Opinion ID: 2634716
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Heading: Qualified Pollution Exclusion Clause Background

Text: Comprehensive general liability insurance policies issued between 1973 and 1985 often included qualified pollution exclusion clauses. Nancer Ballard & Peter M. Manus, Clearing Muddy Waters: Anatomy of the Comprehensive General Liability Pollution Exclusion, 75 Cornell L.Rev. 610, 612 (1990). By their terms, these clauses eliminate coverage for damages caused by a discharge or release of contaminants but restore coverage if the discharge or release was unintended. The two qualified pollution exclusion clauses at issue in this case each contain similar language. [3] The qualified pollution exclusion clauses contained in the policies issued by Great American, Granite State, American Employers', and Lexington state: This insurance does not apply: . . . to bodily injury or property damage arising out of the discharge, dispersal, release or escape of ... toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental. Similarly, the qualified pollution exclusion clause contained in the First State policies reads: The Insurance does not cover any liability for: . . . Personal Injury or Bodily Injury or loss of, damage to or loss of use of property directly or indirectly caused by seepage, pollution or contamination, provided that always this clause shall not apply to liability for Personal Injury or Bodily Injury or loss of or physical damage to or destruction of tangible property, or loss of use of such property damaged or destroyed, where such seepage, pollution or contamination is caused by a sudden, unintended and unexpected happening during the period of this insurance. Through several cases, this court has delineated the scope of qualified pollution exclusion clauses by defining phrases within them. We have primarily analyzed two phrases in the language that restore coverage: the discharge, dispersal, release, or escape language and the sudden and accidental or sudden, unintended and unexpected language. We have concluded that the phrase discharge, dispersal, release or escape refers to the release of pollutants from an area of containment. Specifically, in Compass Insurance Co. v. City of Littleton, 984 P.2d 606 (Colo.1999), we held that the initial placement of wastes in an unlined landfill does not necessarily constitute a discharge, dispersal, release or escape of pollutants into the environment. Id. at 616-18. We reasoned that the phrase does not refer to the initial placement of wastes in an unlined landfill. Id. at 617. Rather, we explained that the phrase carr[ies] the connotation of the issuance of a substance from a state of containment; none of the terms is normally used to describe the placement of a substance into an area of confinement. Id. (quoting Queen City Farms, Inc. v. Cent. Nat'l Ins. Co., 126 Wash.2d 50, 882 P.2d 703, 719 (1994)). Therefore, we concluded that a discharge, dispersal, release or escapewhich we termed the relevant polluting event for purposes of qualified pollution exclusion clausesis the release of pollutants from a containment area. Id. Thus, we have held that qualified pollution exclusion clauses do not preclude coverage for the initial placement of wastes into containment areas. Qualified pollution exclusion clauses only restore coverage for the release of pollutants from areas of containment if the release was sudden and accidental. We have interpreted the phrase sudden and accidental as meaning unexpected and unintended. Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1091-92 (Colo.1991). Similarly, we have defined sudden, unintended, and unexpected as unprepared for, unintended, and unexpected. Pub. Serv. Co. v. Wallis & Cos., 986 P.2d 924, 933 (Colo.1999). Therefore, qualified pollution exclusion clauses restore coverage for unexpected and unintended releases from contained areas. [4]