By David A. O’Neill JD


The U.S. District Court for the Western District of North Carolina ruled on October 19, 2020 that the “hazardous materials” exclusion in a 2008 CGL policy did not apply to relieve the insurer of its duty to defend a manufacturer of fire suppressant foam against allegations of bodily injury from direct product exposure. The court’s decision appears to be the first of several hundred cases consolidated in North Carolina alleging bodily injury and property damage from exposure to products containing perfluoroctane sulfanate (PFOS) and/or perfluorooctanic acid (PFOA).

In Colony Insurance Company v. Buckeye Fire Equipment Co., Colony sought the Court’s declaration that its “hazardous exposure” exclusion applied to bar its duty to defend in a case where a firefighter was significantly exposed to elevated levels of PFOS and PFOA in his demonstration and application of Buckeye’s products. The Colony policy defined “hazardous materials” in part as “pollutants” and defined “pollutants” as “any solid, liquid, gaseous irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

Looking to North Carolina law, the District Court cited a 1991 case styled West American Insurance Co. v. Tufco Flooring East, Inc. in which the state court of appeals found a duty to defend despite the presence of a pollution exclusion. The Tufco court characterized the terms used in the pollution exclusion as “environmental terms of art” and reasoned that any “discharge, dispersal, release or escape of pollutants” therefore needed to be into the environment to trigger the pollution exclusion and deny coverage to the insured.

Further, the District Court found that the Tufco rule had been applied in a 4th Circuit Court of Appeals case styled Auto-Owners Insurance Co. v. Potter where the insured was sued for bodily injury based on contact with contaminated water. That court had determined that “under North Carolina law, an insurer may not deny coverage to an insured based on a pollution exclusion, or any variation thereof, if the occurrence and the resulting injury and property damage allegedly suffered….are not the prototypical environmental harms that a pollution exclusion clause is generally intended to protect against.”

Applying the Tufco rule to the Colony Insurance Company case, the District Court determined that the firefighter’s bodily injury complaint did not allege the “prototypical environmental harm” that the pollution exclusion was intended to protect against. Hence, the exclusion was ineffective to bar the insurer’s duty to defend.

This decision by the U.S. District Court for the Western District of North Carolina is expected to be indicative of its future decisions in the underlying cases as it applies the law of the various states to issues identified here concerning the use of firefighting products containing PFOS and PFOA. The underlying cases include those from Maryland, Washington and New Hampshire – all states where courts have found personal injury can result from exposure to pollutants. Also, this North Carolina decision did not determine whether the insurer had the duty to indemnify, only that it had the duty to defend. That issue remains to be decided in the various cases.

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headshot of David O'NeillDavid A. O’Neill, Director of Investigations

David O’Neill has over 20 years of experience in claims recovery on behalf of corporate policyholders involving environmental property damage and toxic tort and asbestos exposure claims. He is an accomplished insurance archeologist with extensive experience in locating and retrieving insurance coverage evidence on behalf of potentially responsible parties responding to environmental investigation and remediation demands. Mr. O’Neill is also an experienced PRP investigator with knowledge of CERCLA/SARA requirements, having conducted over thirty PRP searches at Superfund hazardous waste sites for PRP defense counsel and previously for USEPA Regions V and VIII. Mr. O’Neill was formerly Insurance Research Manager for Risk International Services, Inc. He graduated from Case Western Reserve Law School in 1986.