Opinion ID: 1734320
Heading Depth: 1
Heading Rank: 8

Heading: Position of Louisiana Commissioner of Insurance

Text: We believe that a full discussion of the issue in this case would be wanting without discussing the position of the Louisiana Commissioner of Insurance on this issue. No insurance policy is permitted to be issued in this state without the prior approval of its provisions by the Louisiana Commissioner of Insurance. See La.Rev.Stat. 22:620(A)(1). In reviewing proposed policies, the Commissioner is required to disapprove any policy that contains or incorporates by reference any inconsistent, ambiguous, or misleading clauses, or exceptions and conditions which unreasonably or deceptively affect the risk purported to be assumed in the general coverage of the contract. Id. at 22:621(3). Further, the Commissioner approves standard form policies which serve as a bare minimum of the rights which must be afforded an insured. See id. at 22:623. The Commissioner is permitted to approve policies which are more favorable to the insured, but prohibited by law from approving policies which are less favorable. See id. 22:623. It is undisputed by the parties that the pollution exclusion in this case was approved by the Commissioner; however, comprehension of the meaning of the clause by the Department of Insurance is particularly relevant here. Following a three-year review of pollution exclusions in various comprehensive general liability policies, in 1997 (prior to Ducote ), the Louisiana Department of Insurance issued an advisory letter designed to guide insurers in their application of the exclusions. See James H. Brown, Louisiana Commissioner of Insurance, Advisory Letter 97-01, p. 1 (June 4, 1997). The Commissioner noted: Our review shows that standard pollution exclusions have been included in an extremely wide variety of policy forms. These exclusions are inappropriate for many types of coverage and/or for certain classes within particular coverage lines. Many insureds do not present a pollution risk obviating the need for the broad exclusionary language found in standard pollution exclusions. Further; our review has disclosed a number of incidents where the standard pollution exclusions have been used to disavow coverage even though there was no underlying pollution incident which would justify use of the exclusion. We are also concerned that the broad definition given to the term pollutant creates an opportunity for abuse. This is a particular concern as regards commercial enterprises whose ongoing business activities do not present a risk to the environment. For example, we have found instances where it has been argued that any thing and/or matter that harms a person, whether or not it has toxic or hazardous properties, is de facto an irritant and therefore a pollutant, thereby triggering the pollution exclusion. The appropriate use of standard pollution exclusions in claims handling is an issue of grave concern. The [Louisiana Department of Insurance] will take such action as is necessary to assure that the integrity of the regulatory process is not undermined. It is of critical importance that such exclusions are used in a manner which is consistent with their stated purpose. Id. at 1-2 (footnotes omitted). The letter continued by advising insurers that (1) new pollution exclusions should be drafted to address pollution risks actually posed and (2) there must be a reasonable basis for the application of the policy's pollution exclusion. Id. at 3. Following our decision in Ducote, several insurers questioned whether the Department of Insurance had changed its position on the application of pollution exclusions: The answer to that question is no. To the contrary, the court's refusal to consider the regulatory history in rendering its decision has reinforced this agency's position. This is particularly true as regards the blanket utilization of standard pollution exclusions in policy forms. Further, nothing in the Ducote decision affects this agency's regulatory authority under the Insurance Code. Unlike the court, this agency has considered the regulatory records and the historical purpose of the total and absolute pollution exclusions. That record shows that these exclusions were meant to exclude coverage for RCRA regulated activities for a limited class of insured. They are not chemical products exclusions. They were not meant to exclude coverage for routine accidents which incidentally involved a chemical agent such as was the case in Ducote. James H. Brown, Louisiana Commissioner of Insurance, Preface to Advisory Letter 97-01, p. 1 (September 1999). [16] The Office of the Commissioner of Insurance is a constitutionally-created office, and the elected official holding that office is charged with the administration of the Insurance Code and the protection of the public interest in the realm of insurance. See La. Const. Art. IV § 11; La.Rev.Stat. 22:2. Because of the Commissioner's role in the regulation of Louisiana Insurance law, his opinion regarding matters within his province is persuasive. However, it is the job of the courts to resolve disputes over insurance coverage. See La. Const. Art. V, § 1 (The judicial power is vested in a supreme court, courts of appeal, district courts, and other courts authorized by this Article.). With the history and intent of the pollution exclusion in mind, we will now address the proper interpretation of these pollution exclusions under Louisiana law.