Pollution Exclusion and Heating Equipment Exception

Our insured rented the meeting room of the local fire hall to the blood bank to collect blood donations. When the blood bank employees arrived, they could smell gas and they called the insured to check it out. The insured's employees checked and found that the pilot light was out on the cooking stove. They lit the pilot light and then checked the level of gas fumes and found them well within the safety limits.

The blood bank workers then spent the rest of the day taking donations. When they went back to their home base, three employees went to the doctor or emergency room at the hospital. They made workers compensation claims which the WC insurer turned into a subrogation claim against our insured. Our insured's carrier denied coverage based on the pollution exclusion. We cited the exception to the exclusion about bodily injury sustained within a building and caused by smoke, fumes, or vapor produced by or originating from equipment used to heat, cool, or dehumidify the building, or equipment that is used to heat water for personal use by the building's occupants or guests.