Coverage Litigation

Oralabs timely notified Atain of the lawsuit, and Atain began defending the suit by the injured child's mother. However, Atain later sought to recoup the costs and expenses of the defense, arguing it didn't owe defense or indemnity to any of the companies based on the total pollution exclusion. Dollar Tree, Greenbriar, and Oralabs sought dismissal of Atain's declaratory judgment, arguing there was no claim because the damages were covered and Atain could not prove otherwise. 

The court began with an examination of the Atain policy. It stated that Atain would "pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' … to which" the Atain policy applied. The list of products covered by the product-specific endorsement included the breath drops that were the subject of the child's mother's suit; coverage under this endorsement applied to both Oralabs and any vendors or distributors of Oralabs products. 

Despite the inclusion of the breath drops on the list, Atain argued the total pollution exclusion precluded coverage for the damages they had caused. This exclusion stated any injuries "caused by or arising out of in whole or in part, the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants' at any time" (emphasis added) were not within the scope of the policy. It also stated that "pollutants" meant "any solid, liquid, gaseous or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." (emphasis added). 

This alleged clash of coverages, according to the court, created ambiguity in the policy. Though the foundations of the total pollution exclusion were geared toward environmental claims, the Missouri Court of Appeals had since extended the scope of the total pollution exclusion to damages unrelated to the environment. 

Atain admitted it had not included definitions for several key terms related to the Total Pollution Exclusion, including "dispersal," "escape," "irritant," and "chemicals," but said this gap was easily bridged by using the standard dictionary definition for each term. They pointed out that Merriam-Webster's online dictionary defined "irritant" as "causing irritation, specifically: tending to produce physical irritation"; "chemicals," according to the same source, meant "a substance obtained by a chemical process or producing a chemical effect." They did not reference a definition for either "dispersal" or "escape." 

The insurer argued that the breath drops were "irritants" according to the dictionary definition of the term given above, as well as "chemicals" capable of causing damage to organic tissue, as shown by the devastating effects on the injured child's esophagus. The accidental ingestion itself proved the alleged irritants had "discharge[d], dispers[ed], seep[ed], migrate[ed], release[d], or escape[d]" their container; therefore the total pollution exclusion applied to the girl's injuries because they had been caused by the "escape" of an "irritant" within the meaning of the exclusion. 

The judge agreed using a dictionary to provide context for "undefined terms in insurance policies, including pollution exclusions" was a reasonable measure to take. However, the court specifically stated that "Atain's broad interpretation of the Total Pollution Exclusion in this context took the use of dictionary definitions a bridge too far. The judge pointed out that the intended function of the breath drops "depend[ed] on their being released from a container and ingested by humans." (emphasis original). It defied logic to market and sell the breath drops as a product intended for human consumption and issue a policy endorsement specifically covering the breath drops and similar products, only to disclaim the specifically insured drops as excluded "pollutants" when in court. 

Conclusion

There was no question that the offending breath drops had caused severe injury to the girl after control of the product had been relinquished; her claim fit squarely within the coverage requirements under the policy endorsement. Atain's assertion that the breath drops were excluded as "pollutants," however, would strip that coverage of its effectiveness. The judge therefore ruled the total pollution exclusion was "rendered illusory and ambiguous" and dismissed Atain's declaratory judgment action without leave to refile. 

Editor's Note: The question of what substances or materials constitute a "pollutant" for the purpose of the pollution exclusion can be tricky. In this case, Atain argued the breath drops were "pollutants" that had "escaped" the bottle to cause damage. The court disagreed. The principal function of the breath drops was to exit the bottle and fall into the mouth of a consumer. Though the consumption of the drops in this case had yielded a disastrous result, it did not transform the nature of the breath drops as a product intended for human consumption into a "pollutant."

Read More: 

A Discourse On The Pollution Exclusion 

Ambiguous Definition Means Insurer Owes Duty of Defense 

Mississippi Supreme Court Finds Pollution Exclusion to be Ambiguous