Minnesota Supreme Court Holds Absolute Pollution Exclusion Covers Carbon Monoxide

In Midwest Family Mutual Insurance Company v. Wolters, __ N.W.2d __, 2013 WL 2363239 (Minn. May 31, 2013), the Minnesota Supreme Court, applying Minnesota law, affirmed the court of appeals ruling that an absolute pollution exclusion in a general liability policy encompasses carbon monoxide released inside a home by a negligently installed boiler. The court found the definition of “pollutant” unambiguously applied to carbon monoxide.

In Wolters, a general contractor improperly installed a boiler, as well as the carbide monoxide detectors, in a personal residence. Id. at *2. The home owners suffered carbon monoxide poisoning and brought litigation against the contractor. Id. The contractor's insurer appointed defense counsel, subject to a reservation of rights, and initiated a declaratory judgment action, seeking a ruling that it had no duty to defend or indemnify because coverage was barred under the absolute pollution exclusion. Id. The district court denied the insurer's motion for summary judgment, holding that it would be inappropriate to rule as a matter of law in favor of the insurer under the facts presented, since the contractor did not cause “environmental pollution.” Id. at *3.

The court of appeals reversed. Id. Following the “non-technical, plain-meaning approach” previously taken by Minnesota courts in interpreting a qualified pollution exclusions, it held that carbon monoxide constituted a “pollutant” within the meaning of the policy. Id. The Minnesota Supreme Court agreed. It noted that the term “pollutant” was defined in the policy to include “any . . . gaseous . . . pollutant, irritant or contaminant” and that both the federal government and government of Minnesota classify carbon monoxide as a pollutant. Id. at *7. It also noted that carbon monoxide qualifies as an “irritant,” because it caused physical irritation to the injured parties. Id. at *8.

The court addressed whether pollution can occur indoors; it noted the distinction drawn in an earlier Minnesota Supreme Court case between policy language referring to pollution of the air and pollution of the atmosphere. Id. (citing Board of Regents of the University of Minnesota v. Royal Insurance Co. of America, 517 N.W.2d 888, 892-93 (Minn. 1994)). It then held that, since the policy at issue did not use language “descriptive of the natural environment only,” it applied to pollution of the air inside a building. Id.

The court also rejected public policy arguments, holding...