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Hydrochloric acid as a gas is a pollutant and not "smoke"



A complainant sued his insurance company for breach of contract, breach of good faith and fair trade and damage to breach of contract due to the company's failure to pay a claim after its property was damaged by gaseous hydrochloric acid. The insurance proposal's proposal for a brief assessment regarding the exclusion of pollutants was granted and the insured appealed. The Fifth Circuit Resolved the Dispute in B urroughs Diesel, Incorporated v. The Traders Indemnity Company Of America No. 19-60875, U.S. Court of Appeals for The Fifth Circuit (July 31, 2020) [19659002] FACTUAL BACKGROUND

On October 14, 2016, over 5,000 gallons of hydrochloric acid leaked from a storage tank in Laurel, Mississippi, on properties adjacent to the owned by the appellant, Burroughs Diesel, Incorporated ("BDI"). The acid was a liquid, but it quickly created a cloud that traveled across the street and engulfed BDI's property. According to the BDI, this cloud caused extensive damage to its buildings, vehicles, warehouses, tools, machinery and equipment. BDI immediately reported the loss to its insurance company, Travelers Indemnity Company of America. Following this report, Travelers' adjusters and a professional engineer concluded that the hydrochloric acid was in fact damaging BDI's property. However, travelers denied coverage and relied on the exclusion of pollutants in BDI's insurance policy.

The district court held that BDI's alleged damages were "excluded from coverage by the police's exclusion of contaminants", and that BDI failed to show that any exemption from the contamination applied exclusion.

DISCUSSION

A summary assessment is appropriate if the mover shows that there is no real dispute about any material fact and the mover has the right to a judgment as a matter of law. There is a genuine dispute as to an essential fact whether the evidence is such that a reasonable jury could return a judgment to the non-moving party.

Mississippi courts consider the interpretation of insurance to be a matter of law. BDI bears the burden of proving its right to recover under the policy. Travelers have the burden of proving whether a policy exclusion is applicable. The district court concluded that when the insurer proved the application of an exclusion, the insured would then have the burden of establishing a relevant exemption from the exclusion.

The policy required Travelers to "pay for direct physical loss of or damage to Covered Property caused by or as a result of a covered cause of loss." Excluded from coverage were losses caused by "pollution", as described in the policy as " [d] charge, spread, discharge, migration, discharge or escape from "pollutants. "Then there is an exception to the exclusion, which states that there is coverage if 'emissions, spread, envelope, migration, release or refugee itself is caused by any of the' stated causes of the loss. 'Travelers agreed to' pay for the loss or the damage caused by such "specified causes of loss." "The specific causes of loss" include, among other things, many "smoke". Whether "smoke" as a specific cause of loss overcomes the introduction of "acids" as an excluded pollutant was the only The issue presented to the Fifth Circuit.

Travelers agreed that BDI's property is covered by the policy. "Acids", at least in general, are clearly excluded pollutants.BDI claims that the cloud resulting from the release of hydrochloric acid constituted "smoke ", which is a" specific cause of loss. "The term" smoke "is not defined in the policy. BDI claims that since there is more than one dictionary definition of" smoke ", the term is ambiguous and should be resolved for a tt cover.

The controlling Mississippi law states that political conditions are to be understood by applying the "common and popular meaning" to all undefined terms, ambiguities exist when a policy can be logically interpreted in two or more ways, where a logical interpretation provides coverage According to the BDI, when the liquid acid leaked, "it turned into gas particles on contact with the ambient heat / moisture and formed a white cloud of [hydrochloric acid] gas particles suspended in water vapor (gas) traveling across the street."

after a dictionary definition that would at least create some ambiguity about the meaning of "smoke", BDI is locked on a secondary in a dictionary defining it as "a suspension of particles in a gas." The fifth circuit refused to interpret state law to mean that it was enough to find a definition that does not focus on smoke as a result of combustion, instead of using dictionaries, it sought the usual, popular or logical meaning one of "smoke". It is the first definition in the same dictionary: "gaseous products of burning material."

As the BDI failed to prove that an exemption from the exclusion of pollutants is applicable, the district court did not err in granting travelers' draft summary judgment in the matter of infringement. Since the BDI cannot establish that there is coverage for its damages under the insurance, it cannot recover its claims of bad faith.

Recognizing that although insurance covers many causes of loss, no insurance covers all reasons. Exemptions from pollution have been corrected in recent decades and the result has made it clear that insurers do not want to insure against losses caused by pollution. The Fifth Circuit refused to allow the BDI to create an ambiguity by finding a smaller, off-hand definition of "smoke" that did not discuss combustion. The acid release did not involve combustion ̵

1; it simply evaporated and changed naturally from a liquid to a gas. Although smoke is a gas, not all gases are smoke. As there was no covered cause for loss including damage caused by a hydrochloric acid gas, there was no cover for the loss.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now restricts his practice of serving as an insurance consultant specializing in insurance coverage, handling insurance claims, bad faith insurance and near-insurance fraud. insurers and policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and attorney handling attorney and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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