Pollution Exclusion and Heating Equipment Exception

Our insured rented the meeting room of the local fire hall to the blood bank to collect blood donations. When the blood bank employees arrived, they could smell gas and they called the insured to check it out. The insured's employees checked and found that the pilot light was out on the cooking stove. They lit the pilot light and then checked the level of gas fumes and found them well within the safety limits.

The blood bank workers then spent the rest of the day taking donations. When they went back to their home base, three employees went to the doctor or emergency room at the hospital. They made workers compensation claims which the WC insurer turned into a subrogation claim against our insured. Our insured's carrier denied coverage based on the pollution exclusion. We cited the exception to the exclusion about bodily injury sustained within a building and caused by smoke, fumes, or vapor produced by or originating from equipment used to heat, cool, or dehumidify the building, or equipment that is used to heat water for personal use by the building's occupants or guests.

The insurer denied coverage and said that the exception applies only to a hot water heater. What is your opinion?

Nebraska Subscriber

The insurer is reading the pollution exclusion much too strictly. A stove is equipment that is used to heat water for personal use. It is true that a hot water heater serves this purpose also, but the exclusion does not specify the ″equipment″ that will make the exception applicable. Since the term ″equipment″ is not defined and there is no specification in the pollution exclusion that the exception pertains just to hot water heaters, there is no reason to limit the exception's scope.

The interpretation of the insurer is just that, its own interpretation. But, it is just as reasonable to interpret the exclusion and the exception in the opposite manner. Since exclusions have to be read as narrowly as possible in order to give the insured the maximum protection as is reasonably possible, any reasonable doubt has to be settled in favor of the insured. We have no doubts that if the insurer consulted an attorney on this issue, the attorney would side with this latter view.

This premium content is locked for FC&S Coverage Interpretation Subscribers

Enjoy unlimited access to the trusted solution for successful interpretation and analyses of complex insurance policies.

  • Quality content from industry experts with over 60 years insurance experience, combined
  • Customizable alerts of changes in relevant policies and trends
  • Search and navigate Q&As to find answers to your specific questions
  • Filter by article, discussion, analysis and more to find the exact information you’re looking for
  • Continually updated to bring you the latest reports, trending topics, and coverage analysis