Pollution Exclusion Precludes Coverage For Carbon Monoxide Poisoning
In Shaw v. Liberty Mutual Ins. Co., No. 15-686 (M.D. Fla. Feb. 12, 2016), a Florida federal court, applying Texas law, held that a Pollution Exclusion precluded coverage for serious injuries caused by carbon monoxide poisoning at a hotel in Daytona Beach. The injured hotel guest settled with the hotel owners for nearly $7 million. The owners’ primary liability policy paid its $1 million limit. The hotel owners then assigned their rights, under their Liberty Mutual umbrella policy, to the underlying plaintiff, in exchange for a covenant not to execute.

The underlying plaintiffs made more arguments than I have ever seen in an attempt to avoid the application of the pollution exclusion. The court rejected all of them. In general, once the court concluded that, under Texas law, the pollution exclusion is unambiguous, i.e., it is not limited to traditional environmental pollution, the case was over. The many other arguments raised by the plaintiffs were serious hail Marys, including this one: “The [underlying plaintiffs] allege that Liberty Mutual had actual or constructive knowledge of the daily existence of carbon monoxide in the ambient air at the Hotel, and of the failed Hotel systems. They claim that despite this knowledge, Liberty Mutual continued to issue the Policy and has therefore, waived its right to contest coverage.”

Insurer’s ROR Did Not Entitle Insured To Independent Counsel
In DHR International, Inc. v. Travelers Casualty & Surety Company, No. 15C4880 (N.D. Ill. Feb. 12, 2016), the court held that an insurer’s issuance of a reservation of rights letter did not entitle the insured to independent counsel. The court was guided by the absence of mutually exclusive theories of liability being asserted by the plaintiff: “[U]nder Travelers’s reservation of rights letter … there was no risk of mutually exclusive theories of liability because DHR [the insured] could be held liable for the discrimination and wrongful termination claims that Travelers reserved the right to disclaim liability for and also held liable for other claims asserted by [Plaintiff] for which Travelers did not reserve the right to disclaim liability; hence, the theories of liability for the covered and uncovered claims were not mutually exclusive. In short, looking at [Plaintiff’s] complaint and the reservation of rights letter even in the light most favorable to DHR, it is implausible that DHR’s liability for claims that Travelers reserved its rights for would preclude a finding that it liable for claims that are covered by the Policy or vice versa.”