Opinion ID: 1734320
Heading Depth: 1
Heading Rank: 7

Heading: History of Pollution Exclusions in Louisiana Courts

Text: The litigation involving pollution exclusions has been relatively frequent over the years in Louisiana. The first Louisiana court to address the applicability of the exclusion was Connor v. Farmer, 382 So.2d 1069, 1070 (La.App. 4th Cir.1980). In Connor, the plaintiff was diagnosed with silicosis following years of exposure to sandblasting materials while on the job, and he subsequently sued his former employers' executive officers as well as their insurers. See id. at 1069. Within the insurance policy at issue in the case was a pollution exclusion clause similar to the one in this case, but the court found that the exclusion did not apply because the injury resulted from the failure to give proper equipment to Mr. Conner, not because of the discharge or escape of pollutants. See id. at 1069-70. More specifically, the court reasoned that the exclusion would be inapplicable when the pollution is only one of two or more liability-imposing circumstances out of which the injury arises. See id. at 1070. Similarly, five years later, the same court reversed a trial court's grant of summary judgment based on the pollution exclusion because a genuine issue of material fact remained as to whether the exclusion applied to the facts of the case. See Sellers v. Seligman, 463 So.2d 697, 702 (La. App. 4th Cir.1985). In doing so, the court rejected the literal reading of the pollution exclusion argued for by the insurance company and found: [T]he question of whether the instant situation falls within the language of the pollution exclusion is primarily a factual issue; i.e., did the [silica dust] plaintiff inhaled constitute irritants, contaminants, or pollutants which were discharged, dispersed, or escaped into or upon land or the atmosphere within the meaning of the policy? In Thompson v. Temple, 580 So.2d 1133 (La.App. 4th Cir.1991), the court of appeal established the first true test in Louisiana to determine whether or not a pollution exclusion would prevent coverage to an insured. In Thompson, the plaintiffs were overcome one evening by carbon monoxide leaking from a bathroom heater in the home they rented from Katie Temple. See id. at 1134. Plaintiffs filed suit against Temple and her homeowner's insurance carrier, Allstate Insurance Company. See id. Allstate moved for summary judgment based on a pollution exclusion within the policy similar to the one in this case. See id. After the trial court granted the motion for summary judgment, the Fourth Circuit reversed and found that the exclusion did not apply to the facts of the case. See id. at 1134. More specifically, the court enunciated a test by reasoning that [p]ollution exclusions are intended to exclude coverage for active industrial polluters, when businesses knowingly emitted pollutants over extended periods of time. Id. at 1134. As the homeowner in this case was surely not an active polluter, the court found that the pollution exclusion was inapplicable. See id. Later that year, the Fourth Circuit expanded on the test in West v. Board of Commissioners, 591 So.2d 1358 (La.App. 4th Cir.1991), in a case involving an investigator who sustained injury because of inhaling chemicals during an investigation into damaged containers of pesticide at his work. The plaintiffs employer was a warehousing company which had agreed to warehouse a pesticide even though some of the storage containers had earlier been damaged. See id. at 1359-60. The Fourth Circuit reasoned that when an insured only incidentally possesses a pollutant in the course of other business, the exclusion does not apply. See id. at 1360. Consequently, the court found that only when the insured is actually a polluter would the exclusion apply. See id. at 1361. The court remanded the case to the district court for a determination of that issue of fact. See id. Similarly, this reasoning was followed in Crabtree v. Hayes-Dockside, Inc., 612 So.2d 249, 252-53 (La.App. 4th Cir.1992), where the defendant was found to be a polluter within the meaning of the policy because of his routine and regular transportation of polyvinyl chloridethe substance which caused the damage in the case. Finally, the Third Circuit adopted this reasoning and held that the pollution exclusion could only be enforced if an insured was an active industrial polluter who knowingly emitted pollutants over a period of time. See Avery v. Commercial U. Ins. Co., 621 So.2d 184, 190 (La.App. 3rd Cir. 1993). Following Avery, this court gave its first interpretation of the application and meaning of the pollution exclusion in Louisiana. In South Central Bell Telephone Co. v. Ka-Jon Food Stores, Inc., 93-2926, p. 1 (La.5/24/94), 644 So.2d 357, 357, vacated on other grounds, (La.9/15/94), 644 So.2d 368, an underground gas tank at the Ka-Jon convenience store leaked and caused damage to subsurface telephone cables owned by South Central Bell. [11] State Farm Insurance Company had initially issued a standard CGL policy to Ka-Jon with a standard pollution exclusion. See id. 93-2926 at 2, 644 So.2d at 358. When the policy was reissued in 1986, the policy contained an Absolute Pollution Exclusion. See id. Relying on this provision, State Farm filed a motion for summary judgment. See id. The trial court followed the decision in West and found that Ka-Jon was not an active industrial polluter. See id. 93-2926 at 3, 644 So.2d at 358. Therefore, the motion was denied. See id. The First Circuit Court of Appeal expressly disagreed with West and found that the pollution exclusion clause clearly and unambiguously excluded coverage in the case. See id. This court granted a writ to resolve the conflict. See id. 93-2926 at 4, 644 So.2d at 358-59. After documenting the history of pollution exclusions, this court, in Ka-Jon, found that the exclusion in the case was ambiguous as a matter of law because a literal reading of the exclusion could lead to absurd consequences. See id. 93-2926 at 11, 644 So.2d at 364. The court found that the intent of the policy was to insure Ka-Jon against fortuitous accidents and incidental business risks of running its convenience store. See id. 93-2926 at 13, 644 So.2d at 365. The court held that the pollution exclusion would preclude coverage for: (1) all damages or losses resulting from intentional acts of pollution or pollution causing activities, including remedial damages for environmental cleanup operations, and (2) environmental damages resulting from fortuitous pollution occurrences, including remedial damages for environmental cleanup operations. Id. 93-2926 at 12-13, 644 So.2d at 364. Finally, the court distinguished intentional acts of pollution from fortuitous acts and found that coverage for fortuitous acts of pollution was only excluded as they might pertain to environmental damage, not to other types of damage. See id. 93-2926 at 13-14, 644 So.2d at 365. Therefore, the court found that, because the gasoline leak was a fortuitous pollution event, coverage would be excluded only as it might pertain to environmental damage and was not excluded as it may pertain to other damage claims, such as damage to South Central Bell's telephone cables. See id. 93-2926 at 15, 644 So.2d at 366. As a result, the court found summary judgment to be inappropriate in the case. [12] After rendition of the original opinion, State Farm applied for a rehearing arguing several matters. Following our grant of the rehearing application, but prior to oral argument, State Farm filed a Motion to Vacate and Remand asserting that the pollution exclusion interpreted in the original opinion may not have been part of the actual policy issued by State Farm to Ka-Jon. See id. 93-2926 at 2, 644 So.2d at 369 (on rehearing). Four months after rendering our original opinion, we vacated all prior judgments and remanded the matter to the district court to determine whether the pollution exclusion interpreted by the court was actually part of the policy. See id. [13] Despite the fact that Ka-Jon was vacated, its reasoning was adopted by several Louisiana courts following its release. [14] For instance, in Sandbom v. BASF Wyandotte, Corp., 95-335, pp. 21-22 (La.App. 1 Cir. 4/30/96), 674 So.2d 349, 363-64, the First Circuit cited Ka-Jon and found that the exclusion was inapplicable to the case where a plaintiff had entered a storage tank containing pollutants because no actual discharge, dispersion, or release of chemicals had taken place. Similarly, in Hinds v. Clean Land Air Water Corp., 96-1058, p. 7 (La.App. 3 Cir. 4/30/97), 693 So.2d 321, 325, the court relied on Ka-Jon's reasoning and found that an insured who placed waste in contaminant ponds had released or discharged pollutants within the meaning of the policy. Consequently, the Hinds court denied coverage for the incident. See id. 96-1058 at 10, 693 So.2d at 326. With these precedents in the jurisprudence, the issue was brought before this court for a second time in Ducote v. Koch Pipeline Co., 98-0942 (La.1/20/99), 730 So.2d 432. As pointed out above, Ducote departed from this line of jurisprudence and found that the exclusion was unambiguous and would apply regardless of whether the release was intentional or accidental, a one-time event or part of an on-going pattern of pollution. Id. 98-0942 at 4-5, 730 So.2d at 437. [15] In dissent from Ducote, the author of this opinion cited this court's prior holding in Ka-Jon and reasoned that although that holding was ultimately vacated because of a question as to whether the total pollution exclusion considered on original hearing was part of the insurance policy in the case, the reasoning of the opinion should remain persuasive to the Ducote court. See Ducote, 98-0942 at 1, 730 So.2d at 437-38 (Calogero, C.J., dissenting). In Ka-Jon, this author noted, this court interpreted a similar exclusion to be inapplicable to fortuitous occurrences because the parties never intended a literal and limitless interpretation of the policy, for such would lead to absurd consequences. See id. In conclusion, this author found in his dissent that because the injuries in Ducote stemmed from a fortuitous grass cutting accident, the exclusion could not operate to exclude coverage. See id. In her dissent in Ducote, Justice Kimball also concluded that the pollution exclusion clause was inapplicable under the facts of the case. See id. 98-0942 at 1, 730 So.2d at 438 (Kimball, J., dissenting). First, she found that the pollution exclusion was ambiguous, and therefore the policy should be read to effectuate, not deny, coverage. See id. 98-0942 at 3, 730 So.2d at 439 (Kimball, J., dissenting). Second, because a policy cannot be read in a manner so as to bring about absurd consequences, she reasoned that coverage should be found applicable. See id. 98-0942 at 4-5, 730 So.2d at 440 (Kimball, J., dissenting). Finally, Justice Kimball documented the history of the exclusion and pointed out that it was originally designed to exclude from coverage only that property and personal damage which resulted from traditional forms of pollution. See id. 98-0942 at 6, 730 So.2d at 441 (Kimball, J., dissenting). Consequently, Justice Kimball would have found that the exclusion did not preclude coverage to the claims of the Ducotes. In light of the fact that Ducote represented a significant departure from the interpretation of pollution exclusion clauses in Louisiana, and, more importantly, because Ducote runs counter to the true intent of the exclusion, we overrule it at this time.