Absolute Pollution Exclusion Still Unenforceable in Indiana
On February 27, 2014, the Insurance Committee of the Indiana State Senate voted 6 to 3 against House Bill 1241, which would have amended the Indiana Insurance Code to specify the manner in which the term "pollutant" must be construed in liability insurance policies.
By way of background, standard commercial general liability policies contain “pollution exclusions” that typically define the term “pollutant,” in relevant part, to include “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Indiana courts are in agreement that the breadth of this definition renders the term “pollutant” to be ambiguous and, therefore, pollution exclusions that incorporate this definition are unenforceable. See, e.g., State Auto Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845 (Ind. 2012) (“absolute pollution exclusion” did not eliminate coverage for the cost of remediating groundwater contamination caused by the insured’s use of the chemical solvent trichloroethylene (TCE)).
House Bill 1241, which was sponsored by the Indiana Insurance Institute and passed in the Indiana House of Representatives by a vote of 57 to 36, was vigorously opposed by Indiana manufacturing groups and a number of Indiana municipalities. If passed, the bill would have amended the Indiana Insurance Code to provide that if a liability insurance policy either does not define the term “pollutant” or defines it to mean “any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste . . . ,” then it must be construed as follows:
Sec. 3. (a) As used in a liability insurance policy described in section 2 of this chapter, the following apply:
(1)"Pollutant" means any solid, liquid, gaseous, or thermal irritant or contaminant, including:
(A) smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste;
(B) agents or substances that are recognized in industry or government to be harmful or toxic to an individual or to property; and
(C) agents or substances that are regulated under or listed in any of the following:
(i) The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Priority List of Hazardous Substances (1997 and all subsequent editions).
(ii) The Resource Conservation and Recovery Act (RCRA), including all categories of hazardous waste and all hazardous constituents.
(iii) The Agency for Toxic Substances And Disease Registry ToxFAQs.
(iv) The United States Environmental Protection Agency EMCI Chemical References Complete Index.
(v) The United States Occupational Safety and Health Administration List of Hazardous Chemicals.
(vi) All successive editions, updates, and successors of items (i) through (v) and similar state and federal statutes, regulations, and indices concerning potentially harmful agents.
(2) "Waste" includes a material that is to be recycled, reconditioned, or reclaimed.
(b) The definitions specified in subsection (a):
(1) shall be presumed to be clear and sufficient notice to an insured under the liability insurance policy; and
(2) shall not be considered to be ambiguous or unenforceable.
Sec. 4. An irritant or a contaminant referred to in section 3 of this chapter constitutes a pollutant without regard to the:
(1) physical form;
(2) presence, alone or in combination with another irritant or contaminant; or
(3) use in the insured's general business activities; of the irritant or contaminant.
A similar bill was rejected by the Indiana Legislature in 1997.