(Article from Insurance Law Alert, February 2024)
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Holding
The Ninth Circuit ruled that a general liability policy potentially covered claims alleging injuries caused by exposure to airborne wildfire debris, notwithstanding a pollution exclusion, and that the insurer had a duty to defend the underlying suit. Wesco Ins. Co. v. Brad Ingram Constr., 2024 U.S. App. LEXIS 1488 (9th Cir. Jan. 23, 2024).
Background
The underlying suit alleged injuries as a result of exposure to “clouds of toxic dust” formed by California wildfires. According to the complaint, the dust, consisting of “ash, debris, metal, concrete, and contaminated soil,” was “stirred up” during the cleanup process. The district court ruled that the insurer had no duty to defend the suit based on a pollution exclusion that applied to injuries or damage “which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” The Ninth Circuit reversed.
Decision
The Ninth Circuit reasoned that under California law, the question of whether a pollution exclusion applies to underlying claims turns primarily on two factors: the nature of the injurious substance and the mechanism of exposure. The Ninth Circuit explained that while wildfire debris may be a “pollutant,” the “mechanism of exposure described in the complaint does not clearly constitute an event commonly thought of as pollution.” More specifically, the court reasoned that the stirring up of wildfire-related dust during loading and dumping operations at a waste facility does not, as a matter of law, fall within the scope of “environmental pollution” so as to relieve the insurer of its defense obligations. In so ruling, the court noted the absence of California precedent relating to “dust created or disbursed by a naturally occurring event” and the broad scope of an insurer’s duty to defend.
Comments
Because the court was ruling on the insurer’s duty to defend, rather than its indemnity obligations, it did not reach the question of whether the pollution exclusion would ultimately bar coverage for the underlying claims. And as the dissenting opinion emphasized, the underlying claims appear to fall squarely within the scope of the exclusion. In particular, California courts have recognized that “natural materials” such as rocks and dirt, may be deemed pollutants in certain contexts. See Ortega Rock Quarry v. Golden Eagle Ins. Corp., 46 Cal. Rptr. 3d 517 (Ct. App. 2006). Further, the dust at issue was classified as “toxic” and located in a heavily regulated cleanup site that required contractors to be certified for “hazardous substance removal.” The dissent also noted that the claims alleged a “release” of the toxic dust during the cleanup process, rejecting the notion that a release requires an escape from some sort of structure or protective barrier.