8.5.3 The Sudden and Accidental Pollution Exclusion

• Jurisdiction: Arizona

In 1973, the Insurance Services Organization incorporated into its comprehensive general liability insurance form, which is used by many insurance companies, the sudden and accidental pollution exclusion. This exclusion was apparently incorporated to limit coverage for environmental claims.^[281] Continued judicial inconsistency in the interpretation of the sudden and accidental pollution exclusion prompted the insurance industry to revise the CGL policy again in 1985, to include what is now being called an "absolute" pollution exclusion. The sudden and accidental pollution exclusion reads as follows:

This insurance does not apply:

* * *

. . . to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalies, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water, but his exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

Numerous issues have arisen regarding the interpretation of the sudden and accidental pollution exclusion. Among these issues are: (1) whether the exclusion only applies to industrial polluters;^[282] (2) whether the exclusion was designed to further restrict coverage or is merely a restatement of the "occurrence" definition; and (3) whether the "sudden and accidental" language possesses a temporal element.

There is a split of authority in the case law regarding the interplay between the occurrence definition and the sudden and accidental pollution exclusions. Some courts have held that the pollution exclusion clause is no more than a restatement of the occurrence definition and, therefore, does not restrict coverage to sudden and accidental occurrences. Other courts have held that the pollution exclusion clause is a further restriction on the coverage provided by the occurrence definition, thus precluding coverage for pollution that is not sudden and accidental. The pro-insured cases hold that the pollution exclusion clause is co-extensive with the occurrence definition and has no significant effect upon the coverage provided. These courts find, in essence, that the sudden and accidental language is a mere restatement of the occurrence definition.^[283] According to this line of reasoning, the pollution exclusion only excludes expected or intended pollution, regardless of whether it is sudden and accidental. Thus, gradual pollution would be covered as long as the pollution was neither intended nor expected by the polluter.^[284] The courts following this line of reasoning have afforded coverage by holding that the exclusion was ambiguous, and have thus read it out of the policy.^[285] The ambiguity construction appears to be a minority view.^[286]

Those courts finding in favor of the insured hold that the term "sudden" incorporates a temporal element, and that this is plain, ordinary, and obvious in meaning; otherwise, the word "sudden" would be mere surplusage since courts uniformly find "accident" to mean unintended or unexpected.^[287] The court in Lower Paxton Township v. United States Fidelity & Guaranty^[288] observed:

An ever-increasing number of courts have rejected the insured's ambiguity argument and have found that sudden and accidental has a clear plain meaning that excludes coverage not only for intentional pollution but also for any unintentional release or disbursal of pollution that occurs gradually over time. (In fact, it has recently been noted that "there is an emerging nationwide judicial consensus that the pollution exclusion clause is unambiguous"). Any other interpretation of the policy is blatantly unreasonable. To read "sudden and accidental" to mean only unexpected and unintended is to rewrite the policy by excluding one important pollution coverage requirement-abruptness of the pollution discharge. The very use of the words "sudden" and "accidental" reveals a clear intent to define the words differently stating two separate requirements. Reading "sudden" in its context, i.e., joined by the word "and" to the word "accident" the inescapable conclusion is that "sudden," even if including the concept of unexpectedness, also adds an additional element because "unexpectedness" is already expressed by "accident." This additional element is the temporal meaning of sudden, i.e., abruptness or brevity. To define sudden as meaning only unexpected or unintended, and therefore as a mere restatement of accident, would render the suddenness requirement mere surplusage.

In International Minerals & Chemical Corp. v. Liberty Mutual Insurance Co.,^[289] the court rejected the argument that the pollution exclusion was nothing more than a restatement of the occurrence definition. The court observed:

In our view, this reasoning is seriously flawed for at least two reasons. First, interpreting "sudden" as "unintended and unexpected" renders it synonymous with "accident," as that term is employed in the policy and thus the word "accidental" can be read out of the exception as nothing more than redundant surplusage. Such a reading does not comport with fundamental rules of contract construction requiring that to the extent possible, all words used in a contract be given effect. [Second, we believe] that "sudden" is understood in its ordinary, most common sense, to have a temporal significance . . . , and we decline to ignore these temporal-focus definitions or hold that because the word might also have contextual uses, it is ambiguous and must be interpreted to provide coverage where the policy language read as a whole clearly intends to exclude such coverage.^[290]

In order for the sudden and accidental exception to the pollution exclusion to apply, the complainant must show that the...