Source: http://www.lexology.com, October 5, 2012
By: Brian Margolies, Traub Lieberman Straus & Shrewsberry LLP
In its recent decision in Doe Run Resources Corp. v. Lexington Ins. Co., 2012 U.S. Dist. LEXIS 140981 (E.D. Mo. Sept. 28, 2012), the United States District Court for the Eastern District of Missouri had occasion to consider whether the total pollution exclusion is ambiguous for failure to define the term “pollutants,” or for failure to include this term to include specific constituents.
The insured, Doe Run Resources Corporation, was named as a defendant in two lawsuits resulting from its mining, milling and smelting operations. Specifically, both suits alleged bodily injuries resulting from Doe Run’s release of lead, cadmium and other toxic substances from chat and tailing piles located at two different facilities in Missouri. Doe Run sought coverage for these suits from its general liability carrier, Lexington, which insured Doe Run under successive policies dating back to 1995. Lexington denied coverage on the basis that the suits did not allege “bodily injury” or “property damage” arising out of an occurrence, as well as on the basis of the application of its policies’ pollution exclusion.
For the policies issued from 1995 through 2003, the Lexington policies contained a pollution exclusion applicable to:

… bodily injury or property damage (including the loss of use thereof) caused by, contributed to or arising out of the actual or threatened discharge, dispersal, release, or escape of smoke, vapors, soot, fumes, acids, alklis, toxic chemicals, liquids or gases, waste materials or other irritants, pollutants or contaminants into or upon the land, the atmosphere or any course of body of water, whether above or below ground.

Notably, these policies did not define the term “pollutants.” For the policies issued beginning in 2004, the pollution exclusion barred coverage for:

… “bodily injury” or “property damage” which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.

These policies define “pollutants” in relevant part as “any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”
After concluding that Missouri law governed the Lexington policies, the court considered Doe Run’s arguments on summary judgment as to why the pollution exclusions were inapplicable. Doe Run argued that the policies did not specifically exclude lead or other commercial products or commercial materials, and that the Lexington policies did not define “pollutants” to include lead and the other constituents at issue.
The court began its decision by noting that the language policies’ pollution exclusions were clear and unambiguous, even the pre-2004 exclusions that did not specifically define “pollutants.” Relying on a standard dictionary definition, the court agreed that that the term “pollutants” is commonly understood as something that pollutes or contaminates the environment, especially with man-made waste. Finding that the underlying suits alleged releases of pollutants from Doe Run’s facilities, thereby contaminating the environment, the court agreed that the suits “describe pollutants, as that term is used in its typical and ordinary sense.”
Doe Run nevertheless argued that the decision in Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., 997 S.W. 510 (Mo. Ct. App. 1999) required a different outcome. Hocker involved the application of the pollution exclusion to an insured gas company’s accidental release of 2,000 gallons of gasoline into the ground. The Missouri Court of Appeals held the exclusion was ambiguous as to whether gasoline was a “pollutant” for the purpose of a pollution exclusion, since in the eyes of that particular insured, gasoline was not a pollutant but instead the only product it sold. The Doe Run court nevertheless found Hocker to be distinguishable since it involved “the onetime release of Hocker Oil’s finished product, gasoline, into the ground.” By contrast, the underlying suits filed against Doe Run alleged negligent and careless releases of lead, cadmium and other toxic materials into the environment over a number of years. The court found this to be a critical distinction:

That is, unlike Hocker’s isolated accident, the [underlying lawsuits] allege the continual and systematic release of pollutants into the environment. Moreover, despite Doe Run’s pleas to the contrary, the products involved here are not finished products. Even if some of these raw materials are marketable (as Doe Run claims), their continued release of these contaminants into the community constitutes pollution. In sum, “the Court believes that contamination caused by a gasoline leak resulting from a failed plug is quite different from contamination resulting from lead concentrate abandoned on a landowner’s property.”

The court also distinguished a Missouri trial court decision relying on Hocker in which Doe Run was a party. That decision concluded that the pollution exclusion did not clearly apply to claims involving releases of lead, arsenic, cadmium or sulfur dioxide since the policies at issue (not issued by Lexington) did not define “pollutants” to include those materials. The Eastern District of Missouri found the reasoning of the state trial court’s decision to be flawed, concluding that the mere fact that lead or other constituents were not included in the definitions of pollutants did not “undermine” the application of the exclusion or otherwise render its application ambiguous.