Opinion ID: 2585539
Heading Depth: 1
Heading Rank: 3

Heading: Historical Background of Pollution Exclusion

Text: In order to understand the meaning of the pollution exclusion, some historical background is useful. The Illinois Supreme Court's comprehensive review of this history in Koloms, supra, 177 Ill.2d 473, 227 Ill.Dec. 149, 687 N.E.2d 72, merits extensive quotation: The events leading up to the insurance industry's adoption of the pollution exclusion are `well-documented and relatively uncontroverted.' [Citation.] Prior to 1966, the standard-form CGL policy provided coverage for bodily injury or property damage caused by an 'accident.' [Citations.] The term `accident,' however, was not defined in the policy. As a result, courts throughout the country were called upon to define the term, which they often interpreted in a way as to encompass pollution-related injuries. In response, the insurance industry revised the CGL policy in 1966 and changed the former `accident'-based policy to an `occurrence'-based policy. The new policy specifically defined an `occurrence' as `an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury and property damage that was neither expected nor intended from the standpoint of the insured.' [Citation.] Despite these changes, courts continued to construe the policy to cover damages resulting from long-term, gradual exposure to environmental pollution..... Meanwhile, at about the same time, the United States Congress substantially amended the Clean Air Act in an effort to protect and enhance the quality of the nation's air resources. Pub.L. No. 91-604, 84 Stat. 1676 (1970) (now codified at 42 U.S.C. §§ 7401 through 7642 (1983), as amended). The passage of these amendments, which included provisions for cleaning up the environment, imposed greater economic burdens on insurance underwriters, particularly those drafting standard-form CGL policies. [Citation.] The insurer's burdens further increased with the .... environmental disasters of Times Beach, Love Canal and Torrey Canyon. [Citations.] In the wake of these events, the insurance industry became increasingly concerned that the 1966 occurrence-based policies were `tailor-made' to cover most pollution-related injuries. To that end, changes were suggested, and the industry proceeded to draft what was to eventually become the pollution exclusion.... `The result of these efforts was the addition of an endorsement to the standard-form CGL policy in 1970 [adopted as exclusion (f) ]. The endorsement provided in pertinent part: 'This policy shall not apply to bodily injury or property damage] arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.' During the next 13 years, various courts labored over the exact meaning of the words `sudden and accidental.' Much of the litigation focused on whether the word `sudden' was intended to be given a strictly temporal meaning such that, in order for the exception to apply, the discharge of pollution had to have been 'abrupt.' [Citation.] This controversy generated an enormous amount of litigation, leading one commentator to describe the dispute as one of `the most hotly litigated insurance coverage questions of the late 1980's.' [Citations.] Not surprisingly, insurance companies responded by drafting a new version of the exclusion, which, first appearing in 1985, is now commonly known as the absolute pollution exclusion. [ [3] ].... The two most notable features of this latest version are (i) the lack of any exception for the `sudden and accidental' release of pollution, and (ii) the elimination of the requirement that the pollution be discharged `into or upon land, the atmosphere or any watercourse or body of water.' [Citation.] ( Koloms, supra, 227 Ill.Dec. 149, 687 N.E.2d at pp. 79-81, fn. omitted, italics added; see also Jackson Tp., etc. v. Hartford Acc. & Indem, (1982) 186 N.J.Super. 156, 451 A.2d 990, 993-994 [noting the holding of a considerable number of courts that pollution would be regarded as sudden and accidental if the result or injury was unexpected or unintended].) Even commentators who represent the insurance industry recognize that the broadening of the pollution exclusion was intended primarily to exclude traditional environmental pollution rather than all injuries from toxic substances. As two attorneys representing the insurance industry have concluded: Insurers introduced the Absolute Exclusion in 1985 as a replacement for the Qualified Exclusion, principally in response to court decisions interpreting the Qualified Exclusion in favor of coverage. In particular, courts have noted that the revised pollution exclusion deleted the `sudden and accidental' exception because some decisions had misapplied this exception or, at least, construed it in a manner contrary to insurers' original intent. By the mid-1980s a significant body of law had developed construing the `sudden and accidental' exception to embrace gradual pollution. [¶] The courts' broad reading of the Qualified Exclusion's `sudden and accidental' exception was at the forefront of insurers' concern at the time the Absolute Exclusion was drafted. (Shelley & Mason, Application of the Absolute Pollution Exclusion to Toxic Tort Claims: Will Courts Choose Policy Construction or Deconstruction? (1998) 33 Tort & Ins. L.J. 749, 753-754, fns. omitted (Shelley & Mason).) Commentators have pointed as well to the passage of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, 42 U.S.C. § 9601 et seq.) in 1980 and the attendant expansion of liability for remediating hazardous wastes (see AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 815-816, 274 Cal.Rptr. 820, 799 P.2d 1253 {AIU Ins. Co.) as motivation for amending the exclusion. [T]he available evidence most strongly suggests that the absolute pollution exclusion was designed to serve the twin purposes of eliminating coverage for gradual environmental degradation and government-mandated cleanup such as Superfund response cost reimbursement. (Stempel, Reason and Pollution: Correctly Construing the Absolute Exclusion In Context and in Accord with Its Purpose and Party Expectations (1998) 34 Tort & Ins. L.J. 1, 32 (Stempel).)