If Not 'Determinative,' Then At Least Compelling: Other, Specific Exclusionary Language Available On Market Undermines Application Of Pollution Exclusion

Recently, in a non-precedential order, an Illinois appellate court correctly held that a "Pollution and Health Hazard Exclusion" in a commercial general liability policy did not preclude coverage for mold-related bodily injury claims. See In re Liquidation of Legion Indem. Co., 2014 IL App (1st) 140452-U (Sept. 30, 2015) (applying Texas law).

That court held, inter alia, that "the plain language of the [p]olicy does not specifically exclude mold related claims." Id. at ¶ 16. It continued: "While the policy does not need to specifically list the terms 'mold' and 'fungi', the intent to exclude coverage must be expressed in clear and unambiguous language. Here the alleged intent to exclude mold related claims was not clearly stated in the [pollution e]xclusion." Id. at ¶¶ 17-18 (internal citation omitted). The court later stated: "It is undisputed that the [p]olicy's [e]xclusion did not include the words 'mold,' or 'fungi' although [the insurer] could have easily inserted the words in the [p]olicy's [e]xclusion to avoid different interpretations." Id.at ¶ 21. All good points.

The appellate court added, "While not determinative, we also note that several liability and property insurance policies that [the insurer] filed in the Illinois Department of Insurance clearly and unambiguously excluded mold or fungi from coverage by listing the terms in the exclusion sections of their policies while the [p]olicy in the instant case does not." Id. at ¶ 28.

The court was correct to consider whether there was other exclusionary language available on the market (regardless whether it was used by the same insurer) that expressly precluded coverage for mold-related bodily injury claims. In fact, although the court found such evidence not to be "determinative," it could have - and should have - given this evidence even greater weight.

"[S]everal courts have observed an insurance company's failure to use available language to exclude certain types of liability gives rise to the inference that the parties intended not to so limit coverage." Fireman's Fund Ins. Cos. v. Atlantic Richfield Co., 115 Cal. Rptr. 2d 26, 33 (Cal. Ct. App. 2001). Cf. also, e.g., Philadelphia Elec. Co. v. Nationwide Mut. Ins. Co., 721 F. Supp. 740, 742 (E.D. Pa. 1989) ("If the parties had intended coverage to be limited to the vicarious liability type suggested by the defendants, language clearly embodying that intention was available ...."); Pardee Constr. Co. v. Insurance Co. of the...