The pollution exclusion barred coverage for alleged property damage and bodily injury in Evanston Ins. Co. v. Harbor Walk Dev., LLC, No. 2:10cv312 (E.D. Va. Sept. 9, 2011) [Evanston Decision here].
Homeowners sued the insured, Harbor Walk, in three lawsuits, alleging the Chinese drywall installed in their homes emitted sulfides and other noxious gases. This caused corrosion and damage to the air-conditioning and ventilation units, refrigeration coils, copper tubing, faucets, metal surfaces, electrical appliances and other personal items. The homeowners also alleged the compounds emitted by the drywall caused bodily injury, such as allergic reactions, headaches, etc.
Harbor Walk's insurer, Evanston, filed for a declaratory judgment that the pollution exclusion precluded coverage. The exclusion stated there was no coverage for "bodily injury" or "property damage" that would not have occurred but for the discharge, dispersal, release or escape of pollutants. Pollutants included solid, liquid gaseous or thermal irritant or contaminant, chemicals, etc.
The homeowners argued the use of environmental terms in the exclusion meant it was limited to excluding damages caused by "traditional pollution events," and not the emission of gas from building material occurring inside a home. Because their reading of the exclusion was reasonable, the exclusion was ambiguous. After surveying case law in Virginia, however, the court disagreed. The pollution exclusion unambiguously applied to injuries caused by both traditional and non-traditional pollution.
Further, each of the causes of action (including negligence, breach of express and/or implied warranties, breach of contract, private nuisance, unjust enrichment, etc.) implicated the emission of sulfides and noxious gases from the Chinese drywall as either the basis for the claim, or the cause of the resulting damage. Thus, every cause of action fell within the reach of the pollution exclusion, barring all claims made by the homeowners. Consequently, Evanston was entitled to summary judgment.
