Oregon Federal Court Decides Carbon Monoxide Incident Is Excluded by Pollution Exclusion
Rejects Argument That Exclusion Only Applies To "Environmental" Damages
Applies "Intent Of The Parties" Rather Than "Reasonable Expectations"
The United States District Court for the District of Oregon has determined that carbon monoxide from a natural gas swimming pool heater is a pollutant within the meaning of a commercial general liability insurance policy. Colony Ins. Co. v. Victory Constr. LLC, No. 3:16-cv-00457-HZ, 2017 WL 960024, at *1 (D. Or. Mar. 9, 2017). Ruling on cross-motions for summary judgment, the court determined that the plain meaning of "pollutant" as defined by the Colony policy includes carbon monoxide, and, thus, the policy unambiguously precludes "coverage for harm caused by carbon monoxide." Id.
The opinion is notable as the first reported decision to predict how an Oregon court would interpret a modern pollution exclusion in the context of a "non-traditional" pollution claim.
Two lawsuits were filed in state court alleging that the defendants negligently installed a natural gas swimming pool heater with insufficient ventilation, and failed to warn plaintiffs of the risks of carbon monoxide poisoning when using the heater without sufficient ventilation.
The subject policy excludes coverage for "'[b]odily injury '... which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'hazardous materials' at any time." Id. The term "hazardous materials" is defined as "'pollutants,' lead, asbestos, silica and materials containing them." Id. "Pollutants" is defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Id.
The court set forth the so-called "Hoffman analysis" for policy interpretation, established in Hoffman Construction Co. of Alaska v. Fred S. James & Co. of Oregon, 313 Or. 464 (1992), and refined in its progeny. The primary focus under the Hoffman analysis is to determine the contracting parties' intention. Victory Constr., at *3. The intention is determined using the policy terms and conditions, including applying definitions included in the policy, and the plain, ordinary meanings of any undefined terms. Id. If the court finds only a single, plausible interpretation of policy terms, the court applies that interpretation. Id. If more than one plausible interpretation is perceived, the term is examined by the court in the broader context of the policy as a whole. Id. (citation omitted). Following additional analyses, if the court cannot resolve the ambiguity, it is construed against the drafter - the carrier. Id.
Acknowledging a relative split between courts in other jurisdictions, the court determined that carbon monoxide is either a contaminant or an irritant within the meaning of the exclusion, and therefore a pollutant. Id. at *6.
Next, the court considered the insureds' argument that the exclusion should be limited to "traditional environmental pollution" as decided by the Supreme Courts of Nevada and California. The court found that an Oregon court is more likely to adopt an interpretation like that employed by the Iowa Supreme Court, which utilizes an approach similar to the Hoffman analysis. The court predicted that, like Iowa courts, an Oregon court would not limit the exclusion to traditional environmental pollution. Id. at *9.
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 See Hoffman, 313 Or. at 470, for a detailed explanation of the analyses.