Is My Drywall Chinese? - HB Litigation Conferences

Even when courts find that an APE should be interpreted to preclude coverage, they
may – as courts did with the “sudden and accidental” pollution exclusions 19 – order discovery of
the regulatory history of the exclusion. Thus, a federal court in Pennsylvania held that, without
more, the text of an APE would preclude coverage for contamination from deterioration of
copper roofing materials which discharged lead and copper into the environment. 20 However,
the court allowed the policyholder to pursue discovery about representations made to
Pennsylvania insurance regulators with regard to whether an APE was intended, as a matter of
insurance industry custom and practice, to preclude coverage for products and completed
operations claims. 21
Environmental Terms of Art
Insurance companies also resist the argument that the APE and TPE should be limited to
environmental pollution because they use environmental terms of art. However, proceedings of
the National Association of Insurance Commissioners (“NAIC”) in 1986 demonstrate that the
insurance industry developed the exclusion specifically to address the retroactive, joint-and-
several, and strict liability imposed for the first time in the Comprehensive Environmental
Response, Compensation & Liability Act (“CERCLA” or “Superfund”) in 1980. 22 It is telling
that, when the insurance industry chose its limiting language for use in its insurance policies, it
19
See supra footnote 2 and accompanying text.
20
Hussey Copper Ltd. v. Royal Ins. Co., No. 07-758, 2008 WL 2906899 (W.D. Pa. July 28,
2008).
21 Id.
22 Such terms did, as insurance companies sometimes point out, predate CERCLA and, in fact,
appear in the “sudden & accidental” pollution exclusion in 1970. However, it was the spectre of
CERCLA’s vast expansion of liability that the insurance industry most feared and spurred the
industry to promulgate the APE.
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