(Article from Insurance Law Alert, May 2017)
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The Washington Supreme Court ruled that carbon monoxide claims were not barred by a pollution exclusion because the efficient proximate cause of the underlying injuries was a covered negligent act. Xia v. ProBuilders Specialty Ins. Co., 2017 WL 1532219 (Wash. Apr. 27, 2017).
A homeowner sustained carbon monoxide injuries as a result of the improper installation of an exhaust vent. The homeowner, as assignee of the builder, sued the builder’s general liability insurer. The insurer denied coverage based on an absolute pollution exclusion and a townhouse exclusion. A Washington trial court granted the insurer’s summary judgment motion, finding that the townhouse exclusion barred coverage. An appellate court reversed, finding that the townhouse exclusion did not apply, but that the pollution exclusion did. The Washington Supreme Court reversed.
The Washington Supreme Court ruled that carbon monoxide is a pollutant within the meaning of the pollution exclusion and thus the carbon monoxide leak was an occurrence barred by the exclusion. However, the court held that the insurer owed coverage because the efficient proximate cause of the injuries was a covered occurrence – namely, the negligent installation of the exhaust vent. The court stated: “The exclusion cannot eviscerate a covered occurrence merely because an uncovered peril appeared later in the causal chain.”
This opinion appears to run counter to a well-established body of law. In determining the scope of a policy’s coverage, courts typically analyze coverage provisions, and then turn to exclusionary clauses. Here, however, the court first determined that the pollution exclusion applied, but then deemed it inapplicable based on an initial coverage grant for negligent occurrences. Moreover, as the court noted, the efficient proximate cause doctrine has not previously been applied in this context. Typically, the doctrine is implicated in the first-party property context when a covered and uncovered peril both contribute to a loss. As the insurers argued (and the dissenting opinion emphasized), application of the proximate causation doctrine in this context operates to defeat the pollution exclusion almost entirely because most acts of unintentional pollution begin with negligence. Finally, the decision ignores the plain policy language. In applying the proximate causation doctrine, the court reasoned that “emphasis must be given to the phrase ‘caused by’” in the pollution exclusion. However, the exclusion is not limited to injuries or damages “caused by” pollution. Rather, the exclusion also encompasses injuries or damage “resulting from, attributable to, contributed to, or aggravated by the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants.” The court similarly declined to enforce a provision that stated that the pollution exclusion “applies whether any other cause of the bodily injury, property damage, or personal injury would otherwise be covered under this insurance,” finding that the clause improperly attempted to circumvent the efficient proximate cause rule.