A commercial general liability (CGL) policy containing a “total pollution exclusion endorsement” was found to be effective in excluding claims based on alleged injuries arising out of inhaling silica dust from sand-blasting operations.
In John Garamendi v. Golden Eagle Ins. Co., 127 Cal. App. 4th 480 (2005), the Court of Appeal of California affirmed a lower court holding that dismissed claims by plaintiffs who alleged they were exposed for many years to silica and silica dust at their employment, as a result of actions by 49 defendants. Among the defendants was Pauli Systems, Inc., who is alleged, collectively with the other defendants, to have:
- designed, tested, evaluated, manufactured, mined, packaged, furnished, supplied and/or sold abrasive blasting products, protective gear and equipment, safety equipment and/or sandblasting-related materials, equipment, products, etc.
Pauli Systems’ CGL policy from the Golden Eagle Insurance Company had replaced a pollution exclusion that was standard in the policy as Exclusion f. with a total pollution exclusion that provided that the insurance would not apply to:
- “Bodily injury” or “property damage” which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.
The endorsement further defined pollutants as “any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste….”
In response to plaintiffs’ suit against it, Pauli Systems tendered the defense to Golden Eagle which denied coverage based on the pollution exclusion endorsement. Pauli Systems (hereinafter the “Claimant”) then sued Golden Eagle, seeking a court order for coverage. Claimant argued that silica is not a pollutant because it is not smoke, vapor, soot, fumes, acid, alkalis, chemicals, or waste, and is found in commonplace materials such as sand, glass, and concrete.
In rejecting that argument, the court stated that even if silica is not one of the enumerated items of pollution in the policy, the listing is not exclusive. In addition, the court found that silica dust comes within the broad definition of “any solid, liquid, gaseous, or thermal irritant or contaminant.” Moreover, pointed out the court, silica dust is identified by federal regulations to be an air contaminant. Thus, the court explained that:
- the widespread dissemination of silica dust as an incidental byproduct of industrial sandblasting operations most assuredly is what is “commonly thought of as pollution” and “environmental pollution.”
Pauli Systems attempted to persuade the court that coverage might apply since part of the plaintiffs’ complaint alleged a product defect. In comparing the language of the exclusion printed in the policy form and the exclusion of the endorsement, the court said the contrast in the language made clear “that under the operative endorsement in claimant’s policy, there is no coverage for any of the claims of the underlying complaints, even if the products liability claims apply to claimant.” The court held that:
- even on the assumption that claimant’s alleged liability is based on the sale of defective products that contributed to personal injuries caused by silica dust, the injuries would not have occurred but for the discharge of the pollutant. Absent some other provision in the policy excepting product liability claims from the exclusion, the exclusion applies.
One final argument by the Claimant was that because the policy included an endorsement with a specific exclusion for claims based on exposure to asbestos, a reasonable insured party would understand that the pollution exclusion did not apply to claims for exposure to silica, for which there was no comparable explicit endorsement. The court rejected this argument with little discussion other than to say that in light of all the asbestos litigation that has been ongoing, “it is not surprising that an insurer seeking to exclude coverage for asbestos claims would include an explicit provision making that exclusion unmistakably clear.” Significantly, however, the court concluded that:
- The inclusion of a specific provision concerning asbestos claims cannot reasonably be understood to mean that the pollution exclusion is inapplicable to other pollutants not specifically designated in a separate endorsement.
For these reasons, the court held in favor of the insurance company.
Comment and Opinion
This decision is well-reasoned in its logic which grants to the insurance policy and its endorsements only the meaning reasonably intended by the insurer—the meaning easily and unambiguously understandable by a reasonable insured. It is most noteworthy that the court rejected Claimant’s argument that by adding an endorsement explicitly excluding asbestos, the insurance company was required to add other endorsements to explicitly exclude items such as silica.
Insurance companies need the flexibility to sometimes reiterate, by issuing a separate endorsement, an exclusion for something they believe is already excluded under the general policy terms or under another exclusion. This is due, at least in part, because of surprising decisions by some courts that seem to stretch common sense as they attempt to find ambiguity in policy language and to find or even invent coverage for claimants where coverage was never intended by the insurer and never reasonably understood to exist by a reasonable insured at the time the policy was acquired.
Rather than asking courts to grant pollution coverage that was never intended, or paid for, in a CGL policy, a more appropriate insurance solution for a company with a known environmental risk may be to consider acquiring a separate policy specifically designed to cover its potential pollution liability.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, (Aug 2005).