5 useful pieces of knowledge about the application of pollution exclusions
The creation and enforcement of environmental laws in the 1970s and 1980s imposed liability to businesses for the remediation and cleanup of environmental contamination. In response, to shield themselves from this ever-growing exposure, insurance companies introduced the first pollution exclusions on standard liability and property policies. On a very basic level, pollution exclusions eliminate coverage for bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants.
Probably the most widely-recognized pollution exclusion is the “Absolute” Pollution Exclusion that was brought into use in 1986. The reason “absolute” is in quotation marks is because this exclusion was never formally referred to as such; it was an industry-given nickname of sorts. The exclusion earned its name due to its removal of the “sudden and accidental” exception found in the original 1973 Commercial General Liability standard pollution exclusion. Perhaps a better name for the infamous exclusion is the “broad form pollution exclusion”.
The effects of this pollution exclusion on insurance coverage litigation are curious, to say the least, and continue to this day. As we know, insurance is regulated at the state level. Because of this, states and jurisdictions widely vary in their application of this exclusion. When it comes to litigation involving the “Absolute” Pollution Exclusion, courts generally apply one of two approaches for interpreting its application:
Application of Pollution Exclusions