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Vol.11 - Issue 3

June 15, 2022

Pollution Exclusion Precludes Coverage For Carbon Monoxide Poisoning
When it comes to the pollution exclusion and Alaska, case law is sparse.  It’s nice that we can say that about America’s last frontier.  Just another reason not to confuse Alaska and New Jersey.  But the pollution exclusion was at issue before an Alaska federal court in Estate of Wheeler v. Garrison Prop. & Cas. Co., No. 20-41 (D. Alaska May 25, 2022), whether the court had this to say about it: “[E]ven though Alaska judicial policy construe[s] coverage broadly and exclusions narrowly, in favor of insureds, the Court concludes that the Alaska Supreme Court appears to have placed the state into the literal-interpretation ‘camp.’  As such, that court would likely interpret the pollution exclusion clause at issue here to unambiguously apply to the death caused by the inhalation of the discharged carbon monoxide, as that injury is plainly covered by the literal terms of the pollution exclusion.”

Massachusetts High Court To Address Coverage For Money Spent To Save Money
In 2018, Ken’s Foods, the salad dressing folks, had a discharge at a processing facility which caused wastewater to enter a Georgia waterway.  Ken’s took steps to clean-up the pollution and address the situation with state officials.  Ken’s also spent over $2 million to prevent a suspension of its operations.  In doing so, Ken’s prevented a suspension loss in excess of $10 million that would have been covered by an environmental policy with Steadfast.  Ken’s sought coverage for the money spent on these prevention efforts.  Steadfast declined, saying that the policy did not cover the prevention of a suspension, but, rather, a complete suspension.

The First Circuit, in Ken’s Foods, Inc. v. Steadfast Ins. Co., No. 21-1649 (1st Cir. June 7, 2022), looked at whether uncovered damages should be covered, if their purpose was to prevent covered damages.  In doing so, the federal appeals court made the following observation: “In one sense, the duty here would align the interests of the parties. Without a duty to compensate for actions that prevented a covered loss, an insured may decide to just allow their operations to be suspended to ensure it receives insurance proceeds (here, $10 million) rather than eat the costs (here, $2 million) to prevent the harm.”

Recognizing the importance of the issue, the court certified the following question to the Supreme Judicial Court of Massachusetts: “To what extent, if any, does Massachusetts recognize a common-law duty for insurers to cover costs incurred by an insured party to prevent imminent covered loss, even if those costs are not covered by the policy?”


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