Absolute Pollution Exclusion Definition
An absolute pollution exclusion is a liability insurance policy used by insurance companies to exclude coverage for liability for pollution that are caused by steady business operations. This is an insurance clause that removes coverage for pollution events and sometimes property damage that are attributed to regular business operations.
Before the creation of absolute pollution exclusion, the provision of the 1973 CGL’s standard pollution exclusion did not clearly maintain a stand on coverage for ‘sudden and accidental’ events. The absolute pollution exclusion however removed such coverage. The absolute exclusion liability insurance policies became popular after 1986. This policy is an improvement on standard pollution exclusions, it removed coverage for “sudden and accidental” pollution incidents.
A Little More on What is Absolute Pollution Exclusion
When insurance policies that entailed absolute pollution exclusions were created, insurance companies provide coverage for harmful and pollution events resulting from regular business operations. There were also many cases that arose from environmentally injurious materials and this drew the attention of the government of the day.
Absolute pollution exclusions were created in response to how environmentally injurious materials were regulated or controlled by the government. For example, a California based company, Montrose Chemical Corporation which produced DDT (dichlorodiphenyl- trichloroethane) discharged the harmful materials resulting from their production into the Pacific Ocean causing water pollution.
A lawsuit filed against the company required that they pay for the cleanup costs of the waste deposited, they however transferred the payment for the cleanup to insurance companies. This led to a gradual exclusion of coverage for pollution events by insurance companies before the absolute pollution exclusion became popular after 1986.
The absolute pollution exclusion removed coverage for all pollution events include coverage for bodily injury, property damage and other damages caused by pollution events. However, there is a controversy on what exactly is considered pollution and the court addresses this issue. This is because insurers sometimes use the clause when they do not want to pay for certain claims.
The explanation of what is considered pollution moot is also not captured in absolute pollution exclusion but addressed by courts.
There are some exceptions to the absolute pollution exclusion, the common ones are;
- Bodily injury and property damage caused by an unintended escape of harmful materials such as fuel, fluids and other lubricants during business operations.
- Bodily injury sustained in a property owned and occupied by an insured and caused by pollution events from equipment used by occupants of the building or guests.
- Bodily or property damage in a facility owned or occupied by or rented to an insured resulting from pollution events, heat, smoke and fumes when an insured contractor is working.
- Bodily injury and property damage sustained in a building and caused by the escape of gases, fumes brought into the building in relation to an insured contractor’s work.
Reference for “Absolute Pollution Exclusion”
Absolute Pollution Exclusion
Application of the Absolute Pollution Exclusion to Toxic Tort Claims: Will Courts Choose Policy Construction or Deconstruction?, Shelley, W. P., & Mason, R. C. (1998). Tort & Insurance Law Journal, 749-782. This article explores the decisions that have essentially imposed an environmental restriction on the application of the Absolute Pollution Exclusion. These decisions rely on several recurrent assumptions. One of the assumptions is that the Absolute Exclusion was drafted to preclude a narrow field of Superfund liability and similar environmental claims that arise under pollution statutes.
Reason and Pollution: Correctly Construing the” Absolute” Exclusion in Context and in Accord with its Purpose and Party Expectations, Stempel, J. W. (1998). Tort & Insurance Law Journal, 1-59. This paper presents the new standard pollution exclusion language for commercial general liability (CGL) policies that were largely adopted by the insurance industry during the mid-1980s as a response to the flurry of environmental coverage litigation over the application of the sudden and accidental pollution exclusion.
Absolute Pollution Exclusions: So Far, So Good, Bates Jr, R. J. (1991). Def. Counsel J., 58, 241. This article states that the purpose of this exclusion was to preclude coverage for the typical gradual pollution claim arising from a dumpsite or regular discharges from a manufacturing plant. This exclusion also extended to pollution liability that resulted from the products and completed operations hazard.
The total and absolute pollution exclusions are neither total nor absolute, at least for now: Doerr v. Mobil oil corporation, Knight, K. M. (2001). Loy. L. Rev., 47, 1153. This paper explains that CGL policies usually have an exclusion of coverage known as absolute or total pollution exclusion. A closely divided Louisiana supreme court with its recent decision in Doerr v. Mobil Oil Corp addressed for a third time the correct interpretation of the total pollution exclusion in CGL policies.
Unreason in Action: A Case Study of the Wrong Approach to Construing the Liability Insurance Pollution Exclusion, Stempel, J. W. (1998). Fla. L. Rev., 50, 463. This article shows how for over 25 years, an essential component of the scholarly commentary on insurance law has focused on reasonable expectations doctrine developed by Robert Keeton in his 1970 article. The life of the doctrine can be described as one of the early growth followed by subsequent retreat and dilution.