California Court of Appeal Again Upholds Absolute Pollution Exclusion
After the California Supreme Court's 2003 opinion in MacKinnon, rejecting the application of an absolute pollution exclusion to injuries to building occupants by pesticide sprayings and declaring that such exclusions are limited to "injuries commonly thought of as "pollution" (ie. environmental pollution), one might well have assumed that it would be a rare day indeed before a California court gave effect to such exclusions in bodily injury cases. In surprising turn of events, however, the Court of Appeal has since done that in several recent cases.
The latest ruling to give an expansive interpretation to MacKinnon's construct of "environmental pollution" is the Second District's opinion this week in American Casualty Co. of Reading, PA v. Miller. At issue were personal injuries suffered by a workman who, in the course of performing maintenance work in a sewer line, was exposed to methylene chloride that had been flushed into the sewer by Stripper Herk, a furniture stripping business (why don't the insureds in my cases ever have cool names like that). Stripper Herk ultimately enter into a plea agreement with the U.S. Attorney in which it confessed to have discharged chemicals in violation of its permit.
In the ensuing coverage litigation, the Los Angelese Superior Court ruled for CNA in 2006, holding that the worker's suit for injuries caused by exposure to the methylene chloride were clearly subject to the APE in a 2002 American Casualty policy as arising out of a discharge of pollutants on or from the insured's premises. This finding was affirmed by the Second District of the Court of Appeal on January 29.
The court ruled that “an ordinary insured would reasonably expect that the release of methylene chloride into a public sewer is environmental pollution.” In keeping with other recent opinions such as Ortega Rock Quarry and Garamendi v. Golden Eagle, the court held that the insured's discharge of methylene chloride into the sewer was a widespread dissemination of a pollutant into the environment. The court rejected the insured's argument that such exclusions do not apply to "one-time, negligent" discharges or should be limited to "catastrophic events such as large scale industrial pollution The court also held that the fact that the sewer in question was sealed merely limited the scope of injury and did not alter the fact that there had been a release into the environment.. Finally, the Second District held that the operator of a furniture stripping business should have been well aware of the need to handle such chemicals carefully.
Although not discussed in the opinion, the Second District's analysis is in keeping with the First District's opinion late last year in Cold Creek Compost, Inc. v. State Farm Fire & Casualty Co., A114623 (Cal. App. November 20, 2007), in whichh the Court of Appeal ruled that neighbors’ nuisance claims due to exposure to offensive odors, dust and noise from the insured’s composting operations are subject to an absolute pollution exclusion. The First District declared that “the widespread dissemination of offensive and injurious odors from a commercial compost facility is ‘environmental pollution’ under MacKinnon and thus excluded from coverage...”
It will be interesting to see if the California Supreme Court takes an appeal from one of these cases. Meanwhile, it appears that the rumors of the demise of the absolute pollution exclusion in California were exaggerated after all.
