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Vol. 11 - Issue 2

February 28, 2022


Really, Really Strange Decision: Supreme Court Addresses Pollution Exclusion For The First Time


Given how well-developed the law is nationally concerning the interpretation of the absolute/total pollution exclusion, it is unusual these days to see a state high court address the issue for the first time.  But that’s what the Supreme Court of Mississippi did in Omega Protein v. Evanston Insurance Company, No. 2020-1097 (Miss. January 20, 2022).  It is a really, really strange decision. 

At issue was additional insured coverage for Omega Protein, for death and serious injuries, on account of an explosion, at one of its facilities, while employees of a subcontractor were performing welding work on a large metal storage tank used for the temporary storage of stickwater.    

Of course, you know stickwater -- a byproduct of the fish meal and fish oil production process. 

In addition to some additional insured issues, the Mississippi high court addressed the applicability of the pollution exclusion -- which an excess insurer asserted applied to preclude coverage.

The pollution exclusion at issue was pretty standard stuff, applying to “the actual, alleged or threatened discharge, dispersal, release, migration, escape, or seepage of pollutants,” with pollutants defined as “any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes material, to be recycled, reconditioned, reclaimed or disposed of.” 

It was alleged that the explosion took place because stickwater produces gases from methanethiol, hydrogen sulfide and methane, all of which are extremely flammable and produced by the decomposition of organic matter.  The opinion went on provide information about the toxicity and serious consequences of exposure to such substances.

The court concluded that the pollution exclusion did not apply as the terms “irritant” and “contaminant,” as used in the pollution exclusion, are subject to more than one meaning: “On one hand a substance can be an irritant or contaminant at its core and by its very nature. That substance is an irritant or a contaminant no matter where it is, how it is contained, or whether it is in contact with something actively irritating or contaminating it. On the other hand, pursuant to the above-cited definitions, a substance is not necessarily an irritant or contaminant until it comes into contact with something and is actively irritating or contaminating it.”

To give an example of this dual meaning of the terms “irritant” and “contaminant,” the court turned to crude oil: “Though it is contained inside [a] tanker, were it to come into contact with the water or wildlife, it would contaminate them immediately.”  But, “[i]t can also be said that the same crude oil under the same set of facts is not a contaminant because it is located inside an inert container within the ship and is not in contact with anything. In that context, that crude oil it is not a contaminant because it is not actively contaminating something.”

Having concluded that the pollution exclusion is susceptible to more than one reasonable interpretation, the court concluded that it is ambiguous, must be construed in favor of coverage, so, therefore, it did not apply.  That was it.  End of story.  No further discussion nor an application of this analysis to the facts at hand was provided. 

The opinion reads like the court was in a 7-Mississippi rush to be done.
Of note, scores of Mississippi federal courts have addressed the pollution exclusion and concluded that it precluded coverage for all manner of hazardous substances, such as paint and glue fumes, Chinese drywall, ammonia, hydrochloric acid and more.  The Omega Protein court did not mention a single one of these federal court decisions.  Not that it needed to.  But still.  That was a lot of law to not even give a slight nod to.    

I’m struggling with this decision.

There are no shortage of courts nationally that have concluded that the pollution exclusion does not apply to certain substances.  But that’s usually because the court concludes that, despite the breadth of the pollution exclusion, and its otherwise applicability on its face, the exclusion must be limited to so-called traditional environmental pollution, based on its purported historical purpose.  Or, some courts have concluded that the pollution exclusion, because so broadly worded, if applied literally, would have no limiting principle.  But, in both cases, courts still conclude that the exclusion can apply to some substances -- just not every substance.

Here, is the Omega Protein court saying that the pollution exclusion cannot apply to any substance -- including a traditional pollutant, such as crude oil, as used in its example -- because “irritant” and “contaminant,” as words generally, are subject to two meanings? 

Or, does Omega Protein require you to look at the particular substance and determine whether it is not an “irritant” and “contaminant” when safely stored, but can cause injury when outside of its container.  Therefore, “irritant” and “contaminant” are subject to two meanings, in that particular case.  Thus, the pollution exclusion does not apply to that substance?  But aren’t most hazardous substances not hazardous when safely stored? 




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