Pollution Exclusion not Limited to Environmental Pollutants
An issue of coverage arose after homeowners were exposed to carbon monoxide. The insured said the pollution exclusion was not applicable to such a claim since the exclusion was limited to environmental pollutants; the insurer argued the opposite. This case is Midwest Family Mutual Insurance Company v. Wolters, 2011 WL 3654498 ( Minn. ).
Bartz and Brewster went to sleep in Bartz's newly constructed. They awoke the next morning disoriented and nauseous. Both went to the hospital and were treated for carbon monoxide poisoning. An investigation revealed that the boiler caused the high levels of carbon monoxide and that the carbon monoxide detector was not connected to a power source.
The insured, Wolters, had been hired to construct the residence. He subcontracted the plumbing and electrical work and bought a boiler from a local supplier. Wolters testified that he asked for a boiler designed to use liquid propane fuel but he got one that was compatible only with natural gas. The plumber installed the boiler and Wolters connected it to a liquid propane fuel line. Wolters never tested the boiler.
After becoming ill, Bartz and Brewster sued Wolters for negligence. Wolters sought coverage from his insurer, Midwest Family Mutual. The insurer filed a declaratory judgment action, claiming it had not duty to defend or indemnify Wolters. The district court ruled in favor of the insured and the insurer appealed.
The Minnesota Court of Appeals noted that Wolters' general liability policy had a pollution exclusion that applied when BI or PD arose out of the actual discharge, release, or escape of pollutants at or from any premises where the named insured was working or had completed work, but that the exclusion did not apply if the BI or PD arises from smoke or fumes of a fire that breaks out from where it was intended to be. The district court reviewed this exclusion and concluded that it was limited to traditional environmental pollutants. However, the appeals court disagreed and said Minnesota's interpretation of the exclusion would have it encompass carbon monoxide released in a residence.
The court then said that the discharge of carbon monoxide occurred at Bartz's home where Wolters had worked because the boiler that Wolters purchased was not compatible with the liquid propane fuel source that Wolters connected it to; thus, the injuries occurred in connection with Wolters' work. As for the argument that the exception to the exclusion applies, the court ruled that the exception wording referred to fire and not to fumes and the facts showed that the fire in the boiler was not hostile and was where it was intended to be.
In sum, the court decided that the pollution exclusion is not limited to environmental pollutants under Minnesota law and that damages resulting from Wolters' installation of a boiler incompatible with propane are excluded from coverage. Consequently, Midwest did not have a duty to defend or indemnify Wolters in the underlying action. The opinion of the district court was reversed.
Editor's Note: The Minnesota Court of Appeals acknowledged that a majority of jurisdictions now limit the pollution exclusion to traditional environmental pollution. However, the court said that Minnesota precedent rejects a technical reading of the pollution exclusion and prefers an ordinary reading. Thus, carbon monoxide released in a residence (that is, interior pollution) is within the scope of the pollution exclusion.
Furthermore, unlike the pollution exclusion in the standard CGL form, the wording of this exclusion did not require a contractor bring the pollutant onto the premises for the exclusion to apply. The exclusion applies simply if the pollutant discharges or is released at any premises where the named insured is working or has worked (ongoing operations and completed operations). In this case, the carbon monoxide was discharged and the injuries occurred in connection with Wolters' work and that meant the exclusion prevented any coverage in this instance.