Georgia Supreme Court Denies Coverage for Lead-Based Paint Injuries Based on the Pollution Exclusion

By on April 15, 2016

In a matter of first impression, the Georgia Supreme Court recently held that personal injury claims arising from lead poisoning due to lead-based paint ingestion were excluded from coverage under an absolute pollution exclusion in a commercial general liability insurance policy covering residential rental property.  The decision in Ga. Farm Bureau Mut. Ins. Co. v. Smith, S15G1177, 2016 Ga. LEXIS 245 (Ga. Mar. 21, 2016) is significant for insurers since it expressly rejects the notion that a pollution exclusion clause is limited to traditional environmental pollution.leadpainthork

The facts are straightforward.  Amy Smith (“Smith”), individually and as next friend of her daughter Tyasia Brown (“Brown”), sued her landlord, Bobby Chupp (“Chupp”), for injuries Brown allegedly sustained as a result of ingesting lead from deteriorating lead-based paint at the house Smith rented from Chupp.  Georgia Farm Bureau Mutual Insurance Company (“GFB”) insured the house under a CGL policy issued to Chupp.  Chupp tendered Smith’s claims to GFB,  and the insurer filed a declaratory judgment action against Smith and Chupp seeking a determination that Brown’s injuries were not covered under the policy and that it had no duty do defend Chupp against Smith’s claims.

GFB contended, among other things, that Brown’s injuries from lead poisoning were excepted from coverage by the policy’s pollution exclusion, which defined “Pollution” as “‘[b]odily injury’ or ‘property damage’ arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ . . . .”  The policy defined “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

In granting summary judgment to GFB, the trial court relied on the Georgia Supreme Court’s decision in Reed v. Auto-Owners Ins. Co., 284 Ga. 286 (2008), which addressed the proper construction of an identical pollution exclusion in a CGL policy insuring residential rental property wherein a tenant sued her landlord for carbon monoxide poisoning.  Although not explicitly listed in the policy as a pollutant, the Reed Court held that carbon monoxide gas fell within the policy’s definition of a pollutant and concluded that all of the plaintiff’s injuries arising therefrom were excluded from coverage under the pollution exclusion.

lead-paint-epa-dangerOn appeal, the Georgia Court of Appeals reversed the trial court’s grant of summary judgment to GFB.  The Court of Appeals observed that the specific issue of whether lead-based paint should be considered a “pollutant” under the pollution exclusion clause was one of first impression in Georgia, and noted that a conflict existed among other jurisdictions on this issue.  The Court of Appeals sided with those foreign courts holding that a pollution exclusion similar to the instant one did not bar coverage for injuries arising out of the ingestion or inhalation of lead-based paint. The Court of Appeals rejected the trial court’s interpretation of Reed, finding that while a straightforward reading of the pollution exclusion in Reed compelled the conclusion that carbon monoxide gas was a pollutant, it was unclear whether identical language in the instant policy was expansive enough to unambiguously include lead, lead-based paint or paint as a pollutant.

In its analysis, the Georgia Supreme Court found that GFB’s CGL policy contained an absolute pollution exclusion that precludes recovery for bodily injury or property damage resulting from exposure to any pollutants.  Overviewing the genesis and development of the absolute pollution exclusion, the Court highlighted the litany of Georgia decisions, including Reed, that have repeatedly applied such clauses outside the context of traditional environmental pollution.  Further, the Court rejected the notion that the pollutant at issue must be explicitly named in the policy to be enforceable.

In reversing the Court of Appeals, the Georgia Supreme Court followed Reed and found that GFB’s CGL policy unambiguously governed the factual scenario.  Simply put, the Court of Appeals failed to apply the plain language of the contract.  Accordingly, the Georgia Supreme Court held that lead present in paint unambiguously qualifies as a pollutant and that the plain language of the policy’s pollution exclusion excluded Smith’s claims against Chupp from coverage.

*** On March 3, 2016, this author published a related blog article on a recent Vermont Supreme Court decision holding that the plain language interpretation of a pollution exclusion in a homeowner policy barred coverage for property damage to a home rendered uninhabitable by an over-application of a bed bug pesticide.

Filed under Georgia, Insurance, Insurance Coverage, Lead, lead paint, lead pigment, pollutant, Pollution Exclusion Tagged with

Insurers Uphill Fight On Coverage In Indiana

By on October 25, 2010

Guest Bloggers David L. Guevara, Ph.D., and Bradley R. Sugarman are attorneys in the environmental practice group in the law firm of Taft Stettinius & Hollister LLP in Indianapolis, Indiana.  Messrs. Guevara and Sugarman provide services in the areas of trial practice, Superfund defense and negotiation, enforcement defense, cost-recovery for plaintiffs and defendants, criminal environmental defense, environmental insurance and toxic tort litigation.  Mr. Guevara is the co-editor of a forthcoming book from ABA Book Publishing titled “Environmental Liability and Insurance Recovery.”   

 

In a recent decision, the Seventh Circuit Court of Appeals provided insurance companies doing business in Indiana with guidance on how to draft pollution exclusion clauses—provisions typically included in commercial general liability (“CGL”) policies that seek to exclude coverage for claims based on environmental contamination. Indiana is known for the tough standards it imposes on insurance companies with respect to withholding coverage based on policy exclusions. Since the Indiana Supreme Court’s 1996 decision in American States Insurance Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996), Indiana courts will not exclude coverage based on pollution exclusion clauses unless the language of the insurance policy explicitly excludes the “pollutant” at issue. If the policy language is vague as to whether the pollutant is included, then the pollution exclusion clause does not apply. In West Bend Mutual Insurance Company v. United States Fidelity and Guaranty Company, et al., 598 F.3d 918 (7th Cir. 2010), the Seventh Circuit Court of Appeals confirmed that clear and unambiguous language in pollution exclusion clauses is necessary in order to bar coverage for environmental contamination claims. 

The issue in West Bend was whether CGL policies issued by Federated Mutual Insurance Company (“Federated”) covered liabilities for petroleum released from underground storage tanks and associated piping from a 7-Eleven gas station in Goshen, Indiana. The petroleum contaminated the groundwater and migrated underneath a nearby residential neighborhood.  The contamination vaporized into homes causing property damage and personal injury. The neighborhood residents sued 7-Eleven and West Bend Mutual Insurance Company’s (“West Bend”) and Federated’s mutual insured, MDK, who formerly owned and operated the station. After lengthy litigation, MDK eventually settled for $4 million.  West Bend sued Federated to recover its costs of defending MDK. 

Federated argued that it owed no duty to defend because it had no duty to indemnify claims arising from petroleum contamination pursuant to the pollution exclusion clause in its policy. West Bend countered by arguing that the Federated pollution exclusion clause was similar to the exclusion rejected by the Kiger court. 

The Seventh Circuit found that the Federated pollution exclusion clause explicitly excluded “bodily injury” or “property damage” caused by the release of “pollutants” or “motor fuels” from “tanks” and “underground piping.” While the term “pollutants” did not include gasoline or petroleum, the term “motor fuels” did. Moreover, the court noted that the Federated policy included an “Indiana Changes Endorsement” which emphasized that the pollution exclusion applied even to “pollutants” that had an ongoing function in the business. Thus, the court was convinced that “a gas station owner . . . would know to a certainty that Federated would not be responsible for damage arising out of gasoline leaks taking place during the covered period” after reading these two policy provisions.

While the West Bend decision is one of the only opinions to uphold the denial of coverage for environmental contamination in Indiana, it underscores that insurers who wish to deny coverage on the basis of the pollution exclusion face an uphill battle in this jurisdiction. The Federated policy explicitly excluded the type of pollutant (i.e., petroleum) and the manner in which it was released (i.e., from USTs and associated piping). Few CGL policies issued in Indiana are drafted with this degree of specificity. Indeed, pollution exclusion endorsements added to Indiana CGL policies even after Kiger still contain pollution exclusion clauses that may be deemed vague and overly broad. The insurance industry can address the problem posed by Indiana courts by drafting what those courts consider clear and unambiguous contractual pollution exclusions with a precise definition of “pollutants”. 

 

Filed under Brad R. Sugarman, CGL Policies, David L. Guevara, Federal Court Litigation, Indiana, Insurance Coverage, Pollution Exclusion, Seventh Circuit Court Of Appeals, Taft Stettinius & Hollister LLP, West Bend Mutual Insurance Company v. United States Fidelity and Guaranty Company, et al. Tagged with ,