The “pollution exclusion” contained in an insured’s policy was at issue in a recent case in Georgia (Georgia Farm Bureau Mutual Insurance Co. v. Smith et al., 2016 Ga. LEXIS 245).
Georgia Farm presents a relatively straightforward dispute regarding the pollution exclusion. The insured owned a residential house that he rented to a tenant and her infant daughter. The tenant’s daughter became ill after she ate paint chips from the lead paint that was chipping and flaking from the walls in the house. The tenant sued the insured on behalf of her daughter, and the insured sought coverage under his commercial general liability policy that had been issued by Georgia Farm. Georgia Farm denied coverage, arguing that there was no coverage because the pollution exclusion applied.
A pollution exclusion excludes coverage for personal injury or property damage arising out of the discharge or release of “pollutants.” As can be seen in SDV’s State by State Survey on the pollution exclusion, one of the main issues with the pollution exclusion is what constitutes a “pollutant.” There are generally two schools of thought, and the states are relatively evenly split on the issue. One interpretation, more favorable to policyholders, limits the pollution exclusion to “traditional environmental pollutants” like oil and toxic waste. The other approach expands the definition to anything that could fit the plain meaning of the words in the definition of the policy. Like most CGL policies, the Georgia Farm policy defined “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”
The Georgia Supreme Court looked to their prior decision in Reed v. Auto-Owners Ins. Co., 667 S.E.2d 90 (Ga. 2008) for guidance on the interpretation of the pollution exclusion. The court in Reed found that carbon monoxide, although not a traditional environmental pollutant, was an irritant or contaminant under the plain language of the policy. Following that logic, the Georgia Farm court found that the lead paint chips were also a pollutant, and therefore the pollution exclusion applied to bar coverage.
Unfortunately for policyholders in Georgia, it appears that the pollution exclusion will remain broadly interpreted.