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Use Chemicals in Your Business? Read your Insurance Policy: You Might Not be Covered

A recent federal appeals court ruling underscores the need for businesses using potentially irritating chemicals to check their insurance policies for “absolute pollution exception” clauses. These increasingly common clauses exclude coverage indemnification for any bodily injuries resulting from exposure to environmental pollutants.

In its May 13, 2014 decision in United Fire & Casualty Company v. Titan Contractors Service, Inc., the Eighth Circuit Court of Appeals vacated a district court’s ruling that held an irritating chemical was not a pollutant under a company’s commercial insurance policy. In doing so, the majority stated that it was holding the parties to the plain language of their insurance contract. Businesses in Missouri should review their policies to ascertain the extent of their coverage should they be sued for damages arising from environmental pollutants.

Titan Contractors Services, Inc., a clean-up and sealing company, held a general commercial insurance policy issued by United Fire & Casualty Company. The relevant absolute pollution exception excluded from coverage “‘[b]odily injury’ or ‘property damage’ which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” 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 March 2009, three women sued Titan for alleged injuries resulting from inhalation of TIAH, an acrylic concrete curing and sealing compound.  Titan used TIAH to seal a floor in a building where the three women worked.  The TIAH fumes allegedly caused the women to suffer physical injuries. Although United defended Titan against the women’s negligence claims, it filed a separate suit against Titan seeking a ruling that the insurer had no duty to defend or indemnify Titan in the TIAH suits. Titan counterclaimed, seeking a declaration that United owes duties to defend and indemnify it against the state-court lawsuit. The district court held for Titan, reasoning that TIAH did not constitute a “pollutant” and, thus, that the absolute pollution exclusion did not apply.

The Eighth Circuit majority, looking to the text of the insurance policy, held that the contract’s definition of “pollutant” included any substance that was an “irritant.” On this basis, the court vacated the district court’s order and in doing so remanded the case to the district court for further proceedings, including a determination as to whether the negligence claims arose from a “discharge, dispersal, seepage, release or escape” of TIAH.

The 2-1 decision highlights the difficulty that both the insurance industry and the courts face in defining what “pollution” risks are encompassed within standard commercial general liability coverage.  The interpretation and application of the absolute pollution exclusion and similar types of exclusions are far from uniform and have led to substantially different results in courts around the country.  The Missouri Supreme Court has yet to weigh in on the issue and Missouri’s intermediate appellate courts have not resolved the questions definitively.

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About this Author

Patrick J. Kenny, Armstrong Teasdale Law firm, Litigation Attorney

Patrick Kenny is a trial lawyer with emphasis on complex litigation and appellate work including bad faith and insurance coverage disputes, ERISA litigation (pension and benefits), subrogation, cases involving business "divorces," non-compete and trade secrets, fraud and business torts. He has tried cases to verdict in Missouri and Illinois.  Mr. Kenny has been listed as a Top Rated Lawyer in Commercial Litigation by Martindale-Hubbell and American Lawyer Media (ALM) since 2012, been listed as a Missouri/Kansas Super Lawyers / Super Lawyers Business Edition since 2010, and has been listed...

Julie O'Keefe, Environmental Attorney, Armstrong Teasdale Law Firm

For more than 20 years, Julie O’Keefe has defended businesses in environmental and occupational safety and health (OSH) enforcement actions brought by governmental agencies and private entities. She also represents heavy industrial manufacturers in wide-ranging contract negotiations.

 Kevin Stolworthy, Armstrong Teasdale Law Firm, Litigation Attorney

Kevin Stolworthy is a trial attorney practicing in the area of civil litigation with an emphasis on construction, banking and bad faith insurance and coverage litigation. He also handles criminal litigation, focusing on Federal Court criminal defense. With unique adeptness in a variety of litigation applications, he has provided clients with proficient and significant insight throughout his career. 

Laurence R. Tucker, Armstrong Teasdale Law Firm, Litigation Attorney

Larry Tucker, managing attorney of the firm’s Kansas City, Missouri and Overland Park, Kansas offices, serves as lead trial counsel in the defense of civil lawsuits. A powerful and experienced advocate in the courtroom, he has tried over 60 jury trials in state and federal courts and argued appeals in federal and state courts including the Missouri and Kansas Supreme Courts and the Fifth, Eighth and Tenth Circuit Courts of Appeals. Larry also acts as an arbitrator and mediator in commercial and business disputes.

Jonathan Wolff, corporate services, Environmental Attorney, Armstrong Law Firm

As a member of the firm’s Corporate Services and Environmental practice groups, Jonathan Wolff helps companies seeking guidance on environmental compliance and the allocation of environmental liabilities of business transactions in the energy, hydraulic fracturing, mining, natural resources and water resources sectors.

Jon advises clients on environmental and regulatory aspects of mergers and acquisitions, private equity transactions, asset purchases and dispositions, real estate acquisitions and divestures, loan transactions and commercial...