(Article from Insurance Law Alert, January 2016)
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Our April 2015 Alert reported on a Vermont Supreme Court decision holding that an absolute pollution exclusion bars coverage for injuries caused by spray foam insulation fumes. Cincinnati Specialty Underwriters Ins. Co. v. Energy Wise Homes, Inc., 2015 WL 1524206 (Vt. Apr. 3, 2015). There, the Vermont Supreme Court rejected the trial court’s holding that the exclusion applies only to traditional environmental hazards. However, the Vermont Supreme Court expressly limited its ruling to the particular surplus lines policy at issue, noting that the exclusionary language was broader than standard form pollution exclusions and that Vermont regulations required in-state general liability insurers to provide pollution coverage in most cases. Last month, the Vermont Supreme Court squarely addressed the issue left open in Cincinnati – namely, whether a standard form pollution exclusion bars coverage for claims arising out of pesticide spray inside a home. The court held that it did.
In Whitney v. Vt. Mut. Ins. Co., 2015 WL 8540432 (Vt. Dec. 11, 2015), the Vermont Supreme Court reversed a lower court decision on interlocutory appeal and held that a standard form pollution exclusion in a homeowner’s policy unambiguously applies to claims arising from interior residential pesticide application. The court explicitly rejected the argument that pollution exclusions should be “presumed, as a class, to be ambiguous or to be limited in their application to traditional environmental pollution.” Rather, under the “plain, ordinary and popular meaning,” the exclusion applies to the spraying of toxic chemicals inside a home.
In another ruling issued last month, the Fifth Circuit reached the same conclusion, holding that under Texas law, a pollution exclusion bars coverage for personal injury claims based on the installation of foam spray insulation inside a home. Evanston Ins. Co. v. Lapolla Indus., Inc., 2015 WL 9460301 (5th Cir. Dec. 23, 2015).