Silica Claim Barred by Total Pollution Exclusion in CGL Policy
August 2005
A commercial general liability (CGL) policy
containing a "total pollution exclusion endorsement" was found to be effective
in excluding claims based on alleged injuries arising out of inhaling silica
dust from sand-blasting operations.
by J.
Kent Holland Jr.
ConstructionRisk.com LLC
In John Garamendi v. Golden Eagle Ins. Co.,
127 Cal. App. 4th 480 (2005), the Court of Appeal of California affirmed a lower
court holding that dismissed claims by plaintiffs who alleged they were exposed
for many years to silica and silica dust at their employment, as a result of
actions by 49 defendants. Among the defendants was Pauli Systems, Inc., who
is alleged, collectively with the other defendants, to have:
- designed, tested, evaluated, manufactured, mined, packaged, furnished,
supplied and/or sold abrasive blasting products, protective gear and equipment,
safety equipment and/or sandblasting-related materials, equipment, products,
etc.
Pauli Systems' CGL policy from the Golden Eagle Insurance Company had replaced
a pollution exclusion that was standard in the policy as Exclusion f. with a
total pollution exclusion that provided that the insurance would not apply to:
- "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.
The endorsement further defined pollutants as "any solid, liquid, gaseous,
or thermal irritant or contaminant including smoke, vapor, soot, fumes, acid,
alkalis, chemicals and waste…."
In response to plaintiffs' suit against it, Pauli Systems tendered the defense
to Golden Eagle which denied coverage based on the pollution exclusion endorsement.
Pauli Systems (hereinafter the "Claimant") then sued Golden Eagle, seeking a
court order for coverage. Claimant argued that silica is not a pollutant because
it is not smoke, vapor, soot, fumes, acid, alkalis, chemicals, or waste, and
is found in commonplace materials such as sand, glass, and concrete.
In rejecting that argument, the court stated that even if silica is not one
of the enumerated items of pollution in the policy, the listing is not exclusive.
In addition, the court found that silica dust comes within the broad definition
of "any solid, liquid, gaseous, or thermal irritant or contaminant." Moreover,
pointed out the court, silica dust is identified by federal regulations to be
an air contaminant. Thus, the court explained that:
- the widespread dissemination of silica dust as an incidental byproduct
of industrial sandblasting operations most assuredly is what is "commonly
thought of as pollution" and "environmental pollution."
Pauli Systems attempted to persuade the court that coverage might apply since
part of the plaintiffs' complaint alleged a product defect. In comparing the
language of the exclusion printed in the policy form and the exclusion of the
endorsement, the court said the contrast in the language made clear "that under
the operative endorsement in claimant's policy, there is no coverage for any
of the claims of the underlying complaints, even if the products liability claims
apply to claimant." The court held that:
- even on the assumption that claimant's alleged liability is based on
the sale of defective products that contributed to personal injuries caused
by silica dust, the injuries would not have occurred but for the discharge
of the pollutant. Absent some other provision in the policy excepting product
liability claims from the exclusion, the exclusion applies.
One final argument by the Claimant was that because the policy included an
endorsement with a specific exclusion for claims based on exposure to asbestos,
a reasonable insured party would understand that the pollution exclusion did
not apply to claims for exposure to silica, for which there was no comparable
explicit endorsement. The court rejected this argument with little discussion
other than to say that in light of all the asbestos litigation that has been
ongoing, "it is not surprising that an insurer seeking to exclude coverage for
asbestos claims would include an explicit provision making that exclusion unmistakably
clear." Significantly, however, the court concluded that:
- The inclusion of a specific provision concerning asbestos claims cannot
reasonably be understood to mean that the pollution exclusion is inapplicable
to other pollutants not specifically designated in a separate endorsement.
For these reasons, the court held in favor of the insurance company.
Comment and Opinion
This decision is well-reasoned in its logic which grants to the insurance
policy and its endorsements only the meaning reasonably intended by the insurer—the
meaning easily and unambiguously understandable by a reasonable insured. It
is most noteworthy that the court rejected Claimant's argument that by adding
an endorsement explicitly excluding asbestos, the insurance company was required
to add other endorsements to explicitly exclude items such as silica.
Insurance companies need the flexibility to sometimes reiterate, by issuing
a separate endorsement, an exclusion for something they believe is already excluded
under the general policy terms or under another exclusion. This is due, at least
in part, because of surprising decisions by some courts that seem to stretch
common sense as they attempt to find ambiguity in policy language and to find
or even invent coverage for claimants where coverage was never intended by the
insurer and never reasonably understood to exist by a reasonable insured at
the time the policy was acquired.
Rather than asking courts to grant pollution coverage that was never intended,
or paid for, in a CGL policy, a more appropriate insurance solution for a company
with a known environmental risk may be to consider acquiring a separate policy
specifically designed to cover its potential pollution liability.
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