Filed Under:Claims, Catastrophe & Restoration

When is a policy's pollution exclusion applicable to contractor damage?

Coverage Q&A

The specifics surrounding a property damage claim resulting from a chemical mishap will dictate the applicability of a policy's pollution exclusion. (Photo: Shutterstock)
The specifics surrounding a property damage claim resulting from a chemical mishap will dictate the applicability of a policy's pollution exclusion. (Photo: Shutterstock)

Question: Our insured is a contractor and sprayed a chemical solution in the claimant's attic to remediate mold. The liquid spray leaked through the attic floor and ceiling, causing damage to the carpeting in the rooms below. We have a CGL form with the standard pollution exclusion. Does the pollution exclusion apply?

— Ohio Subscriber

Answer: The pollution exclusion in the standard CGL form states that there is no coverage for property damage arising out of the actual discharge, dispersal, seepage, or escape of pollutants at or from any premises, site, or location on which any insured is performing operations if the pollutants are brought on or to the premises, site, or location in connection with such operations by the insured.

The chemical solution is, no doubt, a pollutant as defined in the policy and there was a release or seepage of this pollutant that caused the property damage. And since the insured brought the chemical solution onto the premises in order to do his work, the pollution exclusion does apply to the claim.

There are exceptions to this part of the pollution exclusion, but none of them are applicable in this instance.

Related: Environmentally sound? Insurer appetite remains strong in environmental market

Question: Our insured sustained a loss due to a puff back from their gas-fired furnace. The carrier denied coverage under the pollution exclusion of the CP 10 30 10 00. The carrier said that the resulting soot damage was neither smoke nor explosion, both of which qualify for the pollution exclusion's specified perils exception. The adjuster also said that soot was a pollutant and not covered. We disagree. What are your thoughts?

— Pennsylvania Subscriber

Answer: The pollution exclusion in CP 10 30 10 00 states : "We will not pay for loss or damage caused by or resulting from any of the following: …Discharge, dispersal, seepage, migration, release or escape of 'pollutants' unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the 'specified causes of loss'." A "pollutant" is defined on the Building and Personal Property Coverage form as "any solid, liquid, gaseous or thermal irritant or containment, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." And, "specified causes of loss" include fire, smoke, and explosion.

While it is true that the soot is a pollutant as defined by the policy and is not included in the listing of specified perils, if it was in fact caused by a specified peril, soot damage would not be excluded by the pollution exclusion.

And, with a gas-fired furnace, the likelihood is that either fire or explosion was the cause of the puff back. If this was the case, the pollution exclusion would not apply.

Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more—or to have YOUR coverage question answered—visit www.nationalunderwriter.com/FCS

See also: Diggin' in: A look at the Environmental market

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