Opinion ID: 1312473
Heading Depth: 3
Heading Rank: 1

Heading: The relevancy of the pollution exclusion.

Text: The Regents (standing in the shoes of the insureds) first argue that this is a products liability case, not a pollution case. This is simply a case, they argue, where the insured has sold a defective product which has caused property damage. This argument need not detain us for long. The exclusion speaks to property damages arising out of the discharge or release of pollutants. It does not say arising out of a defective or unfit or negligently made product. In other words, the exclusion defines itself by characterizing the activity of the pollutant, not the activity of the insured polluter. See, e.g., Park-Ohio Indus., Inc. v. Home Indem. Co., 975 F.2d 1215, 1223 (6th Cir.1992) (applying Ohio law). The Regents also rely, however, on a court of appeals opinion, Grinnell Mutual Reinsurance Co. v. Wasmuth, 432 N.W.2d 495 (Minn.App.1988), pet. for rev. denied (Minn., Feb. 10, 1989), with a somewhat similar fact situation. There the insured's insulation material, when installed in a home, emitted formaldehyde fumes. The court of appeals found insurance coverage, holding that an insured would not reasonably have expected its comprehensive general liability policy to exclude coverage for unexpected damage due to installation of building materials in a home. 432 N.W.2d at 499. The reasonable expectations test of Atwater Creamery Co. v. Western National Mutual Insurance Co., 366 N.W.2d 271 (Minn.1985), however, has no place here, and the contrary ruling of Grinnell is overruled. In Atwater, we held that where major exclusions are hidden in the definitions section, the insured should be held only to reasonable knowledge of the literal terms and conditions. 366 N.W.2d at 278. [4] In the comprehensive general liability policy involved in this case, the pollution exclusion is plainly designated as such; consequently, the wording of the exclusion should be construed, if a claim of ambiguity is raised, in accordance with the usual rules of interpretation governing insurance contracts. The reasonable expectation test is not a license to ignore the pollution exclusion in this case nor to rewrite the exclusion solely to conform to a result that the insured might prefer. [5]