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Pollution Exclusion Ambiguity Certified to Virginia Supreme Court

Blogs, Insurance Coverage

The Fourth Circuit recently certified the question of pollution exclusion ambiguity to the Virginia Supreme Court in Travco Insurance Co. v. Ward. A coverage dispute arose over damage caused by Chinese Drywall in the policyholder’s home. The District Court for the Eastern District of Virginia granted the insurer’s declaratory judgment action, finding that although there was a direct physical loss, the loss was excluded by the policy’s pollution exclusion, among others. The District Court rejected the policyholder’s argument that Chinese Drywall was not a pollutant, determining that the sulfur gas released by the drywall was a pollutant recognized by state authorities. 

The policyholder appealed AZ to the Fourth Circuit, asserting that the meaning of “pollutant” in the pollution exclusion is ambiguous under Virginia law, and was intended to exclude coverage for past environmental contamination rather than product liability claims. The policyholder also took issue with the District Court’s reliance on case law involving only traditional environmental pollution, arguing that the issue was more properly controlled by Unisun Ins. Co. v. Schulwolf, 53 Va. Cir. 220 (Va. Cir. 2000), where the Virginia Circuit Court concluded that a pollution exclusion applied only to environmental pollution. Because of the lack of clearly controlling precedent, the far-reaching impact of the decision, and the unsettled nature of the issues, the Fourth Circuit opted to certify the ambiguity question to the Virginia Supreme Court.