United States: In Indiana, An Absolute Pollution Exclusion May Exclude Absolutely Nothing

Last Updated: September 13 2016
Article by Heidi Hudson Raschke

A recent article in the Sports section of The Miami Herald read "Shooting coach helps Winslow." Perhaps, but it probably didn't help the coach much. The admonition to "eat every carrot and pea on your plate" undoubtedly elicits laughs from the children to whom it is directed. The point is, some things are unambiguously ambiguous. Others are not.

Consider these basic principles of Indiana contract interpretation:

  • Limitations on coverage in insurance policies must be clearly expressed to be enforceable.
  • Ambiguity exists when a policy is susceptible to two or more reasonable interpretations.
  • If insurance policy language is clear and unambiguous, it should be given its plain and ordinary meaning.

Apply those principles to the following exclusion: "This policy does not cover claims directly or indirectly occasioned by, happening through or in consequence of pollution or contamination of any kind whatsoever." Pretty straightforward, right? Well, unless you happen to be in front of an Indiana court.

It is well-established that insurance policies are interpreted based on their plain language, and where a term is not defined, that term will be given its plain and ordinary meaning. This rule is not, however, followed by Indiana courts were pollution exclusions are concerned. In Old Republic Insurance Company v. Gary/Chicago International Airport Authority, case no. 2:15-CV-281-JD (N.D. Indiana July 25, 2016), the District Court followed Indiana precedent and denied the insurer's motion for summary judgment seeking a ruling that it was not responsible for the defense and indemnity of the insured in an action by the Indiana Department of Environmental Management ("IDEM") in connection with pollution notwithstanding the policies' exclusions for "claims directly or indirectly occasioned by, happening through or in consequence of pollution and contamination of any kind whatsoever."

The Old Republic Policy Excluded Coverage for Pollution and Contamination "Of Any Kind Whatsoever"

After the IDEM initiated an action against its insured, the Gary/Chicago International Airport Authority ("Airport Authority"), for pollution conditions at the Gary/Chicago International Airport ("Airport"), Old Republic filed a declaratory judgment action seeking a ruling that it had no duty to defend or indemnify the Airport Authority with respect to the IDEM action. Old Republic had issued sixteen insurance policies to the Airport Authority between 1997 and 2015, all of which had exclusions for "claims directly or indirectly occasioned by, happening through or in consequence of pollution and contamination of any kind whatsoever." While the policies did not define the terms "pollution" or "contamination," there was no dispute between the parties that pollution and contamination conditions existed at the airport. In fact, it was undisputed that there were, at the site in question, among other things, concentrations of benzo(a)pyrene, arsenic, and polychlorinated biphenyls (PCBs), all of which would indisputably fall within any definition of "pollutant." Therefore, Old Republic asserted that it had no duty to defend or indemnify the Airport Authority. The Airport Authority disagreed, asserting that the pollution and contamination exclusions were ambiguous, so that the exclusions should be unenforceable.

But Sometimes Saying What You Mean Is Not Specific Enough

The Court reviewed the rules governing insurance policy interpretation in Indiana:

Interpretation of an insurance policy presents a question of law that is particularly suitable for summary judgment. It is well settled that where there is ambiguity, insurance policies are to be construed strictly against the insurer and the policy language is viewed from the standpoint of the insured. This is especially true where the language in question purports to exclude coverage. Insurers are free to limit the coverage of their policies, but such limitations must be clearly expressed to be enforceable. Where provisions limiting coverage are not clearly and plainly expressed, the policy will be construed most favorably to the insured, to further the policy's basic purpose of indemnity. Where ambiguity exists not because of extrinsic facts but by reason of the language used, the ambiguous terms will be construed in favor of the insured for purposes of summary judgment.

(quoting State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 848 (Ind. 2012) (internal citations and quotations omitted)). Relying on these contract principles, Indiana courts have "consistently held that 'the insurer can (and should) specify what falls within its pollution exclusion.'" In the absence of such specificity, Indiana courts find pollution exclusions – even absolute exclusions which intend to exclude any kind of pollution – ambiguous and rule in favor of coverage.

The District Court noted that Indiana's approach is unique and acknowledged that other jurisdictions' approaches might support Old Republic's position that there should not be coverage for the Airport Authority's claim:

Unlike Indiana, in analyzing whether a policy excludes coverage for losses resulting from "pollutants," some jurisdictions employ a "literal" view of the absolute pollution exclusion and deem it unambiguous where a substance is acting in any manner as an "irritant or contaminant," while other jurisdictions employ a more "situational" approach and uphold the absolute pollution exclusion only in cases where the facts reveal "traditional environmental contamination."

The court further noted, however, that the Supreme Court of Indiana "reasons that its approach 'avoid[s] both the sometimes untenable results [of eliminating practically all coverage] produced by the literal approach and the constant judicial substance-by-substance analysis necessitated by the situational approach" (quoting Flexdar, 964 N.E.2d at 850).

The District Court acknowledged that no Indiana case has held that all pollution exclusions are unenforceable or had analyzed the exact pollution exclusion language in the Old Republic policy. Nonetheless, the Court found that the Indiana Supreme Court would likely disagree with Old Republic's position, which would allow insurers to exclude coverage for damage caused by any kind of pollution without specifying what pollution is excluded. The Court determined that "the rationale taken from Indiana's precedent is that in order for any pollution exclusion to be enforceable, Indiana requires the policy to specify what falls within the pollution exclusion – which Old Republic's pollution exclusion fails to do." Therefore, notwithstanding the apparent agreement that pollution and contamination conditions existed at the Airport, the Court stated:

Old Republic's pollution exclusion does not explicitly indicate what constitutes "pollution" or "contamination" so that an ordinary policyholder of average intelligence would know to a certainty that Old Republic would not be responsible for damages arising out of the oily sheen, benzo(a)pyrene, arsenic, and PCBs discovered at the Airport. See Flexdar Inc, 964 N.E.2d at 851-52. In fact, Old Republic's pollution exclusion is even broader than the pollution exclusion clauses repeatedly rejected by the Indiana courts, and not one of the fifty-two different pollutants/contaminants that the Airport is required [by the IDEM] to test for are identified as being excluded from coverage. As noted in Flexdar, Inc., whether any of the substances found at the Airport would "ordinarily be characterized as pollution" is beside the point. 964 N.E.2d at 851 (emphasis in original). The question is whether the language of the policy is sufficiently unambiguous to identify the presence of the substances as pollution.

Because the District Court determined that the Indiana Supreme Court would likely hold that Old Republic's failure to specify which pollutions and contamination are excluded renders its exclusion ambiguous, it construed the policy in favor of coverage.

This holding, while supported by Indiana precedent, is troubling for an insurer who wants to exclude any kind of pollution or contamination. In Indiana, and any jurisdiction that might follow this approach, there is essentially no such thing as an absolute pollution exclusion. The insurer must define what it specifically means by pollution or contamination and run the risk that its exclusion will not be interpreted as broadly as intended.

The potential implications of this holding are well-illustrated by this case. The IDEM required the Airport Authority to investigate the presence of fifty-two different pollutants and/or contaminants. Even though they are recognized by the Department of Environmental Management as pollutants and/or contaminants, Old Republic would have been required to specifically identify all of them in order to exclude coverage. If only some of them were specifically excluded, there could be a coverage issue with respect to the scope of damage associated with those which were not excluded. It is easy to see why insurers prefer an absolute pollution exclusion. Indiana, however, apparently interprets breadth as ambiguity and precludes an insurer from relying on an absolute exclusion.

"Pollution and contamination of any kind whatsoever" would seem to be a sufficiently unambiguous phrase to identify the presence of the substances at the Airport as pollution. That is, it appears to be clear and unambiguous and not susceptible to more than one meaning. And in most states courts would agree. Just not Indiana.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.