Written by David O’Neill, JD, Director of Investigations

Unlike the Supreme Court of Indiana, which took a clear position on the ambiguity of the absolute pollution exclusion in its 2012 State Automobile Mutual Insurance Company v. Flexdar, Inc. decision, the Missouri Supreme Court has yet to make a ruling on the meaning of the exclusion.  However, the Federal Courts have been unusually active in predicting how the Missouri high court might apply or not apply the exclusion in varying scenarios.

Most recently, the Eighth Circuit U.S. Court of Appeals filed a June 13, 2013 opinion in the case styled  Doe Run Resources Corporation v. Lexington Insurance Company in which it reviewed a District Court’s denial of insurance defense to a lead mine and mill operator  under a general liability insurance policy.  The lead producer cited to the 1999 Missouri Court of Appeals opinion in Hocker Oil Co. v. Barker-Phillips-Jackson.  There, Missouri court had decided that the pollution exclusion was ambiguous as it applied to gasoline as a product in the operation of a gasoline station.  In both cases, the CGL policies did not define “pollutant.”  The Hocker court was unwilling to enforce a policy that provided no coverage for a large segment of the insured’s business operations.   Making the analogy to lead concentrate and tailings as being products in a lead mining and milling scenario, the Doe Run court then set out to distinguish product from pollutant based on the way the substance is stored. The Eighth Circuit’s decision not to follow Hocker may leave that case’s precedential value in question.

Only six months earlier, the U.S. District Court for the Eastern District of Missouri had relied in part on   Hocker for its ruling in United Fire & Casualty Company v. Titan Contractors Service, Inc. that “like the gasoline at issue in Hocker Oil,” the vapors from a concrete sealant by contractors at a construction site were not specified as “pollutants” and therefore bodily injury resulting from them was a covered occurence.  The District Court also observed that Missouri courts have shown a willingness to “look at the alleged pollutant through the eyes of the insured,” and that “no reasonable policy holder would expect that an insurance policy issued to a contractor that cleans and seals concrete floors in the course of his business, unambiguously excluded coverage for injuries suffered when office workers in adjoining office space were exposed to fumes from the concrete sealant.”

The Eighth Circuit’s opinion in Doe Run Resources Corporation makes a distinction between the lead concentrate that is Doe Run’s “primary product” and discarded or abandoned lead concentrate and tailings which are not products.  The court’s opinion observes that the concentrate and tailings were valuable products  “when properly contained”  but this didn’t change their character as toxic or hazardous materials or make them “any less pollutants” when abandoned and released into the environment.  Not content to distinguish Hocker Oil, the Eighth Circuit’s Doe Runopinion suggests that Hocker Oil was wrongly decided.  While Hocker Oil “focused on whether gasoline was the insured’s product, rather than on its toxic characteristics when accidentally released into the environment, that focus was a minority opinion when adopted, has been almost uniformly rejected by appellate courts in other jurisdictions, and has not since been cited or referred to favorably by the Supreme Court of Missouri.” It goes so far as to reference 2008 cases from Montana and Alaska which decline to follow Hocker Oil.  Quoting the Alaska court’s opinion, the Eighth Circuit states: “As one court concluded, correctly in our view, ‘even though gasoline that is in (an underground storage tank) is a product for purposes of other parts of the insurance policy, when the gasoline escapes or reaches a location where it is no longer a useful product it is fairly considered a pollutant.’”

One can only imagine that the Missouri Supreme Court, after following these Federal Courts’ characterizations of Missouri law will take the next opportunity to clear the air concerning the meaning of the absolute pollution exclusion and the term “pollutants” in insurance policies in force in the state of Missouri.