Is My Drywall Chinese? - HB Litigation Conferences

ingestion of lead paint debris found inside the building. The lessor’s insurance policy contained
a standard “sudden and accidental” pollution exclusion until January 3, 1991. At that time, the
policyholder received a replacement insurance policy containing both an APE and a specific
exclusion for lead. The insurance company argued that both exclusions precluded coverage for
the policyholder’s liability.
The Minnesota Court of Appeals disagreed. The court concluded that the pre-1991
pollution exclusion did not apply to preclude coverage for lead-paint liability, but rather “was
directed at claims involving pollution of the natural environment.” 65 The court also refused to
apply the so-called APE to preclude coverage for the policyholder’s liability, finding that the
insurance company had failed to adequately notify the policyholder of the reduction in coverage
represented by inclusion of the “absolute” pollution exclusion in its insurance policy incepting
on January 3, 1991. The court noted that, if an insurance company does not give adequate notice
of such changes in coverage, the reduction in insurance coverage is void: “[W]hen an insurer
substantially reduces a policyholder’s coverage, it has an affirmative duty to notify the
policyholder in writing.’ . . . If proper notice is not given, any reduction in coverage is void and
the terms of the prior policy apply.” 66
The court concluded that a flier included with the insurance policy suggesting that the
policyholder read his insurance policy did not give sufficient notice of the substantial reduction
in coverage effected by the inclusion of the “absolute” pollution exclusion:
65 Id. at *3.
Although the stuffer suggested that the policyholder “take a few
minutes to read about the improvements to [his] homeowner’s
66 Id. (citing Benton v. Mutual of Omaha Ins. Co., 500 N.W.2d 158, 160 (Minn. App. 1993);
Canadian Universal Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 575 (Minn. 1977)).
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