At issue, were underlying complaints filed in Mississippi containing allegations that the underlying plaintiffs were exposed to silica throughout their employment. The silica and silica dust were allegedly created during sandblasting operations and, although invisible to the human eye, were inhaled by workers in the area. The complaints named 49 defendants, including Golden Eagle's insured, Pauli Systems, Inc., and alleged, among other things, defective design, testing, manufacture, etc., of blasting products, protective gear and equipment and alleged failure to warn. The complaints also alleged that the defendants sold masks and respirators which were inadequate and not approved for blasting operations with the silica-containing products. The complaints contained no allegations describing the nature of Pauli's business or its particular activities or operations.
The pollution exclusion at issue was the "Total Pollution Exclusion Endorsement" which stated that the insurance did 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." (Emphasis added.) Pollutants were defined as "any solid, liquid, gaseous or thermal irritant or contaminant including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste." The trial court determined that the claims administrator had not "abused its discretion" in denying coverage. The Court of Appeal first acknowledged, because of the insolvency proceedings, the somewhat circumscribed nature of its factual determination finding that it, too, was required to find an "abuse of discretion" in order to reverse and affirmed.
In affirming the trial court's ruling, the First District reviewed the Supreme Court's recent ruling in MacKinnon v. Truck Insurance Exchange wherein the Supreme Court considered "at length, the derivation and interpretation of a pollution exclusion" similar to that presented in the Golden Eagle policy. The Court of Appeal acknowledged the Supreme Court's relatively narrow interpretation of the term "pollutant," recognizing that it is not every "irritant or contaminant," only those that are "commonly thought of as pollution." Relying on this language, Pauli Systems argued that silica was not a pollutant because it was not one of the identified materials in the definition and because silica was found in many commonplace materials. Although the Court of Appeal rejected the idea that "a pollutant" required "wholesale environmental degradation", it agreed that the mere fact that silica might be an irritant or contaminant was also not dispositive.
Pauli Systems argued that, because the underlying cases were products liability claims, the pollution exclusion could not apply. The Court of Appeal noted the distinction between the 1985 revision to the standard-form comprehensive general liability exclusion and the endorsement in Pauli Systems' exclusion (the "Total Pollution Exclusion Endorsement"). The Court of Appeal held that "Under the operative endorsement in claimant's policy, there is no coverage for any of the claims in the underlying complaint even if the products liability claims apply to claimant." The court recognized that it was possible that under the prior exclusion, liability arising from the sale of a defective product might have fallen outside the exclusion. However, the court found that the "Total Pollution Exclusion" and its use of the "but for" language placed product liability claims within the exclusion.
Claimants also argued that since there is a particular exposure for asbestos, a product like silica, a reasonable insured would understand that the pollution exclusion did not apply to silica-related claims.
The court was "not convinced," stating that the fact that a specific provision concerning asbestos claims is included "cannot reasonably be understood to mean that the pollution exclusion is inapplicable to other pollutants."
Finally, the insured argued that the complaints could have been amended to add claims for which it might have been responsible. The court rejected this argument as well. Thus, some life remains in the "absolute pollution exclusion". However, we do note that a Petition for Review by the Supreme Court has been filed and while this case remains citable at this point, we will monitor it closely.