By | November 21, 2014

This post was written by Mike Sampson and Caitlin Garber.

Insurance companies often look to the pollution exclusions in their commercial general liability policies in attempts to exclude coverage for many types of claims. They will try to fit all sorts of things within the definition of “pollutants.” Just last Friday, though, the U.S. District Court for the Eastern District of Louisiana made that more difficult, offering a common-sense understanding of the term “pollutant.” That court found that “under Louisiana law, Legionella and Pseudomonas aeruginosa bacteria” – the bacteria which cause Legionnaire’s disease – “do not qualify as ‘pollutants’ within the meaning of [pollution] exclusions.”

At issue, in relevant part, in Paternostro v. Choice Hotel International Services Corp., No. 13-0662 (E.D. La.), is whether primary and excess commercial general liability insurance policies provide coverage for claims brought against a hotel’s (i) franchisor and (ii) franchisee, owner, and operator by guests or invitees of the hotel who allegedly suffered personal injuries as a result of exposure to Legionella and Pseudomonas aeruginosa bacteria in the hotel.

The Eastern District of Louisiana’s recent decision in that case considered numerous dispositive motions and addressed many issues, including the applicability of bacteria exclusions. In considering certain of those exclusions, the court also addressed the relevant policies’ pollution exclusions.

Generally, the pollution exclusions provide that the relevant policy or insurance does not apply to, or provide coverage for, among other things, bodily injury (or personal injury) or property damage arising out of “the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants [anywhere] at any time.” In turn, the relevant policies define “pollutants” to mean: “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

Relying on the foregoing policy language, as well as a 2000 Louisiana Supreme Court decision, the District Court rejected the argument that the bacteria were “pollutants”:

[T]he Court concludes that the bacteria Legionella and Pseudomonas aeruginosa do not qualify as pollutants. The nature of these microbial agents are bacteria, not pollutants as is “generally understood.” These bacteria are significantly different than a typical environmental pollutant and are also distinguishable from other common “pollutants” such as asbestos, carbon monoxide, gasoline, and lead paint. Nor are these bacteria “typically used” in the same manner with which the previously discussed pollutants are used by a “polluter.” Rather, these bacteria are simply microorganisms existing in a natural environment. Finally, they do not discharge, dispersal [sic], seepage [sic], migration [sic] in the manner that a typical pollutant does. For these reasons, Legionella and Pseudomonas aeruginosa do not qualify as pollutants … (citation omitted).

Such an understanding of the term “pollutant” is entirely logical and consistent with the term’s intended use in commercial general liability policies. While in Paternostro, this reasoning negatively impacted coverage (as it meant that, in that case, “there is no ambiguous overlap between the bacteria exclusions and the pollution exclusions” and, therefore, that the bacteria exclusions were not “ineffective”), the same reasoning, applied in other cases, generally should be favorable to policyholders. It should serve to appropriately limit the scope of a pollution exclusion, preventing insurers from over-reaching and relying on the exclusion to preclude coverage for claims (such as those involving diseases) to which a pollution exclusion should be entirely inapplicable.

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