The client is a church that provides daycare services. One of the daycare staff members mistakenly used undiluted quaternary ammonia to clean the toilets and toilet seats, causing 13 students to suffer chemical burns.
Q: "Good news: Most of the students healed with the application of a topical cream. Bad news: The carrier has written a reservation of rights letter stating this may fall under the pollution exclusion. What is your opinion so I can fire back at this decision?"
A: “A reservation of rights letter is not necessarily a claim denial. The carrier is likely issuing the letter in order to cover its bases if it does decide to exclude the claim. As always, it's important to not generalize that ‘ammonia is a pollutant that caused business interruption, so the pollution exclusion applies.’ Read the policy language carefully—one argument for coverage is that the cleaning solution did not involve ‘discharge, dispersal, seepage, migration, release or escape’ as is required of a pollutant under the ISO CGL exclusion. This was an ‘application’ of a chemical by a negligent human. Intentionally wiping a surface does not involve seepage or escape.
The carrier might argue against this premise, but it has merit given the historical intent and evolution of the pollution exclusion. Some courts have found the exclusion applies to ‘environmental’ pollution, and keep in mind the insurer bears the burden of demonstrating that the exclusion applies for reasons beyond their own insistence.
The Big ‘I’ Virtual University recently published an article about how carrier sometimes improperly cite the pollution exclusion in a claim denial when the pollutant caused no irritation or contamination (such as slipping on oil at a garage). Check out the following articles for more information:
‘Pollution Exclusion Requires Irritation or Contamination’
‘Abusing the Pollution Exclusion’”
Bill Wilson is director of the Big “I” Virtual University.
This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.
