Steven Plitt, Expert Witness

Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Phone: 602-322-4038

Steven Plitt, Expert Witness

Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

SMOOTH SAILING FOR A POLLUTION EXCLUSION? (Reprinted from Claims Journal, October 16, 2017)

by | Jun 17, 2021 | Liability

The question of whether carbon monoxide constitutes a pollutant for purposes of a standard policy pollution exclusion has been mixed among the courts.  Whether carbon monoxide constitutes pollution is jurisdiction-specific and depends on whether the jurisdiction adopts a traditional or broadened view of environmental pollution.  Exposure to carbon monoxide is a serious event.  Nevertheless, the seriousness of a carbon monoxide claim can be somewhat blunted by the extremes that claimants will go to in arguing around a pollution exclusion.  Such was the case that was recently decided by the 8th Circuit Court of Appeals.

In Travelers Property Casualty Co. of America v. Klick, 867 F.3d 989 (8th Cir. 2017) the claimant was riding as a passenger on a fishing boat owned by a friend.  The 25-foot fishing boat had been purchased a few weeks earlier.  While fishing on a lake in Minnesota, both the boat owner, Lonnie Norburg, and the claimant, Christopher Klick, noticed that the engine was not operating properly.  At that point Norburg, who was at the helm of the boat, asked Klick to take the helm while Norburg went to check on the engine problem.  The helm of the boat was near the front of the boat in the wheelhouse.  The wheelhouse was a roofed area with walls and windows to the front, left, and right.  The back of the wheelhouse was open.  The boat’s engine was located in a compartment beneath the wheelhouse.

When Norburg opened the hatch of the engine compartment to check on the engine, he was quickly overcome by carbon monoxide.  Klick also quickly lost consciousness and fell into the engine compartment, where he was severely burned while lying on the engine.  Apparently an exhaust pipe had broken off at the spot where it connected with the engine.  As a result, the engine had been expelling carbon monoxide gas into the engine compartment instead of expelling the gas through the exhaust pipe system that took the carbon monoxide out behind the boat.  Although Norburg died, Klick survived.

Travelers had issued a commercial liability policy to the boat dealership that sold the boat.  The Travelers policy contained a pollution exclusion which stated that Travelers did not provide liability coverage for injuries arising out of the movement of pollutants into the atmosphere.  Because of this, Travelers denied coverage.  In the ensuing coverage litigation, Klick argued that his injuries did not arise out of the release, disbursal, or migration of carbon monoxide into the “atmosphere” and therefore the exclusion did not apply.  The parties did agree, however, that carbon monoxide was a pollutant.

Klick’s first argument was that the engine compartment itself did not contain “atmosphere.”  From this he then reasoned that his injuries arose out of the engine’s initial “release” of carbon monoxide into the engine compartment and not by the subsequent movement of the carbon monoxide gas from the engine compartment into the wheelhouse.  The court quickly rejected this argument – assuming for the sake of the analysis that the engine compartment did not contain “atmosphere,” – and found that the movement of the carbon monoxide from the engine compartment into the wheelhouse was a “release,” “disbursal,” or “migration” of a pollutant.  The court found that the pollution exclusion was not limited to liability arising out of any initial release of the pollutant from an original source.  Next, Klick argued that the boat dealer’s liability did not arise out of the release, disbursal, or migration of a pollutant into the wheelhouse because Klick’s injuries arose out of the release of carbon monoxide into the engine compartment.  The court rejected this argument, finding that the carbon monoxide release into the wheelhouse was causally connected to the injuries.  The carbon monoxide caused Klick to lose consciousness and fall into the engine compartment, where he suffered most of his injuries.  Therefore, the carbon monoxide release was at least a cause of the injuries.  Because there could be multiple causes with varying degrees of proximity to an injury, the mere fact that there may have been another cause was not relevant.

Finally, and the reason for the glibness of this article, is that Klick argued that even if the boat dealer’s liability would arise out of the release of carbon monoxide into the wheelhouse, the wheelhouse did not contain “atmosphere.”  This lead the court to have to discuss what was meant by the word “atmosphere” within the context of the pollution exclusion.  Ironically, the Minnesota Supreme Court had addressed the issue and had concluded that the word “atmosphere” used in a pollution exclusion, meant “ambient air.”  See Board of Regents of the University of Minnesota v. Royal Insurance Co. of America, 217 N.W.2d 888, 892-93 (Minn. 1994).  The Minnesota Supreme Court found that a pollution exclusion similar to the one at issue did not exclude coverage for injuries resulting from asbestos fibers being released into the air within a building.  Id. at 893.  The Minnesota Supreme Court juxtaposed the concept of “ambient air” in its “natural setting” (atmosphere) with the air in the “controlled environment” of a building’s interior (not atmosphere).  Id.  Borrowing this logic, the 8th Circuit Court of Appeals found that the wheelhouse was not a “controlled environment.”  In fact, the back of the wheelhouse was open and air readily flowed to and from the surrounding environment.  Thus, any person standing in the wheelhouse was exposed to ambient air.  A reasonable person in the position of the insured thus would have understood that a person in the wheelhouse was in “atmosphere.”  The pollution exclusion applied!