Is My Drywall Chinese? - HB Litigation Conferences

In reaching its decision, the California court first discussed the various reasons courts
narrowly have construed the APE. Some courts have relied on the history of the pollution
exclusion, which was intended to cover only “traditional environmental contamination.” Some
courts have also recognized that a broad reading of the APE to cover any contaminant or irritant
“would have absurd or otherwise unacceptable results.” Other courts have also recognized that
the phrase “discharge, dispersal, release or escape” contains terms of art describing
environmental pollution and implies expulsion of a pollutant over an extended area, and not a
localized toxic accident.
In analyzing the case before it, the California Supreme Court first stated that, under a
CGL policy, a policyholder has a reasonable expectation that it will have coverage for ordinary
acts of negligence resulting in bodily injury and that coverage should therefore be found unless
the APE “conspicuously, plainly and clearly” apprises the insured that ordinary acts of
negligence will not be covered. The court then found that the insurer’s broad construction of the
APE would yield results that no one would consider reasonable, such as excluding a hypothetical
allergic reaction to swimming pool chlorine. 40 The court also reviewed the definitions and uses
of the terms “discharge, dispersal, release or escape” and found that the application of pesticides
around an apartment does not plainly signify the common understanding of the “dispersal” of a
“pollutant.” 41
Finally, the court held that the plain meaning of the APE turns on the meaning of the term
“pollutant.” The court stated that the scope of the APE should be limited to injuries arising from
events commonly thought of as pollution, i.e., environmental pollution, and that this
40
Id. at 239-40.
41
Id. at 241.
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