Background: The case involves a dispute over whether CNA Insurance must defend Construction Distribution & Supply Co. and Discounter’s Pool & Spa Warehouse in a lawsuit by Highland Furniture for property damage caused by a leak of liquid chlorine.
Issue on Appeal: Whether the pollution exclusion clause in the commercial general liability policy applies to exclude coverage.
Exclusion Clause Details: The clause excludes coverage for bodily injury or property damage arising from the release of pollutants, which are defined broadly to include various contaminants.
Application Judge's Ruling: The judge ruled that the exclusion did not apply because "pollution" in this context required an escape into the natural environment, necessitating cleanup and testing, which was not the case here.
Appellant's Argument: CNA Insurance argued that the exclusion should apply since the chlorine leak constitutes pollution, regardless of whether it escaped into the natural environment.
Court's Analysis:
Pollution Definition: The application judge's narrower interpretation, focusing on natural environment impact, was upheld.
Coverage Expectations: The court found that the policy reasonably covers the type of business negligence claimed, as the storage of chlorine for resale does not inherently pose a pollution risk.
Precedents: Cited relevant cases to support the decision, differentiating from cases involving inherent pollution risks, such as underground gasoline storage.
Decision:
Appeal Dismissed: The application judge's ruling was upheld.
Costs: The respondents are awarded costs of $15,000.
This decision reinforces the interpretation that pollution exclusions in liability policies apply primarily to environmental contamination scenarios rather than business negligence incidents involving potential pollutants.
