In Midwest Family Mutual Insurance Company v. Wolters, filed May 31, 2013, the Minnesota Supreme Court addressed the issue of whether the absolute pollution exclusion found in the Midwest general liability insurance policy (“Midwest policy”) was limited to traditional environmental pollutants or whether the exclusion encompassed carbon monoxide released in a home by a negligently installed boiler. In the underlying action, appellants brought litigation against Wolters, whom they had hired to build a seasonal residence, after the appellants suffered injuries due to carbon monoxide poisoning. Appellants alleged negligence in the installation of an in-floor heating system boiler and carbon monoxide detectors and breach of express and implied warranties. Subject to a reservation of rights, Midwest appointed defense counsel to represent Wolters and then initiated a declaratory judgment action. Midwest asserted that it had no duty to defend or indemnify Wolters for the claims asserted in appellants’ lawsuits because the policy’s absolute pollution exclusion barred coverage.
Although the Court had previously considered the scope of a qualified pollution exclusion, this was the first time the Court addressed the scope of the absolute pollution exclusion. The Court ultimately concluded that carbon monoxide released from a negligently installed boiler is a “pollutant” under the terms of the Midwest policy, and therefore subject to the absolute pollution exclusion of the Midwest policy.
The appellants argued that “the definition of ‘pollutants’ is ambiguous in the context of this case and contradicts the policyholder’s reasonable expectations.” The Midwest policy defines “pollutant” to include “any . . . gaseous . . . pollutant, irritant or contaminant.” The Court applied a “plain-meaning approach” of interpretation and noted that both the federal government and the Minnesota Pollution Control Agency regulate carbon monoxide and classify it as a pollutant. Furthermore, the exclusion applies to indoor carbon monoxide because “the Midwest policy does not ‘use language descriptive of the natural environment only,’ such as ‘atmosphere’ or ‘watercourse[.]'” Therefore, the Court determined that carbon monoxide is a “pollutant” under the terms of the Midwest policy and the absolute pollution exclusion would bar coverage for the release of carbon monoxide inside the subject home.
Justice Paul H. Anderson authored a dissenting opinion that found the exclusion ambiguous because it was reasonable to interpret the exclusion as applying only to traditional environmental pollution. The dissent noted that courts that have considered the specific issues of whether the pollution exclusion bars coverage of negligence claims arising from carbon monoxide poisoning are about evenly split, and that this split points in favor of finding ambiguity. Justice Anderson’s dissent argues that since the Court interprets exclusions narrowly and construes ambiguous language in an insurance policy against the insurer, this ambiguous pollution exclusion should be construed in favor of coverage.
Of note, the majority opinion of the Court included a statement in that there are serious concerns regarding the breadth of the exclusion and that the Court was not attempting to define the complete scope of the term “pollutant” in the absolute pollution exclusion. The Court also acknowledged “that the results here are regrettably harsh” but stated that “the place to settle the public policy issues underlying this exclusion is in the marketplace or by legislative action.”