August 23, 2019

Colorado Supreme Court: Pollution Exclusion Clause in Insurance Policy Bars Indemnification for Off-Premises Injuries

The Colorado Supreme Court issued its opinion in Mountain States Mutual Casualty Co. v. Roinestad on Monday, February 25, 2013.

Insurance—Duty to Indemnify—Pollution Exclusion Clauses.

Respondents were overcome by poisonous hydrogen sulfide gas while cleaning a large grease clog in a sewer near the Hog’s Breath Saloon & Restaurant. The district court concluded that the restaurant caused respondents’ injuries by dumping substantial amounts of cooking grease into the sewer. On summary judgment, the district court found the restaurant liable under theories of negligence and off-premises liability, and entered a damage award in respondents’ favor.

Mountain States Mutual Casualty Company sought a ruling that it had no obligation to indemnify the restaurant and the district court agreed, holding that dumping substantial amounts of cooking grease constituted a discharge of a pollutant under the policy’s pollution exclusion clause. The court of appeals reversed. It held that the terms of the pollution exclusion clause were ambiguous and that its application to cooking grease could lead to absurd results and negate essential coverage.

The Supreme Court reversed the judgment of the court of appeals. The restaurant discharged enough cooking grease into the sewer system to create a five- to eight-foot clog that led to a dangerous buildup of toxic gas—conduct that violated a city ordinance prohibiting the discharge of a pollutant in an amount that creates an obstruction to the sewer flow. The Court agreed with the district court that, under the circumstances of this case, the discharge of cooking grease amounted to a discharge of a pollutant. Accordingly, the Court held that the pollution exclusion clause barred coverage in this case.

Summary and full case available here.

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