In interpreting the scope of the pollution exclusion, one question seems to appear in case after case — what exactly does the pollution exclusion exclude? In State Farm Fire & Casualty Company v. Dantzler, 289 Neb. 1 (2014), the Supreme Court of Nebraska added to the body of law on that question while summarizing the various interpretations from other jurisdictions.
Jerry Dantzler, the owner of a rental property in Omaha, Neb., purchased a rental dwelling policy from State Farm. The policy contained a pollution exclusion, which provided that business liability coverage does not apply to bodily injury or property damage arising out of the actual, alleged, or threatened discharge, dispersal, spill, release, or escape of pollutants at or from premises owned, rented or occupied by the named insured. The policy further defined pollutant to mean “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”
Two of Dantzler’s tenants (a father and son) sued Dantzler, claiming that the minor child was exposed to high levels of lead poisoning due to the lead paint contamination within the rental property.
State Farm brought a declaratory judgment action, claiming the rental dwelling policy issued to Jerry Dantzler excluded coverage for personal injuries allegedly sustained by Dantzler’s tenants resulting from lead-based paint exposure. The Nebraska district court granted State Farm’s motion for summary judgment, concluding that the pollution exclusion barred coverage under the policy. The Court of Appeals reversed, and the Supreme Court of Nebraska granted State Farm’s petition for further review.
The Supreme Court of Nebraska reversed the Court of Appeals decision, holding that the pollution exclusion should be interpreted broadly to bar coverage. The court further held that the manner of exposure to lead-based paint did not constitute a material fact preventing summary judgment because the manner of exposure does not affect whether there was a “discharge, dispersal, spill, release or escape” for purposes of the pollution exclusion.
The Dantzler Court explained that state and federal courts follow two general approaches to the application of pollution exclusions — some interpret pollution exclusions to bar coverage for only those injuries allegedly caused by “traditional” environmental pollution, while others interpret pollution exclusions to exclude coverage for all injuries allegedly caused by pollutants because the exclusions are unambiguous as a matter of law. The Dantzler Court noted that in Cincinnati Ins. Co. v. Becker Warehouse, Inc., 262 Neb 746, 635 N.W.2d 112 (2001), the Nebraska Supreme Court had specifically rejected the narrower, environmental approach, finding as a matter of law that the language of the exclusion unambiguously supported a broader interpretation. In Cincinnati Ins. Co., the Nebraska Supreme Court noted that because the policy listed the “environment” as a distinct element that could suffer harm from a pollutant, the pollution exclusion was not limited in application to environmental pollution. In Ferrell v. State Farm Ins. Co., No. A-01-637, 2003 WL 21058165 (Neb. App. May 13, 2003), the Court of Appeals recognized that the Cincinnati Ins. Co. interpretation was generally applicable to pollution exclusions, applying the interpretation to an exclusion identical to the one present in the instant case. As such, the instant pollution exclusion should be interpreted broadly, the Dantzler Court reasoned.
The Dantzler Court next explained that amongst those states adopting the broader interpretation of the pollution exclusion (the interpretation finding that the exclusion should not be limited to traditional environmental pollution claims), several courts have held that all manners of lead-based paint exposure constitute the type of movement described in the pollution exclusion. Finding this approach to be persuasive, the Dantzler Court concluded that “[r]egardless of how the lead-based paint is separated from the painted surface or what form it takes once it is separated, an individual’s exposure to and absorption of that lead-based paint results from the ‘discharge, dispersal, spill, release or escape’ of a pollutant.” Dantzler, 289 Neb. at 16-17.
In short, the Dantzler Court explained, “because there was no factual question as to the existence of a claim that alleged injury from lead-based paint, the district court did not err in concluding as a matter of law that the pollution exclusion barred coverage of that claim.” Id. at 18. The Dantlzer Court therefore reversed the decision of the Court of Appeals and remanded the case with direction to enter an order affirming the district court’s entry of summary judgment in favor of State Farm.
As the Supreme Court mentioned in its opinion, the Dantzler approach to interpreting pollution exclusions “avoids the practical difficulties of compelling the court hearing the declaratory judgment to make a finding as to the causation of the alleged injuries in the underlying personal injury case in order to determine whether a ‘discharge, dispersal, spill, release or escape’ had occurred. … The court’s ultimate finding as to the cause of the alleged injuries might be contrary to the findings of causation in the underlying personal injury case.” The Dantzler case lays down a straightforward rule that pollution exclusions apply broadly to bar claims based on all types of pollutants — not merely “environmental” pollutants.