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The policy included a pollution exclusion that defined pollutant as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Following Texas law, the Fifth Circuit determined that the exclusion was unambiguous. The Court first determined that the allegations in the complaint that combustible vapors emanating from the sediment and water qualified as a “pollutant.” The Court then found that the alleged injuries arose out of the discharge, release or escape of that pollutant. The Court rejected an argument that the vapors were not “acting as a pollutant,” but as an accelerant for the fire. The Court found inapplicable cases finding that liability must be based on a substance’s polluting qualities for the exclusion to apply. The Court noted that unlike other cases, the Bituminous policy defined pollutant, and did not restrict its application to pollutants entering the land, atmosphere, or water. Finally, the Court noted that the injury did arise out of the “hazardous quality of the vapors.” This last point seemed to be a throwaway for the Court since it had already determined that it was not the “quality” of the substance that mattered.

The Court also rejected arguments by the insured that pollution exclusion should not apply because that would be contrary to the reasonable expectation of the insured. The Court observed that that was not the test in Texas for unambiguous policy terms. The Court similarly rejected an argument that the hostile fire exception applied. The hostile fire exception only applied where there is a pre-existing fire that causes pollution, not where the pollutant itself causes a fire. The Court also rejected arguments that the vapors were not discharged into the environment because they were confined to the area of intended use. The Court found that the pollution exclusion was not restricted to situations where environmental harm occurred. In rejecting all of the insureds arguments that the scope of the exclusion should be limited, the court clearly held that liability from any substance that falls within the definition of pollutant is excluded by this form of the pollution exclusion. This decision may help to reinforce that the most recent version of the pollution exclusion is actually “total.”

Hutchings sued Yuter, Neustein and Ten Seventy One for his injuries. They tendered the defense and indemnification of Hutching’s suit to their insurer, Liberty Mutual, who disclaimed coverage. Yuter, Neustein and Ten Seventy One then sued Liberty Mutual for defense and indemnification. Liberty brought a third party action against Greenwich Insurance seeking a declaration that Yuter, Neustein and Ten Seventy One are insureds under its policies and that the policies are primary to the Liberty policies. Greenwich issued two liability policies, both of which were in effect on the date of the accident, but neither of which listed 3001 Arlington a designated premises for coverage.

The Greenwich policies included endorsements titled “Limitation of Coverage to Designated Premises or Project.” The endorsement provided coverage for “bodily injury . . . arising out of . . . the ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises” (emphasis added). Neither Greenwich policy Schedule listed 3001 Arlington as a designated premises. Liberty argued that 3001 Arlington, as the office for premises that were listed on the Greenwich policies’ Schedule, was covered as “operations necessary or incidental to” the other, scheduled premises.

Greenwich moved to dismiss Liberty’s complaint pursuant to CR 12(b)(6) and the court granted its motion. It explained the phrase “operations necessary or incidental to” scheduled premises has a spatial meaning extending the premises listed on the schedule to certain non-scheduled, appurtenant spaces such as location entryways “necessary or incidental” to the enjoyment or use of the insured premises. The court refused to more broadly construe the phrase to include 3001 Arlington. The fact that 3001 Arlington was Ten Seventy One’s business address did not allow Liberty to essentially reform the Greenwich policies to hold it liable for insuring a premise not contemplated in its agreements with its insured.