Opinion ID: 2634716
Heading Depth: 3
Heading Rank: 1

Heading: The Discharge/Damage Distinction

Text: The court of appeals correctly rejected Cotter's contention that qualified pollution exclusion clauses restore coverage for unexpected and unintended damage. Because the language in the clauses that restores coverage focuses on discharges and does not address damage, we hold that the clauses only restore coverage when discharges are unexpected and unintended. An examination of the text of an entire qualified pollution exclusion clause reveals that the clauses only restore coverage when discharges are unexpected and unintended. The clauses first specifically exclude all coverage for damages resulting from discharges of contaminants, stating, for example, This insurance does not apply . . . to bodily injury or property damage arising out of the discharge, dispersal, release or escape [of contaminants]. Then, however, the language that restores coverage does not similarly refer to damages but instead focuses on discharges. For example, one clause specifies that coverage is only restored when a  discharge, dispersal, release or escape is sudden and accidental (emphasis added). The clauses do not state that they restore coverage for unexpected and unintended damage or harm. Therefore, by their terms, the qualified pollution exclusion clauses only restore coverage when discharges are unexpected and unintended, and not when damages are unexpected and unintended. [5] Our case law supports this interpretation. In prior decisions, we have acknowledged that qualified pollution exclusion clauses restore coverage only if the discharge is unexpected and unintended. See Pub. Serv. Co. v. Wallis & Cos., 986 P.2d 924, 926 (Colo. 1999) (holding that when applying the clause, the relevant inquiry is whether the pollution resulted from a happening that was sudden, unintended and unexpected from the standpoint of the insured); Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 617 (Colo. 1999) (holding that the relevant pollution event is the release of pollutants from a containment area). Moreover, other jurisdictions have similarly interpreted the qualified pollution exclusion clauses as restoring coverage only when discharges are unexpected and unintended. See St. Paul Fire & Marine Ins. Co. v. Warwick Dyeing Corp., 26 F.3d 1195, 1203 (1st Cir.1994); New Castle County v. Hartford Accident & Indem. Co., 970 F.2d 1267, 1272 (3d Cir.1992); Liberty Mut. Ins. Co. v. Triangle Indus., 957 F.2d 1153, 1157-58 (4th Cir.1992); Fireman's Fund Ins. Cos. v. Ex-Cell-O Corp., 662 F.Supp. 71, 75-76 (E.D.Mich.1987), disagreed with on other grounds by Ray Indus., Inc. v. Liberty Mut. Ins. Co., 974 F.2d 754 (6th Cir.1992); Morton Int'l, Inc. v. Gen. Accident Ins. Co. of Am., 134 N.J. 1, 629 A.2d 831, 847 (1993); Technicon Elec. Corp. v. Am. Home Assurance Co., 74 N.Y.2d 66, 544 N.Y.S.2d 531, 533-34, 542 N.E.2d 1048 (1989); Transamerica Ins. Co. v. Sunnes, 77 Or.App. 136, 711 P.2d 212, 214 (1985). These courts also relied on the language of the clauses, reasoning that the clauses only refer to discharges and not damages. See, e.g., Fireman's Fund, 662 F.Supp. at 75 (stating that [a]pplication of the pollution exclusion depends exclusively upon the process by which pollutants entered the environment); see also Liberty Mut., 957 F.2d at 1157-58; Transamerica, 711 P.2d at 214. Under this rationale, courts have declined to extend coverage to insureds that intended to discharge into a specific area, but did not anticipate that the discharge was hazardous and would contaminate this specific area. For example, courts have held that the clause does not afford coverage to intentional discharges of hazardous substances believed to be at safe levels or not hazardous at all. See, e.g., Indep. Petrochemical Corp. v. Aetna Cas. & Sur. Co., 781 F.Supp. 9, 16-17 (D.D.C.1991); Anaconda Minerals Co. v. Stoller Chem. Co., 773 F.Supp. 1498, 1506 (D.Utah 1991). One court explained that, by the policies' terms, [s]hould the holy water later turn out to be a witches' brew, . . . [the insured] bears the risk of damage from the innocent but intentional act of pollution. . . . New Castle, 970 F.2d at 1272. We agree with the conclusion of many other courts that, for purposes of qualified pollution exclusion clauses, an insured's expectation of damage is irrelevant and the only necessary inquiry is whether the discharge was unexpected and unintended. Therefore, we hold that the court of appeals correctly interpreted qualified pollution exclusion clauses as restoring coverage when only discharges, dispersals, releases, or escapes are unexpected and unintended.