Fifth Circuit Applies Pollution Exclusion to Explosion Caused by Gas Vapors
Another court has determined that the total pollution exclusion is in fact “total.” In Noble Energy Inc. v. Bituminous Casualty Company, 2008 U.S. Dist. LEXIS 11757 (5th Cir. June 2, 2008), the court addressed the applicability of a pollution exclusion to bodily injury from an explosion. Workers were disposing of sediment and water from Noble’s petroleum storage tanks from two tanker trucks. Combustible vapors from the sediment and water caused the diesel engines in the truck to race which led to an explosion and fire. The sediment and water waste included gas condensate. Three employees were killed and several others injured. Bituminous Casualty argued that the pollution exclusion in its policy barred coverage for the claims.
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.”
