Absolute Pollution Exclusions Are Absolute When There Has Been Pollution

Pollution exclusions first became routine in liability policies in the early 1970s.  After a decade of often unsuccessful litigation trying to enforce those exclusions, insurers introduced a so called “absolute” pollution exclusion into their commerical liability policies. Given that the language of absolute pollution exclusions has almost universally been found to be unambiguous, there has been a surprising amount of litigation on the subject.   What emerges from that litigation  is a general rule:  the exclusion will virtually always be enforced where the claim involves contamination of the environment, but enforcement is far less certain where the claim involves damage to a product, such as defective wallboard, or bodily injury from a defective product, such as harm to a homeowner from carbon monoxide leaking from a furnace.

A recent decision by the Fifth Circuit, applying Texas law, follows this general rule.  In Liberty Mutual Insurance Company v. Linn Energy, LLC, the policyholder sought coverage for damage resulting from a pipeline that leaked contaminants  on its property.    In a brief per curiam opinion, the court ruled that the exclusion was unambiguous and should be enforced notwithstanding an express grant of coverage applicable to undergrond resources, such as minerals and petroleum.  According to the court, the grant of coverage was not inconsistent with the exclusion since damages to underground resources would be covered unless the damages arose from pollution.  Plainly, the Fifth Circuit had no trouble applying the absolute pollution exclusion when the claim involved traditional environmental pollution.

 

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