We have a question regarding the commercial general liability (CGL) forms and whether there is coverage for one of our clients. The client is covered under the 1988 edition of the CGL form. We are concerned about the absolute pollution exclusion.

The insureds reported to us that their boiler had malfunctioned and during the time it was malfunctioning, soot spewed out of their smoke stack and entered and damaged the neighboring commercial building. The insureds fixed the boiler as soon as they were aware that there was a problem.

The insurer denied coverage under the absolute pollution exclusion, pointing out that "soot" is specifically named as a pollutant to which the "hostile fire" exception does not apply. We question whether damage by "soot" from a hostile fire can really be distinguished from damage by "smoke or fumes," since the policy allows coverage in the latter situation.

South Dakota Subscriber

There are several points to note here.

First, a malfunctioning boiler is not necessarily a hostile fire. The 1988 CGL form did not define that term, but the current CGL form defines "hostile fire" as a fire that becomes uncontrollable or breaks out from where the fire was intended to be. So, in order to even consider the exception to the pollution exclusion, we have to assume that the boiler malfunction can be characterized as a "hostile fire".

Second, even if we agree that the boiler malfunction is a hostile fire, the pollution exclusion makes a point of not including "soot" in the exception. That term is specifically mentioned in the definition of "pollutant" along with smoke and fumes, and it is logical to argue that since "soot" does not accompany smoke and fumes in the exception, the policy writer intended "soot" to not be included in the exception's ambit.

Finally, the current CGL form makes a clear distinction between smoke and fumes and soot. The current CGL form allows an exception from the pollution exclusion for bodily injury caused by smoke, fumes, or soot from equipment used to heat the building. There is also an exception for bodily injury and property damage arising out of heat, smoke or fumes from a hostile fire. The point is that "soot" is deliberately omitted from the hostile fire exception which allows coverage for property damage. The only stated allowance for coverage from "soot" is for bodily injury.

So, we would agree with the insurer in the application of the pollution exclusion in this case.

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