(Article from Insurance Law Alert, June 2019)
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A Missouri federal district court ruled that an insurer was not obligated to contribute to an underlying asbestos settlement, finding that coverage was barred by a pollution exclusion. Zurich Am. Ins. Co. v. Ins. Co. of N. Am., 2019 WL 2184973 (E.D. Mo. May 21, 2019).
Zurich settled an asbestos claim on behalf of its insured and then sought contribution from Insurance Company of North America (“INA”). INA argued that it was not obligated to contribute towards the settlement based on a pollution exclusion. The court agreed and granted INA’s motion to dismiss.
First, the court ruled that INA properly asserted the pollution exclusion as an affirmative defense. In its responsive pleading, INA stated that “the Underlying Claim is within an exclusion from coverage, including but not limited to asbestos exclusions.” Zurich conceded that INA properly asserted the asbestos exclusion, which began in 1989, but argued that this statement was insufficient to assert an affirmative defense based on the pollution exclusion. The court disagreed. The court acknowledged that while this affirmative defense statement was not a “model of clarity,” it adequately pled any and all asbestos-related exclusions, including the pollution exclusion.
Second, the court concluded that the pollution exclusion applied to the underlying asbestos claim, which alleged injury to a spouse of a worker who was exposed to asbestos during the course of his employment. The court rejected the contention that the pollution exclusion applies only to outdoor environmental contamination, noting that asbestos is unambiguously an irritant or contaminant. The court deemed it irrelevant that asbestos was not specifically identified in the exclusion, which refers to “smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases [and] waste materials.”
Finally, the court rejected the contention that the pollution exclusion was inapplicable because the release of asbestos fibers occurred inside a building rather than “into the atmosphere,” as required by the exclusion. The court explained that even accepting Zurich’s interpretation of “atmosphere,” any such requirement was met because the alleged contamination of the spouse occurred outside the confines of the factory, meaning that at some point, the asbestos fibers were released “into the atmosphere.”