Benzene and the Pollution Exclusion

Many see benzene-related cases as the next big thing in toxic tort litigation. It is easy to see why. Benzene litigation has all the elements the plaintiffs' bar could want ' a large claimant pool, signature diseases, and sizable verdicts and settlements.

Benzene, one of the top 20 chemicals by volume in the United States, is found in solvents, gasoline and other fuels, and is widely used in various production processes. Unfortunately, benzene exposure has been associated with development of a particular type of leukemia called acute myeloid leukemia. As a result of its widespread usage and signature disease, many see benzene as the next big thing in toxic tort litigation. See, e.g., Lori Calabro, Problem Solvent: Get Ready for a Wave of Class-Action Lawsuits Linked to Benzene, CFO Magazine, Aug. 1, 2006.

In recent years, there has been an increasing number of benzene-related occupational exposure lawsuits and settlements. For example, earlier this year, a San Francisco jury awarded $8 million to a seaman who alleged that he was overexposed to benzene while aboard his employer's ships. Verdicts and Settlements, The Recorder (San Francisco), June 3, 2008, at 5. In a 2007 verdict, a Delaware jury awarded roughly $3.5 million to the wife of a former refinery worker who sued Texaco claiming the disease that killed her husband was caused by on-the-job exposure to benzene. Elizabeth Bennett, New Castle Jury Awards $3.5 Million Over Benzene Exposure, Del. L. Weekly, Nov. 14, 2007, at 3. And, in 2005, an aircraft painter who developed a rare form of leukemia received a settlement of almost $2.3 million based on his alleged exposure to benzene-contaminated paints and solvents used to clean his hands and paint gun. 14-5 Mealey's Emerg. Toxic Torts 3 (2005).

In benzene workplace exposure lawsuits, plaintiffs typically allege that workers were exposed to benzene on the job by means of inhalation and/or dermal contact and often assert product liability theories based on the defendants' alleged failure to warn workers about risks associated with exposure to benzene.

As benzene-related lawsuits continue to proliferate, defendants will undoubtedly turn to their insurers for defense and indemnification notwithstanding the broad pollution exclusions found in most commercial general liability (“CGL”) policies. Consequently, insurers may soon begin to see a significant increase in the number of benzene-related coverage claims. However, coverage is far from certain.

To date, there are very few insurance coverage decisions concerning benzene exposure, particularly in the occupational exposure context. Nonetheless, similar litigation in other contexts shows that the standard pollution exclusion contained in CGL policies may very well bar coverage depending on the facts of the case and the jurisdiction.

Traditional Spill/Leak Cases

It seems clear that the pollution exclusion in CGL policies bars coverage for benzene-related litigation in traditional environmental exposure cases. Traditional benzene-related lawsuits stemming from benzene leaks or spills are typically brought by residents of neighborhoods with benzene-contaminated water or soil against the owners of facilities from which benzene contamination allegedly emanated.

For example, more than 30 lawsuits were filed by Missouri residents against an oil refiner alleging intentional discharge of hazardous pollutants (including benzene) into the groundwater, air, and soil. In September 2005, a jury ordered the oil refiner to pay $13.3 million to the husband of a woman who died from cancer allegedly caused by the refiner's pollutants. Oil Titan Settles Lawsuit After Missouri Jury Verdict, Wall St. J., Sept. 16, 2005, at B4. In another 2005 case, the residents of a Brooklyn neighborhood that was the site of a decades-old oil spill filed a lawsuit against various oil companies. The residents alleged that toxic fumes from the underground spill contained levels of benzene associated with elevated risks of cancer. Nicholas Confessore, An Old Oil Spill Divides A Brooklyn Neighborhood, N.Y. Times, Nov. 1, 2005, at B3.

From an insurance coverage standpoint, the principal line of defense for such pollution claims has been the pollution exclusion contained in CGL policies which bars coverage for the release or discharge of “pollutants” or “contaminants.” Though prior to the mid-1980s, “qualified” pollution exclusions contained an exception for discharges of “pollutants” that were “sudden and accidental” or “sudden, unintended or expected,” most modern CGL policies now contain what is often referred to as a “total” or “absolute” pollution exclusion that is not qualified by time or intent. A typical absolute pollution exclusion states that coverage does not apply:

to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, 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, whether or not such discharge, dispersal, release or escape is sudden or accidental. Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes ”10.02(a), (e) (12th ed. 2004).

Multiple courts have found that pollution exclusions bar coverage for claims arising out of benzene spills or leaks. For example, in NL Industries, Inc. v. Commercial Union Insurance Co., Civ. No. 90-2125 (WHW), 1995 U.S. Dist. LEXIS 21615 (D.N.J. Aug. 25, 1995), the court held that an absolute pollution exclusion barred coverage for claims arising from the disposal of various chemicals, including benzene. Similarly, in Gotham Insurance Co. v. GLNX, Inc., No. 92 Civ. 6415 (TPG), 1993 U.S. Dist. LEXIS 10891 (S.D.N.Y. Aug. 6, 1993), the court held that an absolute pollution exclusion barred coverage for claims arising from the release of a benzene solution from a railroad car that plunged into a river. Finally, in Associated Indemnity Corp. v. Dow Chemical Co., 248 F. Supp. 2d 629 (E.D. Mich. 2003), the court held that a benzene pipeline leak did not fall within the “sudden and accidental” carve-out of the qualified pollution exclusion at issue.

Even jurisdictions that have construed pollution exclusions quite narrowly have held that the discharge of benzene into groundwater or soil falls within the scope of the pollution exclusion. For example, in Pipefitters Welfare Educational Fund v. Westchester Fire Insurance Co., 976 F.2d 1037 (7th Cir. 1992), the court held that regardless of how far some courts have limited the scope of the pollution exclusion, “one could not characterize the discharge onto land of 80 gallons of PCB-laden oil as anything but pollution.” 976 F.2d at 1044. (PCBs ' Polychlorinated biphenyls ' are organic compounds that include biphenyl, a molecule composed of two benzene rings.) Thus, the pollution exclusion should bar coverage for benzene-related spills and leaks in the traditional environmental exposure context.

Workplace Exposure Cases

In occupational exposure cases that do not involve traditional pollution claims, the outcome is less certain. There does not appear to be any reported cases directly addressing application of the pollution exclusion to workplace benzene exposure. However, “a majority of courts have concluded that absolute pollution exclusions unambiguously exclude coverage for damages caused by the release of toxic fumes,” Quadrant Corp. v. American States Ins. Co., 110 P.3d 733, 738 (Wash. 2005), even where the claims do not involve industrial or environmental pollution in the traditional sense. For example:

• In Quadrant Corp. v. American States Insurance Co., 110 P.3d 733 (Wash. 2005), the court held that the pollution exclusion barred coverage for injuries suffered by a tenant when toluene fumes from waterproofing material used by an apartment complex entered that tenant's unit. (Toluene is a less toxic benzene substitute.)
• In National Electric Manufacturers Association v. Gulf Underwriters Insurance Co., 162 F.3d 821 (4th Cir. 1998), the court held that the pollution exclusion barred coverage for claims by welders that were exposed to manganese fumes while using welding products or in the proximity of other persons using welding products.
• In Terramatrix, Inc. v. United States Fire Insurance Co., 939 P.2d 483 (Colo. Ct. App. 1997), an engineering firm owned a printing machine that emitted ammonia gas. Another tenant in the same building filed suit against the firm seeking relief for a variety of injuries caused by exposure to ammonia vapors. The court held that the pollution exclusion in the firm's policy barred coverage.
• In Park-Ohio Industries, Inc. v. Home Indemnity Co., 975 F.2d 1215 (6th Cir. 1992), the court held that the pollution exclusion barred claims stemming from workplace exposure to “soot, smoke, fumes, dust pollutants and other particulates” inhaled by workers during operation of certain furnaces used to strip and burn rubber from the metal tracks of army tanks and armored personnel and missile carriers.

See also Reliance Ins. Co. v. Moessner, 121 F.3d 895, 901 (3rd Cir. 1997) (pollution exclusion excluded coverage for product liability claim stemming from the release of carbon monoxide emitted as a byproduct of a direct-fired steam generator); Am. States Ins. Co. v. Nethery, 79 F.3d 473 (5th Cir. 1996) (pollution exclusion precluded coverage relating to claims arising from the inhalation of fumes from paint and glue material); Toledo v. Van Waters & Rogers, Inc., 92 F. Supp. 2d 44 (D.R.I. 2000) (pollution exclusion excluded coverage for claim arising out of inhalation of toxic fumes); Am. States Ins. Co. v. Technical Surfacing, Inc., 50 F. Supp. 2d 888 (D. Minn. 1999) (pollution exclusion barred coverage for damage to grocery store food caused by the escape of xylene fumes from a floor sealant); Brown v. Am. Motorists Ins. Co., 930 F. Supp. 207, 208-09 (E.D. Pa. 1996) (fumes from waterproofing sealant on exterior of house were “pollutant” within meaning of pollution exclusion), aff'd, 111 F.3d 125 (3rd Cir. 1997); Cook v. Evanson, 920 P.2d 1223 (Wash. Ct. App. 1996) (pollution exclusion precluded coverage for respiratory injuries sustained when fumes from concrete sealant entered building).

On the other hand, a “respectable minority” of jurisdictions has limited application of the pollution exclusion to traditional environmental pollution claims like the spill and leak examples discussed in above. John K. Dimugno & Paul E.B. Glad, California Insurance Law Handbook '45:28.2 (2008). For example, in Clendenin Brothers, Inc. v. United States Fire Insurance Co., 889 A.2d 387 (Md. 2006), the court held that the pollution exclusion provision did not relieve an insurer of a duty to defend its insured in underlying suits alleging injuries from manganese welding fumes because “the policy exclusion does not apply beyond traditional environmental pollution situations.” 889 A.2d at 398. Similarly, in Nautilus Insurance Co. v. Jabar, 188 F.3d 27 (1st Cir. 1999), the court, applying Maine law, held that a pollution exclusion clause applied only to “those hazards traditionally associated with environmental pollution,” and thus, did not bar coverage for underlying claims alleging injury from exposure to hazardous fumes discharged by roofing products. 188 F.3d at 31. See also Am. States Ins. Co. v. Koloms, 687 N.E.2d 72, 82 (Ill. 1997) (“the exclusion applie[d] only to those injuries caused by traditional environmental pollution,” and therefore, did not apply to “[t]he accidental release of carbon monoxide ' due to a broken furnace”).

In MacKinnon v. Truck Insurance Exchange, 73 P.3d 1205 (Cal. 2003), the California Supreme Court explained the reason for this well recognized split of authority:

One camp maintains that the exclusion applies only to traditional environmental pollution into the air, water, and soil, but generally not to all injuries involving the negligent use or handling of toxic substances that occurs in the normal course of business. These courts generally find ambiguity in the wording of the pollution exclusion when it is applied to such negligence and interpret such ambiguity against the insurance company in favor of coverage. The other camp maintains that the clause applies equally to negligence involving toxic substances and traditional environmental pollution, and that the clause is as unambiguous in excluding the former as the latter. MacKinnon, 73 P.3d at 1208-09.

The MacKinnon court went on to hold that the pollution exclusion did not apply to a landlord's negligent spraying of pesticide around an apartment building because it could not be thought of as environmental pollution. Id. at 1218. Consequently, when asserting that pollution exclusion clauses do not apply to workplace exposure claims, policyholders frequently cite MacKinnon. However, four subsequent California cases and one federal case have found that, even under MacKinnon, pollution exclusions barred coverage based on fact patterns potentially analogous to those in benzene-related workplace exposure lawsuits.

For example, in Garamendi v. Golden Eagle Insurance Co., 25 Cal. Rptr. 3d 642 (Cal. Ct. App. 2005), the California Court of Appeal held that there was no duty to defend claims brought by workers exposed to silica dust from sand blasting operations. 25 Cal. Rptr. 3d at 648. Noting that federal regulations identify silica dust as an air contaminant, the court held:

[U]nder MacKinnon, the mere fact that silica, like almost anything else, may be an irritant or contaminant under some circumstances is not dispositive. But unlike the residential use of pesticide for the purpose of killing insects [as in MacKinnon], the widespread dissemination of silica dust as an incidental by-product of industrial sandblasting operations most assuredly is what is “commonly thought of as pollution” and “environmental pollution.” Id. at 646.

See also Am. Cas. Co. v. Miller, 71 Cal. Rptr. 3d 571, 581 (Cal. Ct. App. 2008) (“[p]ermitting methylene chloride to be released into a public sewer is an act of environmental pollution” even if it were a “one time release”); Cold Creek Compost, Inc. v. State Farm Fire & Cas. Co., 68 Cal. Rptr. 3d 216, 229 (Cal. Ct. App. 2007) (pollution exclusion barred coverage for offensive odors emanating from the insured's compost facility); Ortega Rock Quarry v. Golden Eagle Ins. Corp., 46 Cal. Rptr. 3d 517, 532 (Cal. Ct. App. 2006) (claim arising from quarry operator's discharge of fill material into a creek was barred by the pollution exclusion clause); Nat'l Fire Ins. Co. v. Martinelli, No. 07-cv-01056 (AWI), 2008 U.S. Dist. LEXIS 52911 at *31-32 (E.D. Cal. July 10, 2008) (pollution exclusion barred coverage for damage to plaintiff's crops arising from discharge of saltwater/brine wastewater).

Conclusion

In sum, application of the pollution exclusion in cases of occupational benzene exposure may be hotly litigated in the coming years ' particularly given the split of authority with respect to whether coverage exists for damages caused by toxic fumes generally. Depending on the manner in which the worker was exposed to benzene and the jurisdiction, the pollution exclusion may bar coverage.

Chet A. Kronenberg is a litigation partner in the Los Angeles office of Simpson Thacher & Bartlett LLP. He specializes in commercial litigation, insurance coverage, and securities work. Nicholas B. Melzer is an associate in the same office.

Many see benzene-related cases as the next big thing in toxic tort litigation. It is easy to see why. Benzene litigation has all the elements the plaintiffs' bar could want ' a large claimant pool, signature diseases, and sizable verdicts and settlements.

Benzene, one of the top 20 chemicals by volume in the United States, is found in solvents, gasoline and other fuels, and is widely used in various production processes. Unfortunately, benzene exposure has been associated with development of a particular type of leukemia called acute myeloid leukemia. As a result of its widespread usage and signature disease, many see benzene as the next big thing in toxic tort litigation. See, e.g., Lori Calabro, Problem Solvent: Get Ready for a Wave of Class-Action Lawsuits Linked to Benzene, CFO Magazine, Aug. 1, 2006.

In recent years, there has been an increasing number of benzene-related occupational exposure lawsuits and settlements. For example, earlier this year, a San Francisco jury awarded $8 million to a seaman who alleged that he was overexposed to benzene while aboard his employer's ships. Verdicts and Settlements, The Recorder (San Francisco), June 3, 2008, at 5. In a 2007 verdict, a Delaware jury awarded roughly $3.5 million to the wife of a former refinery worker who sued Texaco claiming the disease that killed her husband was caused by on-the-job exposure to benzene. Elizabeth Bennett, New Castle Jury Awards $3.5 Million Over Benzene Exposure, Del. L. Weekly, Nov. 14, 2007, at 3. And, in 2005, an aircraft painter who developed a rare form of leukemia received a settlement of almost $2.3 million based on his alleged exposure to benzene-contaminated paints and solvents used to clean his hands and paint gun. 14-5 Mealey's Emerg. Toxic Torts 3 (2005).

In benzene workplace exposure lawsuits, plaintiffs typically allege that workers were exposed to benzene on the job by means of inhalation and/or dermal contact and often assert product liability theories based on the defendants' alleged failure to warn workers about risks associated with exposure to benzene.

As benzene-related lawsuits continue to proliferate, defendants will undoubtedly turn to their insurers for defense and indemnification notwithstanding the broad pollution exclusions found in most commercial general liability (“CGL”) policies. Consequently, insurers may soon begin to see a significant increase in the number of benzene-related coverage claims. However, coverage is far from certain.

To date, there are very few insurance coverage decisions concerning benzene exposure, particularly in the occupational exposure context. Nonetheless, similar litigation in other contexts shows that the standard pollution exclusion contained in CGL policies may very well bar coverage depending on the facts of the case and the jurisdiction.

Traditional Spill/Leak Cases

It seems clear that the pollution exclusion in CGL policies bars coverage for benzene-related litigation in traditional environmental exposure cases. Traditional benzene-related lawsuits stemming from benzene leaks or spills are typically brought by residents of neighborhoods with benzene-contaminated water or soil against the owners of facilities from which benzene contamination allegedly emanated.

For example, more than 30 lawsuits were filed by Missouri residents against an oil refiner alleging intentional discharge of hazardous pollutants (including benzene) into the groundwater, air, and soil. In September 2005, a jury ordered the oil refiner to pay $13.3 million to the husband of a woman who died from cancer allegedly caused by the refiner's pollutants. Oil Titan Settles Lawsuit After Missouri Jury Verdict, Wall St. J., Sept. 16, 2005, at B4. In another 2005 case, the residents of a Brooklyn neighborhood that was the site of a decades-old oil spill filed a lawsuit against various oil companies. The residents alleged that toxic fumes from the underground spill contained levels of benzene associated with elevated risks of cancer. Nicholas Confessore, An Old Oil Spill Divides A Brooklyn Neighborhood, N.Y. Times, Nov. 1, 2005, at B3.

From an insurance coverage standpoint, the principal line of defense for such pollution claims has been the pollution exclusion contained in CGL policies which bars coverage for the release or discharge of “pollutants” or “contaminants.” Though prior to the mid-1980s, “qualified” pollution exclusions contained an exception for discharges of “pollutants” that were “sudden and accidental” or “sudden, unintended or expected,” most modern CGL policies now contain what is often referred to as a “total” or “absolute” pollution exclusion that is not qualified by time or intent. A typical absolute pollution exclusion states that coverage does not apply:

to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, 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, whether or not such discharge, dispersal, release or escape is sudden or accidental. Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes ”10.02(a), (e) (12th ed. 2004).

Multiple courts have found that pollution exclusions bar coverage for claims arising out of benzene spills or leaks. For example, in NL Industries, Inc. v. Commercial Union Insurance Co., Civ. No. 90-2125 (WHW), 1995 U.S. Dist. LEXIS 21615 (D.N.J. Aug. 25, 1995), the court held that an absolute pollution exclusion barred coverage for claims arising from the disposal of various chemicals, including benzene. Similarly, in Gotham Insurance Co. v. GLNX, Inc., No. 92 Civ. 6415 (TPG), 1993 U.S. Dist. LEXIS 10891 (S.D.N.Y. Aug. 6, 1993), the court held that an absolute pollution exclusion barred coverage for claims arising from the release of a benzene solution from a railroad car that plunged into a river. Finally, in Associated Indemnity Corp. v. Dow Chemical Co. , 248 F. Supp. 2d 629 (E.D. Mich. 2003), the court held that a benzene pipeline leak did not fall within the “sudden and accidental” carve-out of the qualified pollution exclusion at issue.

Even jurisdictions that have construed pollution exclusions quite narrowly have held that the discharge of benzene into groundwater or soil falls within the scope of the pollution exclusion. For example, in Pipefitters Welfare Educational Fund v. Westchester Fire Insurance Co. , 976 F.2d 1037 (7th Cir. 1992), the court held that regardless of how far some courts have limited the scope of the pollution exclusion, “one could not characterize the discharge onto land of 80 gallons of PCB-laden oil as anything but pollution.” 976 F.2d at 1044. (PCBs ' Polychlorinated biphenyls ' are organic compounds that include biphenyl, a molecule composed of two benzene rings.) Thus, the pollution exclusion should bar coverage for benzene-related spills and leaks in the traditional environmental exposure context.

Workplace Exposure Cases

In occupational exposure cases that do not involve traditional pollution claims, the outcome is less certain. There does not appear to be any reported cases directly addressing application of the pollution exclusion to workplace benzene exposure. However, “a majority of courts have concluded that absolute pollution exclusions unambiguously exclude coverage for damages caused by the release of toxic fumes,” Quadrant Corp. v. American States Ins. Co. , 110 P.3d 733, 738 (Wash. 2005), even where the claims do not involve industrial or environmental pollution in the traditional sense. For example:

• In Quadrant Corp. v. American States Insurance Co. , 110 P.3d 733 (Wash. 2005), the court held that the pollution exclusion barred coverage for injuries suffered by a tenant when toluene fumes from waterproofing material used by an apartment complex entered that tenant's unit. (Toluene is a less toxic benzene substitute.)
• In National Electric Manufacturers Association v. Gulf Underwriters Insurance Co. , 162 F.3d 821 (4th Cir. 1998), the court held that the pollution exclusion barred coverage for claims by welders that were exposed to manganese fumes while using welding products or in the proximity of other persons using welding products.
• In Terramatrix, Inc. v. United States Fire Insurance Co. , 939 P.2d 483 (Colo. Ct. App. 1997), an engineering firm owned a printing machine that emitted ammonia gas. Another tenant in the same building filed suit against the firm seeking relief for a variety of injuries caused by exposure to ammonia vapors. The court held that the pollution exclusion in the firm's policy barred coverage.
• In Park-Ohio Industries, Inc. v. Home Indemnity Co. , 975 F.2d 1215 (6th Cir. 1992), the court held that the pollution exclusion barred claims stemming from workplace exposure to “soot, smoke, fumes, dust pollutants and other particulates” inhaled by workers during operation of certain furnaces used to strip and burn rubber from the metal tracks of army tanks and armored personnel and missile carriers.

See also Reliance Ins. Co. v. Moessner , 121 F.3d 895, 901 (3rd Cir. 1997) (pollution exclusion excluded coverage for product liability claim stemming from the release of carbon monoxide emitted as a byproduct of a direct-fired steam generator); Am. States Ins. Co. v. Nethery , 79 F.3d 473 (5th Cir. 1996) (pollution exclusion precluded coverage relating to claims arising from the inhalation of fumes from paint and glue material); Toledo v. Van Waters & Rogers, Inc. , 92 F. Supp. 2d 44 (D.R.I. 2000) (pollution exclusion excluded coverage for claim arising out of inhalation of toxic fumes); Am. States Ins. Co. v. Technical Surfacing, Inc. , 50 F. Supp. 2d 888 (D. Minn. 1999) (pollution exclusion barred coverage for damage to grocery store food caused by the escape of xylene fumes from a floor sealant); Brown v. Am. Motorists Ins. Co. , 930 F. Supp. 207, 208-09 (E.D. Pa. 1996) (fumes from waterproofing sealant on exterior of house were “pollutant” within meaning of pollution exclusion), aff'd , 111 F.3d 125 (3rd Cir. 1997); Cook v. Evanson , 920 P.2d 1223 (Wash. Ct. App. 1996) (pollution exclusion precluded coverage for respiratory injuries sustained when fumes from concrete sealant entered building).

On the other hand, a “respectable minority” of jurisdictions has limited application of the pollution exclusion to traditional environmental pollution claims like the spill and leak examples discussed in above. John K. Dimugno & Paul E.B. Glad, California Insurance Law Handbook '45:28.2 (2008). For example, in Clendenin Brothers, Inc. v. United States Fire Insurance Co. , 889 A.2d 387 (Md. 2006), the court held that the pollution exclusion provision did not relieve an insurer of a duty to defend its insured in underlying suits alleging injuries from manganese welding fumes because “the policy exclusion does not apply beyond traditional environmental pollution situations.” 889 A.2d at 398. Similarly, in Nautilus Insurance Co. v. Jabar , 188 F.3d 27 (1st Cir. 1999), the court, applying Maine law, held that a pollution exclusion clause applied only to “those hazards traditionally associated with environmental pollution,” and thus, did not bar coverage for underlying claims alleging injury from exposure to hazardous fumes discharged by roofing products. 188 F.3d at 31. See also Am. States Ins. Co. v. Koloms , 687 N.E.2d 72, 82 (Ill. 1997) (“the exclusion applie[d] only to those injuries caused by traditional environmental pollution,” and therefore, did not apply to “[t]he accidental release of carbon monoxide ' due to a broken furnace”).

In MacKinnon v. Truck Insurance Exchange , 73 P.3d 1205 (Cal. 2003), the California Supreme Court explained the reason for this well recognized split of authority:

One camp maintains that the exclusion applies only to traditional environmental pollution into the air, water, and soil, but generally not to all injuries involving the negligent use or handling of toxic substances that occurs in the normal course of business. These courts generally find ambiguity in the wording of the pollution exclusion when it is applied to such negligence and interpret such ambiguity against the insurance company in favor of coverage. The other camp maintains that the clause applies equally to negligence involving toxic substances and traditional environmental pollution, and that the clause is as unambiguous in excluding the former as the latter. MacKinnon, 73 P.3d at 1208-09.

The MacKinnon court went on to hold that the pollution exclusion did not apply to a landlord's negligent spraying of pesticide around an apartment building because it could not be thought of as environmental pollution. Id. at 1218. Consequently, when asserting that pollution exclusion clauses do not apply to workplace exposure claims, policyholders frequently cite MacKinnon. However, four subsequent California cases and one federal case have found that, even under MacKinnon, pollution exclusions barred coverage based on fact patterns potentially analogous to those in benzene-related workplace exposure lawsuits.

For example, in Garamendi v. Golden Eagle Insurance Co. , 25 Cal. Rptr. 3d 642 (Cal. Ct. App. 2005), the California Court of Appeal held that there was no duty to defend claims brought by workers exposed to silica dust from sand blasting operations. 25 Cal. Rptr. 3d at 648. Noting that federal regulations identify silica dust as an air contaminant, the court held:

[U]nder MacKinnon, the mere fact that silica, like almost anything else, may be an irritant or contaminant under some circumstances is not dispositive. But unlike the residential use of pesticide for the purpose of killing insects [as in MacKinnon], the widespread dissemination of silica dust as an incidental by-product of industrial sandblasting operations most assuredly is what is “commonly thought of as pollution” and “environmental pollution.” Id. at 646.

See also Am. Cas. Co. v. Miller , 71 Cal. Rptr. 3d 571, 581 (Cal. Ct. App. 2008) (“[p]ermitting methylene chloride to be released into a public sewer is an act of environmental pollution” even if it were a “one time release”); Cold Creek Compost, Inc. v. State Farm Fire & Cas. Co. , 68 Cal. Rptr. 3d 216, 229 (Cal. Ct. App. 2007) (pollution exclusion barred coverage for offensive odors emanating from the insured's compost facility); Ortega Rock Quarry v. Golden Eagle Ins. Corp. , 46 Cal. Rptr. 3d 517, 532 (Cal. Ct. App. 2006) (claim arising from quarry operator's discharge of fill material into a creek was barred by the pollution exclusion clause); Nat'l Fire Ins. Co. v. Martinelli, No. 07-cv-01056 (AWI), 2008 U.S. Dist. LEXIS 52911 at *31-32 (E.D. Cal. July 10, 2008) (pollution exclusion barred coverage for damage to plaintiff's crops arising from discharge of saltwater/brine wastewater).

Conclusion

In sum, application of the pollution exclusion in cases of occupational benzene exposure may be hotly litigated in the coming years ' particularly given the split of authority with respect to whether coverage exists for damages caused by toxic fumes generally. Depending on the manner in which the worker was exposed to benzene and the jurisdiction, the pollution exclusion may bar coverage.

Chet A. Kronenberg is a litigation partner in the Los Angeles office of Simpson Thacher & Bartlett LLP. He specializes in commercial litigation, insurance coverage, and securities work. Nicholas B. Melzer is an associate in the same office.