There are no Absolutes; California Supreme Court Says Absolute Pollution Exclusion does not Preclude Coverage for Pesticide Death

October 1, 2003

Does an absolute pollution exclusion in a CGL policy relieve the insurer of an obligation to defend a wrongful death action against its landlord-insured for accidentally killing a tenant with pesticides? The California Supreme Court recently answered "no" to this question in MacKinnon v. Truck Ins. Exch. (Case No. S104543 -- August 14, 2003.)

This case is far more significant with respect to how the court reached this result than result itself. The absolute pollution exclusion at issue excluded coverage for injuries caused by the "discharge, dispersal, release or escape of pollutants." Despite the clear and all-encompassing language used in the exclusion, the Supreme Court nevertheless held it to be ambiguous and applied the policy interpretation rule requiring ambiguous language to be construed in favor of coverage for the insured.

For at least the past decade, the California Supreme Court has counseled against applying the "interpretation-in-favor-of-the-insured" rule "too early in the interpretative process." (Bank of the West v. Superior Court, 2 Cal.4th 1254, 1264 (1992).) If the language used in the policy is conspicuous and clear, there is nothing to interpret and therefore no basis for construing the policy in favor of the insured. The Court has consistently held that "courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists" (Reserve Insurance Co. v. Pisciotta, 30 Cal.3d 800, 807 (1982), and has repeatedly recognized the insurer's rights to limit the coverage obligations it undertakes and to have those limitations enforced by the courts.

In the MacKinnon case, the Supreme Court seems to have backed away from these longstanding principles in order to achieve a pre-conceived result that it believes is more appropriate to the facts. In the MacKinnon case, an apartment tenant asked the landlord-insured to get rid of some yellow jackets. The landlord hired an exterminator who sprayed the tenant's apartment on several occasions and the tenant eventually died from pesticide exposure. The tenant's parents sued the landlord for wrongful death. The insurer initially defended but ultimately withdrew its defense based on the absolute pollution exclusion and the insured sued the insurance company for bad faith. The Superior Court granted summary judgment in favor of the insurance company and the Court of Appeal affirmed.

The California Supreme Court picked through absolute pollution exclusion word-by-word and found that words such as "pollutant" and "discharge," when used with respect to the application of a household pesticide in an apartment, were ambiguous. Indeed, at one point the court cited its own search of Lexis Nexis Allnews regarding use of the word "pesticide" in the same sentence as "discharge" and determined that the combined use of the two words "almost invariably ... described the runoff of pesticides into water or soil, often with other effluents," and did not refer to the deliberate spraying of pesticides in a home as occurred in here.

The Court also considered the history of the so-called "absolute" pollution exclusion. It noted the huge volume of litigation begotten by the wording of the predecessor "sudden and accidental" pollution exclusion and the insurance industry's attempt to avoid further problems by implementing the "absolute" pollution exclusion. The Court also found, however, that both versions of the pollution exclusion were intended to apply only to "traditional environmental contamination," and not to "ordinary acts of negligence involving toxic chemicals such as pesticides." Even though the plain language of the absolute pollution exclusion facially excluded from coverage the event complained of in the wrongful death action against the landlord-insured, the Court declined to enforce the exclusion, holding: "We would be remiss, therefore, if we were to simply look to the bare words of the exclusion, ignore its raison d' etre, and apply it to situations which do not remotely resemble traditional environmental contamination."

It will be interesting to see whether the California Supreme Court employs this approach to issues of ambiguity in other cases.