The Michigan Court of Appeals recently ruled that just because a substance is considered a pesticide, does not mean it will always be an excluded “pollutant” under a commercial general liability policy. The court took into consideration the policyholder’s reasonable expectations and the insurer’s knowledge of the insured’s line of business.
In Hastings Mut. Ins. Co. v. Safety King Inc., 2009 Mich. App. LEXIS 2448 (Mich. Ct. App. Nov. 24, 2009), the appellate court overturned the trial court’s grant of summary judgment to the insurance company. Hastings had issued a policy to Safety King, a company in the air duct cleaning business. Safety King was sued by a homeowner for damages alleged from use of a sanitizing agent as part of the cleaning services it provided. Hastings originally accepted defense under a reservation of rights but later filed a declaratory action. Relying on Protective Nat’l Ins. Co. v. Woodhaven, 438 Mich. 154, 157 (Mich. 1991), Hastings argued application of the pollution exclusion because the active ingredient in the sanitizing agent is an antimicrobial pesticide, triclosan.
The policy defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” The court noted that the word “pesticide” was absent from the definition of “pollutants” and that “irritants” and “contaminants” were also undefined.
The appellate court construed the terms strictly against the insurer and determined that “an ‘irritant’ is a substance that, because of its nature and under the particular circumstances, is generally expected to cause injurious or harmful effects to people, property, or the environment.” And “a ‘contaminant’ is a substance that, because of its nature and under the particular circumstances, is not generally supposed to be where it is located and causes injurious or harmful effects to people, property, or the environment.”
The court concluded that the terms were unambiguous, finding “the evidence set forth by Safety King showed that triclosan was supposed to be where it was located, i.e., in ductwork, and that it is not generally expected to cause injurious or harmful effects to people.”
The court further reasoned that CGL policies “protect the insured against losses to third parties arising out of the operation of the insured’s business.” Therefore, “Hastings knew or should have known about this normal business practice of using deodorizing and sanitizing agents and would have clearly, specifically, and definitively excluded liability coverage for such practice if that was its intention.” Similarly, “because it was Safety King’s normal business practice to use deodorizing and sanitizing agents, it would have reasonably expected coverage for damage claims arising out of the use of deodorizing and sanitizing agents.”
