Where an insurance carrier denied coverage for damages caused by a heating and air-conditioning company whose removal of a system from a residential home resulted in 170 gallons of heating oil leaking into the basement.  The carrier argued that the oil was a “pollutant” and therefore excluded from coverage by the total pollution exclusion endorsement to the policy.  The trial court agreed and granted summary judgment for the carrier.  This was reversed on appeal, with the appellate court holding that the broad definition of “pollutant” in the policy was ambiguous.  Regan Heating and Air Conditioning, Inc. v Arbella Protection Insurance Company, 287 A.3d 502 (Rhode Island 2023).

The Oil Company argued that in the context of its industry, home heating oil is not a pollutant.

The policy does in question stated that it did not cover:

 “‘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.” (Emphasis added.) Under the policy, “ ‘Pollutants’ mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.”

The court noted that heating oil is not listed as a “pollutant” within the policy’s definition.  Because the court never addressed this issue in any other case, it considered case law from other jurisdictions to conduct its review.  A key distinction between the facts of this case and other cases where the pollution exclusion was found to apply is that the heating oil in question only leaked into the basement and did not get into the ground.  This was not, therefore, traditional environmental pollution.

The Oil Company asserted that the court should adopt the conclusion reached by the First Circuit Court of Appeals in the decision of Nautilus Insurance Company v. Jabar, 188 F.3d 27 (1st Cir. 1999) which found the same definition of pollutant to be ambiguous.  There the court held:

“the pollution exclusion was ambiguous as applied to the underlying claims “because an ordinary intelligent insured could reasonably interpret the pollution exclusion clause as applying only to environmental pollution.”

The First Circuit found “ambiguity in the exclusion’s definition of ‘pollutant[,]’ ” which defined it as:

 “any solid, liquid, gaseous, or thermal irritant or contaminant[,]” because “the terms ‘irritant’ and ‘contaminant’ are virtually boundless[.]” Id. The court noted, and we agree, that “[a] purely literal interpretation of this language, without regard to the fact pattern alleged in the underlying complaint, would surely stretch the intended meaning of the policy exclusion.”

The Rhode Island court stated it endorsed the following commentary from an Indiana court decision:

“Jurisdictions applying a more ‘situational’ approach look to factual context and typically uphold the exclusion only in cases of ‘traditional’ environmental contamination. * * * While this framework may be more palatable than the literal view, it can still be problematic because the concept of what is a ‘traditional’ environmental contaminant may vary over time and has no inherent defining characteristics. This leaves courts in the awkward and inefficient position of making case-by-case determinations as to the application of the pollution exclusion.”

In its conclusion the court stated that it is apparent that the policy is “reasonably susceptible of different constructions” and must, therefore, be strictly construed in favor of Insured plaintiff.  The court reversed the trial court decision and held summary judgment should have been granted to the plaintiff, Oil Company. 


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 ConstructionRisk 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 Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk Report, Vol. 25, No. 5 (July 2023).

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