No Hawai`i appellate court has ever interpreted the meaning of the CGL policy's pollution exclusion. The Ninth Circuit recently issued an Order certifying a question to the the Hawai`i Supreme Court regarding its interpretation of the pollution exclusion. See Apana v. TIG Ins. Co., No. 08-15369 (9th Cir. July 15, 2009) [here].
The underlying case involved an insured plumber who was called upon by Walmart to service a clogged floor drain. An alleged "strong drain cleaner" was used, emitting "noxious fumes" within the store. A Walmart employee breathed in the fumes and left the store bleeding from her nose and mouth. The employee sued the plumber.
The insured tendered the defense to TIG. TIG rejected the claim based on the policy's Total Pollution Exclusion. The employee and insured went to arbitration, where the employee was awarded $87,770.27 in damages. The insured plumber then assigned his rights under the policy to the employee.
The policy excluded coverage for bodily injury resulting from the "discharge, dispersal, seepage, migration, release or escape" of "any solid liquid, gaseous or thermal irritant or contaminant, including smoke vapor, soot fumes, acids, alkalis, chemicals and waste." The district court held TIG had no duty to indemnify but did have a duty to defend. Both parties appealed.
The Ninth Circuit noted there was a split of authority nationwide on the meaning of the pollution exclusion. On one side, courts applied the exclusion literally because they found their terms to be clear and ambiguous. On the other side, courts limited the exclusion to situations involving traditional environmental pollution, either because they found the terms of the exclusion to be ambiguous or because the exclusion contradicted policyholders' reasonable expectations.
Hawai`i's case law did not indicate a preference for either mode of analysis. Some Hawai`i cases enforced a lay person's reasonable expectations, even if "painstaking study" of the pollution exclusion would require a different result. See, e.g., Del Monte Fresh Produce (Hawaii), Inc. v. Fireman's Fund Ins. Co., 183 P.3d 734, 745 (2007). Other cases indicated Hawai`i courts might not apply the policyholder's reasonable expectations to the total pollution exclusion because its terms are unambiguous. See, e.g., Dairy Rd. Partners v. Island Ins. Co., 992 P.2d 93, 106 (2000).
Therefore, the following question was certified to the Hawai`i Supreme Court:
Does a total pollution exclusion provision in a standard commercial general liability insurance policy apply to localized uses of toxic substances in the ordinary course of business (such as when a plumber uses chemicals to open a clogged drain and an employee working nearby inhales the fumes and suffers injuries, or is it limited to situations that a reasonable layperson would consider traditional environmental pollution?