Sick Building Syndrome and a Definition of "Pollution Conditions"
June 2001
Are sick building syndrome claims covered
under your insurance policy? Check the language. But what conclusion do you
reach when the conditions, definitions, and exclusions don't jibe? This article
examines the quandary.
by Kenneth
S. Wollner
Globe Midwest Risk Management
"It isn't pollution that's harming the environment.
It's the impurities in our air and water that are doing it."—Dan Quayle
We normally think that a definition explains the meaning of a word or phrase
we may not understand. But a definition can serve other purposes, such as excluding
coverage or delineating a new concept. The result may be a definition that conflicts
with the obvious or natural meaning of the defined term.
Analysis of a definition in a pollution insurance policy demonstrates why
a "strained" or obscure definition breeds misunderstanding and coverage litigation.
The insurance policy defined "Pollution Conditions" as follows:
Pollution Conditions means the discharge, dispersal, release or escape
of any solid, liquid, gaseous or thermal irritant or contaminant, including
smoke, vapors, fumes, alkalis, toxic chemicals, medical waste and waste
products into or upon land, or any structure on land, the atmosphere or
any watercourse or body of water, including groundwater, provided such conditions
are not naturally present in the environment.
The Pollution Exclusion
The abstruse wording is partly a legacy of terminology first used in environmental
protection legislation and subsequently carried over to property and casualty
insurance policy exclusions. The main part of the "Pollution Conditions" definition
copies a portion of a version of the pollution exclusion in a typical general
liability policy.
The use of "mirror" wording may seem to be a simple and effective way of
achieving coverage coordination But the realty is different because the legacy
includes a body of law interpreting different pollution exclusions. From the
point of view of our client, a large real estate management firm, the definition
raises many questions.
The principal reason our client is interested in pollution insurance is the
risk of sick building syndrome (SBS) claims. Courts have reached different conclusions
about whether certain versions of the pollution exclusion apply to certain types
of SBS claims.
In my home state of Michigan, two courts have held there must be a release
of pollutants into the environment in order for the qualified pollution exclusion
to apply. [See Center for Creative Studies v Aetna Life
and Casualty Company, 871 F Supp 941 (ED Mich 1994) (Student alleged
she became ill from exposure to a "photographic chemical" used during a photography
class); and Meridian Mutual Insurance Company v Kellman,
197 F3d 1178 (6th Cir 1999) (Teacher alleged that chemicals used by the insured
to seal the floor in a room above her class caused the teacher to suffer disabling
respiratory injuries).]
On the other hand, another court ruled that coverage did not apply to a claim
arising out of collection of sewer gas and carbon dioxide inside and under a
mobile classroom building. [Bituminous Casualty Company
v RJ Taylor Corporation, No. 20334 (Mich App 1998).] As of this writing,
there are no reported Michigan decisions on such issues as whether the absolute
pollution exclusion applies to long-term toxic mold contamination. In a few
states, a more definitive statement can be made about coverage (or lack thereof)
of some types of sick building syndrome claims. For the most part, however,
the application of the wording to SBS claims is uncertain.
Additional questions arise because there are many different versions of the
pollution exclusion in property and casualty insurance policies. Each version
may present different coverage coordination issues.
Consider a claim alleging injury or damage from lack of proper ventilation
(not pollution), moisture accumulation (probably not pollution), and black mold
(pollution). If the insurance policy excludes any claim "arising out of" pollution,
then, depending on state law, a court may find that the entire claim is covered
under the concurrent, efficient or dominant causation doctrines. (These doctrines
and their application to multiple cause and effect situations are discussed
in my book
How To Draft and Interpret
Insurance Policies.)
On the other hand, if the insurance policy excludes any claim "arising directly
or indirectly out of, caused by, in any sequence, or connected with" pollution,
the same court may well find that the claim is either partly covered or not
covered at all.
Another issue is whether an allegation or threat of pollution triggers coverage.
Sick building syndrome claims result from a combination of at least two factors:
(1) the possibility of pollution, and (2) the belief that pollution has caused
or may cause injury or damage. The litigants may spend considerable sums of
money to prove or disprove a causal link. Sometimes, no specific illness or
pollutant is identified. Accordingly, it is worthwhile to note that one part
of a typical general liability insurance pollution exclusion that is not part
of the "Pollution Conditions" definition is the following prefatory language:
"Bodily injury" or "property damage" arising out of the actual, alleged or threatened . . . (Emphasis added.)
Verbosity
The use of technical terminology such as "discharge, dispersal, release or
escape" and "solid, liquid, gaseous or thermal" complicates the definition.
Such wording is justified if a fit to the language of environmental protection
statutes and regulations is important. For instance, the insurance may be required
to satisfy financial responsibility laws. However, from the point of view our
client, this verbiage is superfluous. By defining a noun ("Pollution Conditions")
in terms of nominalization of the verbs "discharge," "disperse," "release,"
and "escape," the drafters have come up with an awkward sentence structure.
The proviso (discussed later in this article) weakens the coherence of the definition.
The "Pollution Conditions" definition is not just arcane, ambiguous, and
convoluted. Arguably, it is unnecessary. "Pollution" is a word we use and understand
in everyday speech. So are the words "irritant" and "contaminant," the two synonyms
in the definition.
There is little room, if any, for misinterpretation of the word "pollution"
in the context of an insurance policy covering cleanup costs and third-party
claims for bodily injury and property damage resulting from pollution. As an
explanation of the meaning of the term "pollutants" or "pollution conditions,"
the definition is, at best, a tautology. We learn about tautologies as children
when asked this question, "If a tree falls in the forest where no one can hear
it, does it make a sound?"
The answer depends on how we define sound—as a vibration in the air or as
a vibration in the air recorded by human ears. It is sufficient to know that
under a pollution insurance policy a substance is a "pollutant" if the presence
of the substance results in cleanup costs or a third-party claim. We do not
need a definition repeating information we know from other insurance policy
provisions.
Exemplars
Sometimes an example helps clarify meaning. The "Pollution Conditions" definition
contains the following exemplars:
including smoke, vapors, fumes, alkalis, toxic chemicals, medical waste
and waste products into or upon land, or any structure on land, the atmosphere
or any watercourse or body of water, including groundwater
Do the exemplars help us determine whether pollution associated with sick
building syndrome falls into the definition? An argument can be made that listing
of medical waste and waste products implies that the both organic and non-organic
substances fall within the definition. In addition, the provision clarifies
that the defined term applies to pollution into a "structure" as well as into
the environment. Otherwise, the exemplars do not shed light on coverage for
sick building syndrome claims.
The definition would be somewhat more relevant if the words "existence" or
"presence" were added to "discharge, dispersal, release or escape" and the word
"within" were added to "into or upon land, or any structure on land." As written,
we are left to wonder whether the insurance covers claims alleging the presence
of pollution within a building.
The Proviso
Perhaps the most troublesome part of the "Pollution Conditions" definition
is the proviso:
provided such conditions are not naturally present in the environment.
This clause calls into question whether the proposed insurance covers SBS
claims resulting from contaminants that are "naturally present in the environment."
In many SBS cases, the concentration of contaminants is higher outside the building
than inside the building. In Donaldson v Urban Land
Trust, Inc., the Wisconsin Supreme Court held that sick building syndrome
claims did not fall within the CGL pollution exclusion. Thus, the insurance
company was obligated to provide defense and indemnity. There, the bulk of the
SBS claims arose because of accumulation of carbon dioxide within the building.
The court reasoned that carbon dioxide was not a "pollutant" because carbon
dioxide is present in natural levels in any building.
There are three obvious readability problems that result from insertion of
the proviso in the definition:
- The definition is "strained" to the extent it conflicts with the obvious
or natural meaning of the word "pollution."
- The addition of this substantive provision exacerbates an already unduly
complicated provision.
- The coverage restriction is out of its normal place, in the Exclusions
section of the policy.
Occasionally, a court will refuse to enforce a "rule buried in a definition."
See, e.g., Maryland Casualty Company v Turner,
403 F Supp 907 (WD Okla 1975) (Definition excluded coverage for personal injury
and property damage arising out of a joint venture); C&J Fertilizer v Allied Mutual Insurance Company, 227 NW2d 160 (Iowa
1979) (Definition of "burglary" in a crime policy conflicted with the insured's
reasonable expectations).
Conclusion
My linguistic criticisms of the "Pollution Conditions" definition are severe.
Fairness requires that I point out a fact known to anyone who has ever tried
to interpret an insurance policy: insurance contracts are difficult to understand.
The other pollution insurance policy forms we reviewed are not exactly models
of clear expression.
We in the insurance industry can and should do a better job of communicating
insurance contract terms and conditions to policyholders. Three steps toward
this goal are using plain language, avoiding strained definitions, and placing
exclusions in the exclusion section of the policy.
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