Union Ins. Co. v. Mendoza (United States Court of Appeals, Tenth Circuit, December 13, 2010)
This coverage dispute arises from an environmental exposure claim wherein third-party claimant, Karla Mendoza, appealed the district court’s grant of summary judgment in favor of Union Insurance in which it ruled that the accidental disbursement of anhydrous ammonia was excluded from coverage by Union’s pollution exclusion clause.
Mendoza, while working on a road-side construction crew, alleged personal injuries when she was inadvertently exposed to a mist of anhydrous ammonia fertilizer released by Union’s insured while the insured was plowing an adjacent field. Relying on a pollution exclusion provision in the policy, Union denied coverage for the Mendoza lawsuit. The district court granted Union’s motion for summary judgment ruling the insured’s accidental disbursement of ammonia was excluded from coverage by the pollution exclusion, as the language of the policy defining pollutant was not ambiguous and that anhydrous ammonia, while useful as a fertilizer in farming operations, is an “irritant” and “contaminant.”
On appeal, Mendoza contended that the anhydrous ammonia was being used as a fertilizer and that under the circumstances, was not a pollutant. She further contended that the definition of a pollutant in the exclusion was so overly-broad as to be ambiguous because any substance could conceivably meet the definition of a pollutant under the exclusion. In response, Union presented evidence that anhydrous ammonia has known hazardous effects, including respiratory tract, skin and eye burns, and contains components listed as a hazardous air pollutant under the Clear Air Act. Further, Mendoza’s claims of burning in her eyes, throat, lungs and skin further established that the fertilizer is an irritant.
The court of appeals noted that different courts interpreting the same definition of a pollutant in liability exclusion clauses have reached different conclusions as to the term’s meaning and whether it is deemed ambiguous. Based on these conflicting interpretations, the court of appeals requested the Kansas Supreme Court to accept a certified question whether the exclusion is ambiguous under Kansas law. Notably, however, after initially accepting certification, the Kansas Supreme Court declined to review, stating that in light of the recent Kansas federal district court decision in Gerdes v. American Family Mutual Ins. Co., 713 F. Supp. 2d 1290 (D. Kansas 2010), it would be improper to accept certification because there is now controlling Kansas precedent on the issue. Specifically the Supreme Court noted that Gerdes acknowledged the precedential value of the holdings in Crescent Oil and Atlantic Avenue beyond the facts of those cases. In Gerdes, the district court held that under Kansas law, and as articulated in Atlantic Avenue and Crescent Oil, the definition of a pollutant in a pollution exclusion clause is not so overly broad as to be ambiguous and is not subject to conflicting interpretations. Consequently, based on Gerdes, and the Kansas Supreme Court’s characterization of that decision, the court of appeals held that under Kansas law, the definition of a pollutant as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste” is not ambiguous and must therefore be enforced according to its terms.
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Paul Steck and John Kuller
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