Is My Drywall Chinese? - HB Litigation Conferences

to test for, monitor, clean up, remove, contain, treat, detoxify or
neutralize, or in any way respond to, or assess the effects of,
“pollutants.”
(2) Any loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory requirement that any
insured or others test for, monitor, clean up, remove, contain, treat,
detoxify or neutralize, or in any way respond to, or assess the effects
of, “pollutants”; or
(b) Claim or “suit” by or on behalf of a governmental authority for
damages because of testing for, monitoring, cleaning up, removing,
containing, treating, detoxifying or neutralizing, or in any way
responding to, or assessing the effects of, “pollutants.”
However, this paragraph does not apply to liability for damages because of
“property damage” that the insured would have in the absence of such request,
demand, order or statutory or regulatory requirement, or such claim or “suit”
by or on behalf of a governmental authority. 2
A. Traditional or Literal Interpretation
The most important factor in whether the absolute pollution exclusion will apply to
claims against a particular contractor based on Chinese drywall will be which state’s law is
applied to the contractor’s claim for coverage. The courts of several states construe the
absolute pollution exclusion literally, despite the resulting application of the exclusion to
harm that is well beyond the liability for traditional environmental pollution that gave rise to
the exclusion. These courts generally refuse to consider extrinsic evidence showing that the
insurance industry assured insurance regulators and others when the exclusion was being
adopted that the exclusion applied only to traditional pollution and would not be applied
according to its literal terms. Substances held to be “pollutants” by such courts include
ammonia, carbon monoxide, adhesives, asbestos, cement or cement components, paint
2 The term “pollutants” is defined in part to mean a “solid, liquid, gaseous or thermal
irritant or contaminant.” The definition specifically refers to smoke, vapor, soot, fumes,
acids, alkalis, chemicals, and waste, defined as including material to be recycled, reclaimed
or reconditioned, as examples of irritants or contaminants.
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