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Another (insurer) bites Pond: Virginia District Court rejects narrow reading of pollution exclusion



In a victory for policyholders and an adventurous mention for Merriam-Webster's dictionary, a federal judge in Virginia ruled that the spread of concrete dust as damaged layers stored in a warehouse of a warehouse was a pollutant, as defined in the policy, but also constituted "smoke" as this term was defined in the dictionary, which resulted in an exception to policy exclusion of pollution. The court then granted a summary judgment to the policyholder, who had suffered a loss of $ 3.2 million. [1]

In Allied Property and Casualty Insurance Company Against Zenith Aviation, Inc. the policyholder Zenith, an aircraft parts distributor, employed a construction company to install an elevator in its distribution warehouse. Under the grave of the pit for the elevator, the concrete dust caused by the contractor's damaged use of a wet saw damaged the Zenith inventory of aircraft parts and an electronic retrieval system.

Zenith sought cover for the losses caused by the concrete dust during his commercial insurance policies with allies. The policy contained a standard emissions from pollutants such as removed coverage for loss or damage that resulted in "discharging, spreading, lowering, migrating, discharging, or polluting emissions." But whether "emissions, dispersion, reduction, migration, release or escape… Results in a certain cause of loss," the policy provides coverage for subsequent loss or damage. The policy provided cover for the risk of smoke. In particular, the term "smoke", which occurs in both the definition of "polluting" and as a "specified cause of loss in politics," is not defined.

Allied Denied Coverage Based on Pollution Exclusion. Allies argued that the concrete pile fulfilled the political definition of pollutant and the derogation from the pollution impact was not applicable. Allies advanced a narrow definition of smoke and argued that smoke in the context of the policy meant "visible combustion products". Zenith, on the other hand, claimed that the pollution was not applicable due to the causal role of smoke, a specified cause of loss. Zenith urged the court to accept a broader definition of smoke to include "any visible suspension of solid particles in a gaseous medium, whether it be the result of combustion or simply dust that has been stirred in the air" and further claimed that at a minimum the term "smoke" was ambiguous in the scope of its definition in politics and the ambiguity had to be resolved in favor of coverage.

The court agreed with Zenith and found the text and structure of the policy, especially with regard to specific causes of loss, not enough to conclude that the policy is aimed at a narrower limited definition of smoke in order to exclude emissions. Relying on the definition of smoke in Merriam-Webster's Dictionary, which contained "gaseous products of burning material" and "suspension of particles in a gas," the Court noted that Zenith's loss resulting from the dispersion or migration of the concrete particulate matter the material was caused by the smoke from which it settled, which fell within the simple text of the pollution. In a footnote, the court noted that falling objects were another specified cause of loss and an alternative analysis could lead to coverage from the concrete dust falling on the storage space.

Allied is a reminder of the importance of thoroughly reading your insurance policies and not just accepting insurers' narrow interpretations and constructions. In Allied it was the insurance company's own chosen formulation that ultimately provided the basis for coverage; but the insurance company read it in such a way that it became negative. Often overlooked dictionaries can give policyholders some of the best evidence of the pure policy of the insurance policy and should not be overlooked.

[1

] Zenith's counterclaim for breach of contract and breach of implied good faith and management duty on the grounds that Allied failed to investigate Zenith's claims is still ongoing.


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