyon v. Sec. Ins. Co. of Hartford (DPIC Cos.), 626 N.Y.S.2d 347, 350 (N.Y. Sup. Ct. 1993) (finding the provision ambiguous in a case involving residential carbon monoxide poisoning, because it uses words recognized as terms of art in environmental law), aff'd, 616 N.Y.S.2d 133 (N.Y. App. Div. 1994). Other courts have found that the clause's general purpose shielding insurers from the costs of environmental cleanups prevents it from barring coverage for everyday industrial and residential accidents. See, e.g., Stoney Run Co. v. Prudential-LMI Commercial Ins. Co., 47 F.3d 34, 36-37 (2d Cir. 1995) (finding the provision ambiguous in a case involving residential carbon monoxide poisoning, because it is reasonable to interpret it as applying only to environmental pollution in light of its general purpose); Sullins v. Allstate Ins. Co., 667 A.2d 617, 620 (Md. 1995) (finding a similar version of the provision ambiguous as applied to lead paint because it could reasonably be interpreted to apply only to environmental pollution). Some courts have reasoned that the pollution exclusion clause must be ambiguous if so many courts have given it conflicting interpretations. See, e.g., Meridian Mut. Ins. Co. v. Kellman, 197 F.3d 1178, 1183 (6th Cir. 1999) (finding the provision ambiguous in light of the disarray that characterize[s] this area of law); Motorists Mut. Ins. Co. v. RSJ, Inc., 926 S.W.2d 679, 681 (Ky. Ct. App. 1996) (finding the provision ambiguous as applied to carbon monoxide poisoning because of its conflicting judicial interpretations and because of its use of environmental law terms of art). 24 Other courts have found that a strictly literal reading of the provision could yield absurd results. The Seventh Circuit, in an oft-quoted case, analyzed the problem as follows: 25 The terms irritant and contaminant, when viewed in isolation, are virtually boundless, for there is virtually no substance or chemical in existence that would not irritate or damage some person or property. Westchester Fire Ins. Co. v. City of Pittsburgh, 768 F. Supp. 1463, 1470 (D. Kan. 1991). 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. Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1043 (7th Cir. 1992). The court noted that, to avoid absurd results, many courts have taken a common sense approach when determining the scope of pollution exclusion clauses, holding that the clauses do not apply to injuries resulting from everyday activities gone slightly, but not surprisingly, awry. Id. at 1043-44 (citations omitted); see also Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 948 (Ind. 1996) (Clearly, [the pollution exclusion] clause cannot be read literally as it would negate virtually all coverage. For example, if a visitor slips on a grease spill then, since grease is a 'chemical,' there would be no insurance coverage. Accordingly, this clause requires interpretation.). 26 Another group of courts has found the pollution exclusion clause not to preclude coverage for releases of carbon monoxide and other fumes, without finding the clause ambiguous. See, e.g., Reg'l Bank of Colo., N.A., 35 F.3d at 497 (finding that a carbon monoxide exposure incident was not excluded from insurance coverage, regardless of whether the policy's pollution exclusion clause was ambiguous); W. Alliance Ins. Co. v. Gill, 686 N.E.2d 997, 999 (Mass. 1997) (finding that the clause did not bar coverage for carbon monoxide exposure because its use of environmental law terms of art suggested that it applied to industrial or environmental pollution and holding that the exclusion must be interpreted in a commonsense manner); Thompson v. Temple, 580 So. 2d 1133, 1135 (La. Ct. App. 1991) (finding that a similar pollution exclusion clause did not exclude coverage for injuries caused by a leaking heater where the intent of the insurance industry was to exclude coverage for entities that knowingly pollute the environment). 27 On the other hand, a number of courts have found the pollution exclusion provision to be unambiguous and to bar coverage for incidents like the one underlying this suit. At least one court has specifically found that the clause's language does not reflect the specialized language of environmental law. See Nat'l Elec. Mfrs. Ass'n, 162 F.3d at 825 (applying District of Columbia law and finding the provision unambiguous as applied to welders exposed to manganese fumes because it contains neither technical terms nor terms of art). In other cases, courts have focused on the clause's broad language, which does not explicitly exempt nonenvironmental damage. See, e.g., Assicurazioni Generali, S.p.A. v. Neil, 160 F.3d 997, 1000 (4th Cir. 1998) (finding that a similar provision's expansive language applies to carbon monoxide injuries); Certain Underwriters at Lloyd's London v. C.A. Turner Constr. Co., 112 F.3d 184, 188 (5th Cir. 1997) (finding a similar provision unambiguous as applied to a welding accident because its plain language does not limit its application to environmental harm); Reliance Ins. Co. v. Moessner, 121 F.3d 895, 901, 903-04 (3rd Cir. 1997) (finding the provision unambiguous in a case involving carbon monoxide poisoning because of its plain language, but finding that, under Pennsylvania law, the insured's reasonable expectations could override the plain meaning); Essex Ins. Co., 863 F. Supp. at 40-41 (finding the provision applicable to carbon monoxide poisoning caused by a Zamboni machine in an ice rink because of its plain language); Bernhardt v. Hartford Fire Ins. Co., 648 A.2d 1047, 1050-51 (Md. Ct. Spec. App. 1994) (finding the provision unambiguous because its language is quite specific and people of ordinary intelligence would not conclude that it was inapplicable to tenants' carbon monoxide poisoning). 28 With so many courts coming to diametrically opposed conclusions about the clause's clarity and meaning, it is difficult to know which line of cases the District of Columbia Court of Appeals would follow. Because the issue is important and likely to recur, and because courts have taken conflicting approaches to the clause's interpretation, we hereby certify the question to the District of Columbia Court of Appeals in accordance with D.C. Code § 11-723. We append to this certification the relevant portions of the District Court record. In addition, the Clerk of the Court shall forward copies of all or such portion of the record, including the parties' briefs, that the Court of Appeals may require in order to answer the certified question. See D.C. Code § 11-723(d) (2001).