Source: http://www.lexology.com, April 25, 2014
By: Amy B. Briggs, David B. Killalea , Stephen T. Raptis, Robert H. Shulman and Susan P. White, Manatt Phelps & Phillips LLP
Why it matters
A Connecticut superior court recently ruled that numerous pollution exclusions extending as far back as the 1950s were ambiguous as to the underlying asbestos bodily injury claims and therefore did not preclude coverage for an insured’s massive asbestos liabilities incurred from the sale of industrial talc. The court held that, despite the policy exclusions purporting to eliminate coverage for injuries resulting from the discharge, dispersal, release or escape of pollutants, there was coverage because it was unclear whether they referred to traditional environmental contaminants (as the insured argued) or could be read to include asbestos exposure resulting from mined talc (the insurer’s contention). In so holding, this court joined the vast majority of courts nationwide that have rejected application of pollution exclusions to asbestos bodily injury claims.
Detailed Discussion
Vanderbilt Minerals, LLC, sought coverage from more than 30 of its insurers for asbestos liabilities resulting from its historical sale of industrial talc.
The court addressed multiple issues, including the extent to which so-called “absolute” and “qualified” (e.g., “sudden and accidental”) pollution exclusions in the policies at issue precluded coverage for Vanderbilt’s asbestos bodily injury liabilities.
The insurers took the position that both types of pollution exclusions encompassed claims for asbestos exposure from talc. The insured, on the other hand, argued that the exclusions referred only to traditional environmental pollution and therefore were inapplicable.
The court ruled that both interpretations were viable, stating that “It cannot be said with a high degree of certainty that the policy language clearly and unambiguously excludes the claim.” However, the court noted that specific asbestos exclusions began appearing in policies starting in 1986. Because asbestos exclusions would be largely superfluous if asbestos claims were covered by the pollution exclusion, the court was persuaded that the insured’s interpretation was better.
“[T]he very adoption of separate asbestos exclusions in policies beginning in 1986 is in itself evidence that the industry did not consider the pollution exclusion language to be clear enough to exclude such claims,” the court said. “To argue the pollution exclusion was unambiguous and therefore excluded asbestos claims would render the asbestos exclusion redundant and unnecessary.”
Because the insurers failed to meet their burden of demonstrating the applicability of the exclusions, the court found they did not preclude coverage.
To read the decision in RT Vanderbilt Co. Inc. v. Hartford Accident & Indemnity Co., click here.