Lead-Paint Claims in VT and GA

Plaintiffs Neil and Patricia Whitney had arranged for a pest-control company to spray the interior of their home; the company used the pesticide clorpyrifos, which the EPA has banned for residential use. Testing following application revealed dangerously high levels of the chemical, rendering the Whitneys' home uninhabitable and destroying their personal property. The Whitneys made a claim under their Vermont Mutual Insurance Co. (“Vermont Mutual”) homeowners' policy, but Vermont Mutual denied coverage, citing the absolute pollution exclusion.

The Whitneys won summary judgment against Vermont Mutual in state court. The court found that the terms “pollution” and “discharge, dispersal and release” were ambiguous as applied to the facts, and were to be construed in favor of coverage. The court based its decision partly upon a California decision, MacKinnon v. Truck Insurance Exchange, 73 P.3d 1205, 1218 (Cal. 2003), which held that pollution-exclusion clauses are generally ambiguous and apply only to “conventional environmental pollution.” The MacKinnon court noted the complaint by commentators that the breadth of the absolute pollution exclusion could result in the exclusion of allergic reactions to otherwise useful chemicals like chlorine in a pool. 73 P.3d at 1214.

The Vermont Supreme Court reversed, instead relying on its own intervening decision in Cincinnati Specialty Underwriters Insurance Co. v. Energy Wise Homes Inc., 120 A.3d 1160 (Vt. 2015). In Cincinnati, the court found that the plain language of the pollution exclusion precluded coverage in a case involving spray foam insulation exposure. Although the spray foam insulation was a legal product, the court noted that “the residues at issue had been 'recognized in industry or government to be harmful or toxic to persons, property, or the environment,'” and thus fit within the policy's definition of 'pollutants.'” 120 A.3d at 1167.

The court in Whitney declared that the “main lesson of Cincinnati for our purposes is that pollution exclusions are not presumed, as a class, to be ambiguous or to be limited in their application to traditional environmental pollution,” contrary to the California Supreme Court's ruling in MacKinnon. Rather, the Vermont Supreme Court found that the pollution exclusion should be construed just like any other policy provision, preferring its fact- and policy-specific approach.

The court reasoned that chlorpyrifos was a “contaminant” or “irritant” within the meaning of the Whitney exclusion because it was “toxic to humans,” “banned for residential use,” subject to “EPA regulations, federal and state law,” and triggered the EPA's “action level” response. Although the court noted that the Whitney policy differed from the policy at issue in Cincinnati in that it did not define “pollutants” by reference to government regulation, the court nonetheless relied on the fact that chlorpyrifos is a regulated chemical to place it within the definition of a pollutant. The court also cited Haman, Inc. v. St. Paul Fire & Marine Insurance Co., 18 F. Supp. 2d 103, 1308-09 (N.D. Ala. 1998) for the proposition that “[d]espite [a chemical's] legitimate uses, reasonable persons would agree that a highly regulated chemical is a pollutant, irritant, or contaminant,” as well as Great Lakes Chemical Corp. v. International Surplus Lines Ins. Co., 638 N.E.2d 847, 841 (Ind. Ct. App. 1994) for the proposition that a pesticide is a pollutant because the EPA banned its use.

2. The Absolute Pollution Exclusion

The Georgia Supreme Court recently followed Vermont's approach in Georgia Farm Bureau Mut. Ins. Co. v. Smith, No. S15G1177, 2016 WL 1085397 (Ga. Mar. 21, 2016), a Commercial General Liability (“CGL”) insurance case, finding that, as a matter of first impression under Georgia law, the absolute pollution exclusion barred a claim for personal injury resulting from a tenant's exposure to lead paint dust. Georgia Farm Bureau follows by about eight years the court's last decision concerning the pollution exclusion, Reed v. Auto-Owners Ins. Co. , 284 Ga. 286 (2008). In Reed, the Georgia Supreme Court held that a pollution excluion barred claims for personal injury arising from carbon monoxide released by a malfunctioning home heating unit. In that case, the majority determined that the exclusion's reference to “pollutant” unambiguously included carbon monoxide, citing, among other things, the underlying plaintiff's claim that “the release of carbon monoxide gas inside the rental house 'poisoned' her, causing her to suffer difficulty breathing, dizziness, insomnia, vomiting, nausea, headaches, and decreased appetite.” 284 Ga. at 288. The majority rebuffed the approach taken by a dissenter, who argued that the terms of the policy needed to be considered in the light of “the purpose” and “evolution” of the pollution exclusion, concluding that “focus on extra-textual sources of interpretation le[a]d to find[ing] ambiguity in the pollution exclusion clause where there is none.” Id.

Georgia Farm Bureau, the most recent case before the Georgia Supreme Court, involved claims against a landlord by Ms. Smith, who alleged that her daughter suffered bodily injury as a result of living in a house contaminated with lead-based paint. The landlord's CGL insurer, Georgia Farm Bureau Mutual Insurance Company (“Georgia Farm Bureau”), sued Smith and the landlord in a declaratory judgment action seeking a determination that it was not required to provide coverage. The trial court granted summary judgment to Georgia Farm Bureau because of a pollution exclusion proscribing recovery for “'[b]odily injury' or 'property damage' arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release, or escape of 'pollutants.'” Georgia Farm Bureau, 2016 WL 1085397 *1-2. The policy defined pollutants as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Id. *2.

The intermediate appellate court reversed, explaining that “[e]xclusions from coverage in insurance policies require narrow construction on the theory that the insurer, having affirmatively expressed coverage through broad promises assumes a duty to define any limitations on the coverage in clear and explicit terms.” Smith v. Georgia Farm Bureau Mut. Ins. Co., 331 Ga. App. 780, 784.

While noting that “in other jurisdictions, there is 'conflict in judicial opinions regarding whether lead paint is a 'pollutant' under [a] pollution exclusion,” citing Sullins v. Allstate Ins. Co., 340 Md. 503, 516 (1995) (conflicting interpretations of policy language not determinative of ambiguity”), the Georgia Court of Appeals concluded that “lead-based paint is not clearly a 'pollutant' as defined by the policy,” reasoning that the definition of “pollutant” did not include “the words 'lead,' 'lead-based paint,' or even 'paint.'” Id. at 784-85. The court summarily declared Reed “inapposite” and held that the exclusion did not apply. Id. at 785.

Georgia Farm Bureau appealed to the Georgia Supreme Court, which reversed the intermediated appellate court and held that lead was unambiguously a pollutant even without having been explicitly named in the policy. Georgia Farm, No. S15G1177, 2016 WL 1085397 *5. The court invoked Reed, which it describes requiring examination of “the plain language of the clause itself” rather than the historical purpose and evolution of the exclusion. Id. *4. The decision also cites American States Ins. Co. v. Zippro Constr. Co., 216 Ga. App. 499, 499-501 (finding that asbestos released from floor tiles “unambiguously constitutes a pollutant”) and Perkins Hardwood Lumber Co. v. Bituminous Cas. Corp, 190 Ga. App. 231 (finding that smoke from insured's premises was an “'irritant or contaminant' and, thus, a pollutant”).

Conclusion

While “discharge, dispersal, seepage, migration, release or escape of 'pollutants'” may not have been in play in the Georgia Farm Bureau decision, parties should be cognizant of an earlier decision by the U.S. Courts of Appeals for the Eleventh Circuit, evaluating that language under Georgia law and holding that the language may not be clearly satisfied by an exposure to a pollutant. See Bituminous Casualty Company v. Advanced Adhesive Technology, Inc., 73 F.3d 335, 338 (11th Cir. 1996).

Donald R. McMinn, a member of this newsletter's Board of Editors, is a partner and Meredith C. Neely is an associate at Hollingsworth LLP in Washington, DC.