In Foremost Ins. Co. v. Rodriguez, a Pennsylvania federal district denied
a motion to dismiss a declaratory judgment lawsuit filed by a liability insurer
that sought to disclaim coverage for an underlying lawsuit alleging carbon
In the underlying state court
lawsuit, tenants sued their landlords, alleging that the landlords refused to
repair a heating system, which resulted, ultimately, in carbon monoxide poisoning.
After the tenants’ hospitalization, the local gas company deemed the heater on
the property unsafe, and instructed the landlords to replace the heater.
The landlords’ policy excluded
coverage for bodily injury arising out of the discharge, dispersal, release,
escape of, or the ingestion, inhalation or absorption of pollutants. The policy
contained a typical definition of pollutants, which included any gaseous
irritant or contaminant, including smoke, vapor and fumes. Irritants and
contaminants released by fire on the insured premises were not considered a
pollutant under the policy.
In the coverage case, the Foremost
court applied Pennsylvania law, and compared the “four corners” of
the underlying complaint against the policy. The underlying complaint alleged
injury from exposure to carbon monoxide, and carbon monoxide poisoning. In the
coverage action, the tenants and the landlords tried to redefine those
underlying allegations, arguing that the tenants’ claims were based, at least
in part, upon exposure to natural gas (or the buildup of natural gas), and not
from a byproduct of ignition. But, the court rejected those arguments, and
interpreted coverage in the context of the allegations actually stated in the
underlying complaint, which did not mention natural gas at all. The court
declined to consider coverage based upon possible amendments to the tenants’
allegations of liability.
In applying the pollution
exclusion, the Foremost court was not swayed by the fact that carbon monoxide
was not expressly included in the policy’s definition of pollutant. The court
found that the language of the pollution exclusion was clear and unambiguous,
and in accord with other decisions applying the exclusion. The court determined
that based upon the pending allegations of liability, the pollution exclusion
served as a proper basis for the liability insurer to seek declaratory relief
that it had no duty to defend or to indemnify the landlords.
This case demonstrates that
correctly applying the standards that govern the proper interpretation of a
liability insurer’s coverage obligations is important, and likely outcome
determinative. In this case, the Foremost court applied established Pennsylvania
law governing how courts evaluate the duty to defend, enabling the liability
insurer in this case to overcome motions to dismiss filed in coverage
litigation based upon the application of the pollution exclusion.
 Foremost Ins. Co. v. Rodriguez, Civil
Action No. 19-360, 2019 WL 3037161 (E.D. Pa. July 11, 2019).