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Winter 2006-02 Scope of total pollution exclusion clause limited

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Number 62
Winter 2006
Puerto Rico Supreme Court

Scope of total pollution exclusion clause limited

Application of a total pollution exclusion clause in a liability insurance policy is limited to claims resulting from incidents involving environmental pollution, notwithstanding the general nature of its literal text. Such was the ruling of the Puerto Rico Supreme Court in the case of Molina v. Centro Recreativo Plaza Acuática, 2005 TSPR 172.

The clause

The clause in question, similar to those generally found in insurance policies throughout the United States, read as follows:

"The insurance does not apply to:
'Bodily injury' or 'property damage' which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants a any time."

The event

A number of people swimming in a wave pool were affected by the release of chemicals normally added to the water, which resulted from an apparent equipment malfunction. They filed suit against the water park, which in turn claimed from its insurance company. The insurer denied coverage because of the pollution exclusion clause. It argued that the chemicals discharged were "pollutants," which the policy defined as "any solid, liquid, gaseous, or thermal irritant or contaminant."

Prior rulings

The Supreme Court found no precedent in Puerto Rico, and in the United States what it called a "quagmire" of inconsistent judicial interpretations. While some courts have stuck to the letter of the clause and found against coverage, others have ruled it to be ambiguous and ruled for the insureds under the doctrine that ambiguous provisions are to be construed in their favor.

The Supreme Court said that the discrepancy of judicial interpretations is in itself an indication of the uncertain nature of the clause. Should a slip-and-fall caused by spilled Clorox be excluded from coverage because the product is a "liquid irritant"? The court said that holding so would be absurd. The clause must be construed within its intended purpose of excluding environmental pollution brought about by the discharge, dispersal, seepage, migration or escape of pollutants. The injury contended by the swimmers was, therefore, covered by the policy.


© 2006 Goldman Antonetti & Cordova, LLC

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