Bacteria from Drinking Contaminated Water Insurance Coverage
Generally, the insured bears the burden to establish coverage under an insuring clause, and the insurer bears the burden to establish the applicability of any exclusion. Pacific Indem. Co. v. Kohlhase, 9 Ariz. App. 595, 597, 455 P.2d 277, 279 (1969).
In this case, Northbrook does not argue that X's injuries were not covered; rather, Northbrook argues that the total and fecal coliform bacteria that contaminated the water and caused X's illness were excluded "pollutants" within the meaning of the pollution exclusion clauses. Cf. United States Fidelity & Guar. Corp. v. Advance Roofing & Supply Co., 163 Ariz. 476, 483, 788 P.2d 1227, 1234 (App. 1989) ("policy exclusions . . . merely subtract from coverage already granted"). Thus, Northbrook had the burden of establishing the exclusion.
Both Northbrook policies include standard pollution exclusion clauses, which are identical except for the numbering of the paragraphs, and provide as follows:
This insurance does not apply to:
(1) Bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:
(A) at or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any Insured;
(b) at or from any premises, site or location which is or was at any time used by or for any Insured or others for the handling, storage, disposal, processing or treatment of waste;
(c) Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for any Insured or any person or organization for whom you may be legally responsible; or
(d) at or from any premises, site or location on which any Insured or any contractors or subcontractors working directly or indirectly on any Insured's behalf are performing operations:
(i) if the pollutants are brought on or to the premises, site or location in connection with such operations by such Insured, contractor or subcontractor; or
(ii) if the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants.
Subparagraphs (a) and (d)(i) do not apply to bodily injury or property damage arising out of heat, smoke or fumes from a hostile fire.
As used in this exclusion, a hostile fire means one which becomes uncontrollable or breaks out from where it was intended to be.
(2) Any loss, cost or expense arising out of any:
(a) Request, demand or order that any Insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to or assess the effects of pollutants; or
(b) Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to or assessing the effects of pollutants.
Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
Although our analysis of the pollution exclusion focuses on the emphasized language, we have set forth the entire exclusion to provide the context for our discussion of its meaning.We begin with the plain language of the policy definition of "pollutants."
Courts across the country have noted the breadth of the terms "irritant" and "contaminant." See, e.g., Nautilus Ins. Co. v. Jabar, 188 F.3d 27 (1st Cir. 1999) ("the terms 'irritant' and 'contaminant' are virtually boundless, for 'there is no substance or chemical in existence that would not irritate or damage some person or property.'") (quoting Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1043 (7th Cir. 1992) and Westchester Fire Ins. Co. v. City of Pittsburg, 768 F. Supp. 1463, 1470 (D. Kan. 1991)); Regional Bank of Colorado, N.A. v. St. Paul Fire and Marine Ins. Co., 35 F.3d 494, 498 (10th Cir. 1994); American States Ins. Co. v. Kiger, 662 N.E.2d 945, 948 (Ind. 1996) ("Clearly, this clause cannot be read literally as it would negate virtually all coverage."); Sullins v. Allstate Ins. Co., 340 Md. 503, 667 A.2d 617, 621 (Md. 1995).
While the terms "irritant" and "contaminant" may be extraordinarily broad, we note that the Northbrook policies limit "pollutants" to "irritants" and "contaminants" that are "solid, liquid, gaseous or thermal." the water-borne bacteria alleged to have caused X's injury do not fit neatly within this definition. to the extent that bacteria might be considered "irritants" or "contaminants" they are living, organic irritants or contaminants which defy description under the policy as "solid," "liquid," "gaseous," or "thermal" pollutants.
We further note that the exclusion delineates the types of contaminants or irritants included within the definition of "pollutants":
"smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Because use of the term "including" in a definition generally indicates that unlisted items may nevertheless fall within the definition, we conclude that the list is non-exhaustive. However, under the rule of ejusdem generis, any unlisted items that are construed to fall within the definition must be similar in nature to the listed items.
See generally United California Bank v. Prudential Ins. Co. of America, 140 Ariz. 238, 273, 681 P.2d 390, 425 (App. 1983) ("Where general words in a contract are followed by enumerated specific terms involving the same subject matter . . . the meaning of the general terms is presumed . . . to include only those things of the same nature as those specifically enumerated").
The enumerated items, namely "smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste" are primarily inorganic in nature. Bacteria, as living organisms, are not similar to the exclusion's enumerated list.
Finally, we turn to the term "waste," which arguably could include organic waste material which is a potential source of fecal coliform bacteria. "Waste" is defined under the policies to include "materials to be recycled, reconditioned or reclaimed."
This definition of "waste" implies that the term refers to industrial byproducts, rather than to the organic matter which might have caused the contamination of the water with total and fecal coliform bacteria.
We conclude that the plain language of the pollution exclusion does not include total and fecal coliform bacteria within the definition of "pollutants." Thus, the exclusion does not apply to preclude coverage for X's injuries.
In support of this interpretation, courts have noted that the terms used in the pollution exclusion, such as "discharge," "dispersal," "release," and "escape," are terms of art in environmental law which generally are used with reference to damage or injury caused by improper disposal or containment of hazardous waste.
Sullins, 667 A.2d at 620-21(quoting Atlantic Mut. Ins. v. McFadden, 413 Mass. 90, 595 N.E.2d 762, 764 (Mass. 1992)); see also Nautilus, 188 F.3d at 30. We also note that the exclusion clause appears to describe events, places, and activities normally associated with traditional environmental pollution claims. for example, the clause precludes coverage for dispersal, etc., of "pollutants" at or from sites "used by or for any Insured or others for the handling, storage, disposal, processing or treatment of waste," as well as for pollutants that "are or were at any time transported, handled, stored, treated, disposed of, or processed as waste."
These provisions appear to be directed at industrial insureds who must handle, store, and treat "hazardous wastes" in conducting their daily operations.
Similarly, the clause precludes coverage for any "loss, cost or expense arising out of" a "request, demand or order [presumably from a government entity] that any Insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to or assess the effects of pollutants"; and for claims or suits "by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to or assessing the effects of pollutants."
These provisions appear to be intended to preclude coverage for clean-up operations ordered under RCRA, CERCLA, and other federal or state environmental laws.
Thus, the exclusion's context confirms that the drafters intended it to apply to traditional "environmental pollution" situations and substances.
Historically, the pollution exclusion clauses arose in CGL policies in the 1970's, in response to "the insurance industry's increased concern about pollution claims [attributable to] environmental catastrophes that occurred during the 1960s." Sullins, 667 A.2d at 622 (quoting Morton Int'l, Inc. v. General Accident Ins. Co., 134 N.J. 1, 629 A.2d 831, 850 (N.J. 1993)).
For all of these reasons, courts generally have concluded that the exclusion was intended to eliminate coverage for damages "traditionally associated with environmental pollution." Nautilus, 188 F.3d at 31;
see also Sullins, 667 A.2d at 622; Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 609 N.E.2d 506, 512, 593 N.Y.S.2d 966 (N.Y. 1993); Thompson, 580 So. 2d at 1134; Molton, Allen & Williams v. St. Paul Fire & Marine Ins., 347 So. 2d 95, 99 (Ala. 1977).
We agree with the reasoning of these courts, and conclude that the pollution exclusion clause was intended to exclude coverage for causes of action arising from traditional environmental pollution.
Moreover, we find the cases cited by Northbrook distinguishable.
For example, the court in City of Salina, Kansas v. Maryland Cas. Co., 856 F. Supp. 1467 (D. Kan. 1994), held that the pollution exclusion precluded coverage for damage from wastewater from the city sewer which backed up into a residence. It did so, however, based on the undisputed fact that the wastewater was extremely alkaline, and therefore was a "pollutant" within the express terms of the exclusion (which listed "alkalis" as a specific type of "irritant or contaminant").
Moreover, the initial contamination of the wastewater in the City of Salina case resulted from an event which would traditionally be considered "environmental pollution": a pipe flowing from a tank containing a concentrated sodium hydroxide solution burst, spilling the solution into the sewer system.
Royal Insurance Co. v. Bithell, cited by the insurance companies is, likewise, not helpful. See 868 F. Supp. 878 (E.D. Mich. 1993).