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Vermont Supreme Court Holds Pollution Exclusion Applies to Claims for Bodily Injuries Caused by Exposure to Airborne Chemicals

Blogs, Insurance Coverage

The Vermont Supreme Court recently held that a pollution exclusion in a commercial general liability insurance policy precluded coverage for a lawsuit against an insured contractor for bodily injury allegedly caused by spray-foam insulation. Cincinnati Specialty Underwriters Inc. Co. v. Energy Wise Homes, Inc., No. 2014-165 (VT. April 3, 2015).

In the underlying tort case, Shirley Uhler, an employee at the Shrewsbury Mountain School, filed suit against Energy Wise Homes, Inc. (“Energy Wise”), alleging that the spray-foam insulation used by Energy Wise at the school exposed her to “airborne chemicals and airborne residues,” causing her to suffer bodily injuries.

Energy Wise requested coverage under a commercial general liability surplus lines policy, issued by Cincinnati Specialty Underwriters Insurance Company (“Cincinnati”). Cincinnati provided a defense pursuant to a reservation of rights and subsequently filed a declaratory judgment action seeking a declaration that no coverage existed for the claims asserted by Ms. Uhler. 

After filing suit, Cincinnati moved for summary judgment on grounds that the policy’s “Total Pollution Exclusion Endorsement” barred coverage. The endorsement excluded coverage for bodily injury that “would not have occurred in whole or in part but for the actual … migration, release or escape of ‘pollutants.’” The policy broadly defined “pollutants” as “any solid, liquid, gaseous, or thermal irritant or contaminant … and that which has been recognized in industry or government to be harmful….” Counsel for Ms. Uhler opposed Cincinnati’s motion for summary judgment, arguing that Cincinnati’s interpretation was so overbroad as to make the policy meaningless. The trial court granted summary judgment in favor of Ms. Uhler.

The Vermont Supreme Court reversed, holding that the “Total Pollution Exclusion Endorsement” plainly and unambiguously precluded coverage. The court acknowledged that the “broad nature of the pollution exclusion may cause a commercial client to question the value of portions of its commercial general liability policy,” but the insured’s “reasonable expectations” could not trump “unambiguous policy language.”