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Richardson v. Nationwide Mutual Insurance Company

June 12, 2003

ANTOINETTE RICHARDSON, APPELLANT,
v.
NATIONWIDE MUTUAL INSURANCE COMPANY, APPELLEE.



Certified Question from the United States Court of Appeals for the District of Columbia Circuit (00-7203)

Before Schwelb, Glickman, and Washington, Associate Judges.

The opinion of the court was delivered by: Schwelb, Associate Judge

As amended June 16, 2003.

ANTOINETTE RICHARDSON, APPELLANT,
v.
NATIONWIDE MUTUAL INSURANCE COMPANY, APPELLEE.

Certified Question from the United States Court of Appeals for the District of Columbia Circuit (00-7203)

David P. Sutton, with whom Robert J. Pleshaw was on the brief, for appellant.

Catherine M. Colinvaux, with whom David P. Durbin was on the brief, for appellee.

Robert R. Rigsby, Corporation Counsel at the time the brief was filed, Charles L. Reischel, Deputy Corporation Counsel, and Michael F. Wasserman, Assistant Corporation Counsel, filed a brief for the Commissioner of the District of Columbia Department of Insurance and Securities Regulation, amicus curiae.

Laura A. Foggan and John C. Yang filed a brief for the Complex Insurance Claims Litigation Association, amicus curiae.

Before Schwelb, Glickman, and Washington, Associate Judges.

The opinion of the court was delivered by: Schwelb, Associate Judge

Argued April 23, 2002

Opinion for the court by Associate Judge SCHWELB.

Dissenting opinion by Associate Judge GLICKMAN at page 52.

Antoinette Richardson, a security guard at an apartment complex operated by National REO Management (REO), alleges that she suffered serious personal injuries, including brain damage, as a result of inhaling carbon monoxide fumes from a leaking gas furnace located on the premises. In a suit against REO which she brought in the Superior Court, Ms. Richardson alleged, inter alia, that REO failed to exercise due care in maintaining the furnace and that her injuries were proximately caused by REO's negligence.

REO was insured under a comprehensive general liability (CGL) insurance policy issued by Nationwide Mutual Insurance Company (Nationwide). The policy contained an "absolute" pollution exclusion clause which provided, inter alia, that coverage was excluded for:

(1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured[.]

Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. . . . *fn1

Relying on the pollution exclusion, Nationwide brought an action against REO in the United States District Court for the District of Columbia, seeking a declaratory judgment that Nationwide was not required to defend or indemnify REO in connection with Ms. Richardson's suit. Ms. Richardson was permitted to intervene with respect to certain issues in Nationwide's action and, on July 26, 2000, the District Court granted summary judgment in favor of Nationwide, concluding that the pollution exclusion barred coverage as a matter of law. Nationwide Mut. Ins. Co. v. Nat'l REO Mgmt., Inc., 205 F.R.D. 1, 9-12 (D.D.C. 2000) (Nationwide I). *fn2 Ms. Richardson appealed, and on November 2, 2001, the United States Court of Appeals, noting the importance of the issue presented and the lack of any dispositive District of Columbia precedent, certified the following question of law to this court pursuant to D.C. Code § 11-723 (2001):

In light of the facts set forth below, does the pollution exclusion clause apply to injuries arising from alleged carbon monoxide poisoning?

Nationwide Mut. Ins. Co. v. Richardson, 348 U.S. App. D.C. 124, 126-27, 270 F.3d 948, 950-51 (2001) (Nationwide II).

The largely undisputed history of the adoption of the absolute pollution exclusion reveals that its purpose was to protect insurers, in light of then recently enacted federal environmental legislation, from liability in the billions of dollars for environmental cleanups of hazardous waste sites and industrial facilities. A reasonable person reading the entire clause at the time it was written by the insurance industry and approved by state regulators could fairly conclude that its language was fully consistent with this purpose, and that the exclusion therefore had no application to a malfunctioning furnace in an apartment house. Any ambiguity in the clause must, of course, be resolved in favor of the insured. Finding ourselves in agreement with the decisions of the three highest state courts which have considered factual scenarios and legal issues essentially identical to those here presented, *fn3 with the views of the District agency responsible for the regulation of insurance, *fn4 and with the more persuasive rulings of other courts that have addressed similar issues, *fn5 we answer the certified question in the negative.

I. THE BUSINESS AND REGULATORY CONTEXT

The pollution exclusion clause relied upon by Nationwide in this case and quoted in footnote 1 of this opinion cannot be construed in the abstract, i.e., without an understanding of the business and regulatory context in which the policy of which it is a part was written. *fn6 We therefore begin with a brief description of the procedures by which insurance policies are prepared, and, in particular, we explain how the clause here at issue came into being. In our view, this background illuminates the question whether, as Nationwide contends, the exclusion unambiguously bars coverage, or whether, as Ms. Richardson argues, a proper construction of the policy establishes that the exclusion does not apply.

The relevant context has been well described in the very helpful brief of the Commissioner of the District's Department of Insurance and Securities Regulation as amicus curiae:

A contract of insurance is in its fundamentals simple. In exchange for a certain sum of money, the insurer agrees to perform if some uncertain future event comes about. The sum paid in advance is called the premium. The subject matter of the contract is called the risk. The contract itself is called a policy. If the policy is limited to only certain hazards or dangers, those are called perils.

Several aspects of the organization of the business of insurance flow from its nature. To fix a premium, the insurer must calculate the expected cost of its performance. To do that successfully, it is generally necessary to aggregate and analyze past claims experience. Most insurers, however, do not acquire from their own operations sufficient experience from which to make a reliable calculation. Furthermore, information concerning such matters as local conditions and applicants' claims experience may also be important factors in fixing premiums. Consequently, insurers have historically combined to pool their claims experience as well as to acquire and share other information. . . .

Another aspect of the business of insurance is the use of form contracts. The use of forms is not a mere matter of convenience. Form policies ensure consistency and comparability between contracts. Premiums are more easily and routinely calculated. Experience gained under one form of policy can be more readily aggregated. Administration of many policies based on a single form is more efficient and readily routinized. The language used in the forms acquires particular meaning, based on repeated application to various circumstances. All of that tends toward achieving the great public office of insurance: to render certain and predictable in financial terms things which are uncertain and unpredictable in their nature.

The close relation between premium rates and forms of policies means that the same associations that aggregate and analyze claims experience also draft and license the use of policy forms. Such cooperation is expressly authorized by District law. [Citation omitted.] In the area of commercial liability insurance, the largest United States association is the Insurance Services Office (ISO). [Footnote omitted.] The policy at issue in this case is written on an ISO form.

Brief for Commissioner at 4-6 (emphasis in original).

The foregoing passage reflects the reality that although the policy here at issue is an agreement between Nationwide and REO, its content, which is a part of a "form" prepared by the insurance industry, reflects the experiences of insurers generally. Moreover, as noted by the Commissioner, the business of insurance is closely regulated. Id. at 7. Statements made by representatives of the insurance industry to obtain approval of proposed policy language can therefore be quite significant. See, e.g., Doerr v. Mobil Oil Corp., 774 So. 2d 119, 132-34 (La. 2000) (chronicling inaccurate statements by representatives of the insurance industry regarding the meaning of earlier pollution exclusion clauses), opinion corrected on unrelated grounds, 782 So. 2d 573 (La. 2001) (per curiam); Morton Int'l, Inc. v. Gen. Accident Ins. Co. of Am., 629 A.2d 831, 848-55, 868-70 (N.J. 1993) (same), cert. denied, 512 U.S. 1245 (1994); 9 LEE R. RUSS & THOMAS F. SEGALLA, COUCH ON INSURANCE § 127:8, at 127-24, § 127:14, at 127-37 (3d ed. 1997) (hereinafter COUCH).

As the Supreme Court of New Jersey has recognized, "the typical commercial insured rarely sees the policy form until after the premium has been paid." Morton Int'l, 629 A.2d at 852 (citations omitted). Moreover, insurance policies are

written by the insurers, who are "equipped with able counsel and other experts in the field," while the policyholders, who generally play no role in the drafting of such contracts "are, in vast majority, not informed in the obscurities of insurance expertise and not equipped to understand other than plain language."

Cameron v. USAA Prop. & Cas. Ins. Co., 733 A.2d 965, 968 (D.C. 1999) (quoting Hayes v. Home Life Ins. Co., 83 U.S. App. D.C. 110, 112, 168 F.2d 152, 154 (1948) (Prettyman, J.)) (internal quotation marks omitted); see also Chase v. State Farm Ins. Co., 780 A.2d 1123, 1127 (D.C. 2001). Thus,

to the extent that the pollution-exclusion clause ever was subjected to arms-length evaluation by interests adverse to the insurance industry, that evaluation occurred only when the clause was submitted to and reviewed by state regulatory authorities.

Morton Int'l, 629 A.2d at 852. It is therefore important to consider the meaning of the "form" absolute pollution exclusion clause at issue in this case at the time that it was introduced by the insurance industry and reviewed by state regulators.

II. THE HISTORY OF THE POLLUTION EXCLUSION

Prior to World War II, insurance policies in this country were structured to cover liability arising only from specific perils expressly identified therein. See Brief for Commissioner at 10. Beginning in the 1940s, insurers began to offer CGL policies which were not limited to liability for particular perils; instead, coverage started from the premise that "the risk covered was all liability, unless specifically excluded." Id. (emphasis in original). The insurance contract at issue in this case is such a CGL policy.

We now turn to the pollution exclusion itself. "Before 1966, to be covered [under a CGL policy], an injury giving rise to liability had to be caused by an accident." Brief for Commissioner at 11 (emphasis in original). In 1966, the word "accident" in the CGL policy was replaced by "occurrence," and this change was viewed as expanding the insurer's liability by including harms that came about gradually as well as those that occurred as a result of a single accidental event. Id.

In the 1970s, in order to counteract this perceived expansion of coverage, the insurance industry developed the "original general pollution exclusion." That provision excluded coverage for

Bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water.

9 [COUCH] § 127:6. Over time, many policies began to include a "sudden and accidental" exception to this pollution exclusion: "This exclusion does not apply if such discharge, dispersal, release or escape is sudden or accidental." See id. at § 127:8.

Doerr, 774 So. 2d at 126; see also Brief for Commissioner at 11-12. According to the Supreme Court of New Jersey, the purpose of the "sudden and accidental" exception to the pollution exclusion was to deny coverage only to intentional polluters. Morton Int'l, 629 A.2d at 870-72 (summarized in 9 COUCH § 127:8); see also Claussen v. Aetna Cas. & Sur. Co., 380 S.E.2d 686, 689 (Ga. 1989) ("Documents presented by the Insurance Rating Board [which represents the industry] to the Insurance Commissioner when the 'pollution exclusion' was first adopted suggest that the clause was intended to exclude only intentional polluters.").

Subsequently, in 1980, Congress passed the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601 et seq. CERCLA was enacted in order to

allow the government and private individuals or entities to act as quasi-regulators over environmental pollution by allowing them to carry out the cleanup of hazardous waste sites and then recover the expenses of the cleanup from the responsible parties.

Doerr, 774 So. 2d at 126 (citation omitted); see also Key Tronic Corp. v. United States, 511 U.S. 809, 815 n.6 (1994). In response to this legislation, parties alleged to have engaged in environmental pollution at hazardous waste sites began to claim that the standard CGL policy required their insurers to defend them in such actions and to indemnify them if they were found liable. Considerable litigation ensued, especially over the meaning of the "sudden and accidental" exception to the general pollution exclusion. Doerr, 774 So. 2d at 126 (citation omitted). Indeed, between 1970 and 1985, "insurers [were] held liable for many billions of dollars in defense and response costs incurred pursuant to laws that did not even exist at the time the exclusion, with its exception, was written." Brief for Commissioner at 12; see also Western Alliance, 686 N.E.2d at 999 (relating absolute pollution exclusion to the "enormous expense of environmental litigation") (citing Koloms, 687 N.E.2d at 81).

"[T]he insurance industry reacted with lightning speed to the possibility that . . . it could find itself indemnifying industries facing the staggering retroactive pollution clean-up costs imposed by the 1980 enactment of [CERCLA]." Essex Ins. Co. v. Tri-Town Corp., 863 F. Supp. 38, 39-40 (D. Mass. 1994) (quoted in Nationwide II, 384 U.S. App. D.C. at 128-29, 270 F.3d at 952-53). Specifically, insurers introduced the "absolute" pollution exclusion in a form very similar to the one at issue in this case. Doerr, 774 So. 2d at 126-27; Brief for Commissioner at 12-13. The Supreme Court of Louisiana explained that

[b]y 1986, the "absolute" pollution exclusion had been introduced which omitted from the exclusion the "sudden or accidental" exception. [Citation omitted.] *fn7 Throughout its development, the general purpose of these pollution exclusions has remained constant: "to exclude coverage for environmental pollution, and under such interpretation, [the] clause will not be applied to all contact with substances that may be classified as pollutants." [9 COUCH] at § 127:6 n.62 (citing Stoney Run Co. v. Prudential-LMI Comm. Ins. Co., 47 F.3d 34, 37 (2d Cir. 1995)).

Importantly, there is no history in the development of this exclusion to suggest that it was ever intended to apply to anyone other than an active polluter of the environment.

Doerr, 774 So. 2d at 126-27. Indeed, the changes that led to the absolute pollution exclusion were "intended by the insurance industry to bar coverage for the costs of environmental cleanups." Nationwide II, 384 U.S. App. D.C. at 128, 270 F.3d at 952 (citations omitted).

In Andersen, see note 3 to this opinion, a case factually almost identical to the present one in all relevant respects, the insurer sought to apply the absolute pollution exclusion to death and injury allegedly caused by the inhalation of carbon monoxide fumes from a faulty heating unit in an apartment complex. In ruling in favor of the insured, the Supreme Court of Ohio described the circumstances under which the absolute pollution exclusion came into being:

[T]he genesis of the pollution exclusion does not support the notion that it was created to preclude the kind of claim involved in this case. In June 1970, the insurance industry "went on record as being 'against' intentional polluters and promulgated the qualified pollution exclusion for insertion in all comprehensive general liability (CGL) insurance policies." (Footnotes omitted.) Reiter, Strasser & Pohlman[The Pollution Exclusion Under Ohio Law: Staying The Course, 59 U. CIN. L. REV. 1165, 1168 (1991)]. The insurance industry explained that "accidental pollution continued to be insured under a CGL policy, but deliberate polluters would remain uncovered, unable to use insurance to avoid the financial consequences of their acts. On the basis of these representations, nearly every state, including Ohio, allowed the introduction of this new, qualified pollution exclusion." (Footnotes omitted.) Id.

The exclusion disputed in the case at bar, the absolute pollution exclusion, "was drafted during the early 1980s and was incorporated into the standard form CGL [policies] in 1986." Stempel, Reason and Pollution: Correctly Construing the "Absolute" Exclusion in Context and in Accord With Its Purpose and Party Expectations (1998), 34 Tort & Ins.L.J. 1, 5. The purpose of the new exclusion was "to replace the 1973 'sudden and accidental' [exception] because insurers were distressed by judicial decisions holding that the 1973 exclusion did not preclude coverage for gradual but unintentional pollution." Id. Further, "[t]he absolute exclusion was designed to bar coverage for gradual environmental degradation of any type and to preclude coverage responsibility for government-mandated cleanup[s]." Id.

Andersen, 757 N.E.2d at 332-33; accord, Western Alliance, 686 N.E.2d at 999.

The parties to this appeal are emphatically at odds over the meaning of the pollution exclusion clause in REO's policy. There appears to be no substantial dispute, however, as to the clause's history or as to the events that led to its introduction into ISO's form CGL policy. See Koloms, 687 N.E.2d at 79 (describing the events leading up to the insurance industry's adoption of the pollution exclusion as "well-documented and relatively uncontroverted"). *fn8

III. LEGAL ANALYSIS

A. General background.

Although, as we have noted, the background and history of the absolute pollution exclusion are not in serious dispute, the meaning of the clause has sharply divided the courts. Six years ago, the Supreme Court of Illinois found the arguments for each side of the controversy "compelling" and noted the "vast divergence of the jurisprudence of the courts across the country which have already struggled with the question now facing this court." Koloms, 687 N.E.2d at 78. In certifying the present appeal to us, the United States Court of Appeals remarked that "[c]courts across the nation are hopelessly divided over whether the clause is ambiguous as applied to[, inter alia,] carbon monoxide . . . ." Nationwide II, 348 U.S. App. D.C. at 130, 270 F.3d at 954.

Some courts have concluded that the language of the exclusion is unambiguous, that it plainly applies to the kind of factual scenario presented here, and that no consideration of the history of the clause or of other contextual or explanatory materials is required or appropriate. *fn9 Other courts have held that the clause is ambiguous because its enumeration of "smoke, vapors, soot, fumes, acids, alkalis, chemicals and waste," and its repeated references to "waste" and to "clean[ing] up," suggest industrial pollution and environmental contamination; because it contains words such as "dispersal," "discharge," "escape," "seepage," "irritant" and "contaminant," which are said to be recognizable as terms of art in environmental law; because a strictly literal reading of the provision may yield incongruous results; and because the demonstrable intent of the industry in introducing the clause was to exclude coverage for entities that actively pollute the environment. *fn10 For the reasons set forth below, we reject the purportedly literal approach appearing in the first group of decisions and align ourselves with what we regard as the more persuasive reasoning of the second group. Indeed, we agree with the Supreme Court of Washington that the insurance industry's attempt to apply the absolute pollution exclusion to the kind of situation presented here is "simply an opportunistic afterthought, at odds with the original purpose of providing protection to insurance companies from a potentially vast and unforeseen liability for major environmental disasters." Kent Farms, Inc. v. Zurich Ins. Co., 998 P.2d 292, 295-96 (Wash. 2000) (citation omitted).

B. The applicable principles of construction.

The language of the pollution exclusion at issue in this case is set forth at page 2 and footnote 1 of this opinion. The sentences on which Nationwide relies are relatively simple; indeed, their simplicity is what animates Nationwide's argument. Bodily injury from, inter alia, the "release" or "escape" of pollutants is excluded from coverage. "Pollutant" means, inter alia, any "gaseous . . . irritant or contaminant," including "fumes." *fn11 Ms. Richardson claims to have suffered bodily injury "directly and proximately" caused by the release of carbon monoxide gas fumes at the insured's premises. Therefore, according to Nationwide, the exclusion unambiguously applies.

"Where insurance contract language is not ambiguous, a written contract duly signed and executed speaks for itself and binds the parties, without the necessity of extrinsic evidence." Cameron, 733 A.2d at 968 (internal brackets and ellipsis omitted) (quoting In re Corriea, 719 A.2d 1234, 1239 (D.C. 1998)). An insurance policy is not ambiguous "merely because the parties do not agree on the interpretation of the contract provision in question." Byrd v. Allstate Ins. Co., 622 A.2d 691, 694 (D.C. 1993) (citation omitted); Corriea, 719 A.2d at 1239. "We may not 'indulge in forced constructions to create an obligation against the insurer.'" Chase, 780 A.2d at 1127 (quoting Cameron, 733 A.2d at 968).

But when construing any writing, whether a statute or a contract, "[w]e must not, of course, make a fetish out of plain meaning." James Parreco & Son v. District of Columbia Rental Hous. Comm'n, 567 A.2d 43, 46 (D.C. 1989). *fn12 In the words of Judge Learned Hand, "it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary." Cabell v. Markham, 148 F.2d 737, 739 (2d Cir.), aff'd, 326 U.S. 404 (1945); *fn13 Parreco, 567 A.2d at 46 (quoting Cabell). "It is a fundamental rule that in the construction of contracts the courts may look not only to the language employed, but to the subject-matter and the surrounding circumstances, and may avail themselves of the same light which the parties possessed when the contract was made." Merriam v. United States, 107 U.S. 437, 441 (1882); accord, District of Columbia v. Northeastern Constr. Co., 63 App. D.C. 175, 176, 70 F.2d 779, 780 (1934). Indeed, the meaning of a contract "must be ascertained in light of all of the circumstances surrounding the parties at the time the contract was made." 1010 Potomac Assocs. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 205 (D.C. 1984) (citing RESTATEMENT (SECOND) OF CONTRACTS §§ 202 (1), 212 (1) (1981)). Nothing in Cameron, Corriea and like cases should be read as excluding from consideration the context in which the words of a contract were written. *fn14

"The meaning of words . . . commonly depends on their context . . . . In interpreting the words and conduct of the parties to a contract, a court seeks to put itself in the position they occupied at the time the contract was made . . . ." RESTATEMENT (SECOND) OF CONTRACTS, § 202 cmt. b. "Even though words seem on their face to have only a single possible meaning, other meanings often appear when the circumstances are disclosed." Id. at § 214 cmt. b. *fn15 To paraphrase Hively v. District of Columbia Dep't of Employment Servs., 681 A.2d 1158 (D.C. 1996), "even where the words of a [contract] have a 'superficial clarity,' *fn16 a review of the . . . history [of the relevant provision] or an in-depth consideration of alternative constructions that could be ascribed to [contractual] language may reveal ambiguities that the court must resolve." Id. at 1161 (quoting Peoples Drug Stores v. District of Columbia, 470 A.2d 751, 754 (D.C. 1983)). *fn17 These principles are fully applicable to the kind of controversy now before us; as the Supreme Court of California explained in Montrose Chem. Corp. v. Admiral Ins. Co., 913 P.2d 878, 891 (Cal. 1995),

[the insurer] contends that evidence of the drafting history of the standardized CGL policy provisions and definitions, and available interpretative materials, are irrelevant and should not have been considered by the Court of Appeals in construing the language of its CGL policies issued to [the insured]. Most courts and commentators have recognized, however, that the presence of standardized industry provisions and the availability of interpretative literature are of considerable assistance in determining coverage issues. (See, e.g., Maryland Casualty Co. v. Reeder (1990) 221 Cal. App.3d 961, 968, 270 Cal. Rptr. 719.) Such interpretative materials have been widely cited and relied on in the relevant case law and authorities construing standardized insurance policy language. *fn18

In the words of Justice Oliver Wendell Holmes, "[a] word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the times in which it was used." Towne v. Eisner, 245 U.S. 418, 425 (1918). The following hypothetical illustrates our thesis: Suppose that on January 1, Ruritania *fn19 and Illyria, *fn20 having fought a bitter war, agree to an armistice. The armistice provides that, no later than January 8, Ruritania and Illyria shall release "all prisoners." An Illyrian who has been incarcerated in his own country for distributing unlawful drugs brings a lawsuit in which he claims that he is entitled to his freedom. It would surely be incongruous to exclude from evidence in that lawsuit the history that led to the armistice, when that history demonstrates beyond peradventure that the word "prisoner" as used in that document, although not so limited by its dictionary definition, necessarily refers to a prisoner of war and does not provide solace for dealers in hashish. *fn21 Similarly, in this case, it would be unreasonable to attempt to ascertain the meaning of the absolute pollution exclusion while ignoring the history that defines its raison d'être, namely, to avoid imposing on insurers the obligation to indemnify industries for the "staggering" pollution cleanup costs generated by the enactment of CERCLA. Essex Ins. Co., 863 F. Supp. at 39-40. Thus, assuming for the purposes of argument only that the language of the pollution exclusion appears unambiguous today, it may nevertheless have reasonably appeared to have an entirely different context-related meaning to persons who were writing and approving it in the 1980s, when insurers were seeking to avoid unanticipated liability in the billions of dollars for the harm caused by major industrial polluters.

In the present case, the parties to the insurance policy itself were REO and Nationwide, but the pollution exclusion, as we have seen, is based on a form contract written and presented to state regulators for their consideration and approval by representatives of the insurance industry after CERCLA became law. See Doerr, 774 So. 2d at 126-27; Andersen, 757 N.E.2d at 332-33; Koloms, 687 N.E.2d at 81. The meaning of the language of the absolute pollution exclusion in the form contract has not changed since it was introduced, and we must therefore look primarily to the circumstances then existing to determine whether, as Nationwide insists, the words used plainly and unambiguously rule out coverage. *fn22

If the language of the exclusion was ambiguous when written, then Nationwide's position is indeed difficult to sustain. "To negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies to the particular case." Cont'l Cas. Co. v. Rapid-American Corp., 609 N.E.2d 506, 512 (N.Y. 1993). "The insurer must establish not merely that the policy is capable of the construction it favors, but rather that such an interpretation is the only one that can fairly be placed on the language in question." Andersen, 757 N.E.2d at 332 (emphasis added) (citation omitted). "It will not suffice for [the insurer] to demonstrate that its interpretation is more reasonable than the policyholder's." Id. at 333 (citation omitted). Rather, Nationwide must show that Ms. Richardson's construction is altogether unreasonable.

"The burden is on [Nationwide] to prove that the loss falls within an exclusion." Cameron, 733 A.2d at 969 (citing Lang v. F.G. Arwood & Co., 65 A.2d 194, 196 (1949) and New York Life Ins. Co. v. Miller, 65 App. D.C. 129, 134, 81 F.2d 263, 268 (1935)). Moreover,

[i]n this jurisdiction, as elsewhere, it has long been "a general rule of construction of policies of insurance . . . that any reasonable doubt which may arise as to the meaning or intent of a condition thereof, will be resolved against the insurer." United States Mut. Accident Ass'n of the City of New York v. Hodgkin, 4 App. D.C. 516, 523 (1894), error dismissed, 17 S. Ct. 1002 (1897). "[I]t is the insurer's duty to spell out in plainest terms - terms understandable to the man in the street -any exclusionary or delimiting policy provisions." Holt v. George Washington Life Ins. Co., 123 A.2d 619, 621 (D.C. 1956) (citation omitted). "Failing such unambiguous language, doubt should be resolved in favor of the insured." Id. at 622 (citation omitted). "The rule that a real ambiguity in an insurance policy is to be construed against the company is not a rule of convenience or a mere technicality of legalists." Hayes v. Home Life Ins. Co., 83 U.S. App. D.C. 110, 112, 168 F.2d 152, 154 (1948) (Prettyman, J.). On the contrary, this rule is based on sound public policy, for the contracts in question are written by the insurers.

Cameron, 735 A.2d at 968. In recognition of these realities, ambiguities in an insurance policy are construed against the insurer and in favor of "the reasonable expectations of the purchaser of the policy." Chase, 780 A.2d at 1127 (citation omitted).

Finally, we must "examine the language of the polic[y] and construe it as a whole." Kent Farms, 998 P.2d at 294 (citation omitted). "Put another way, we are required to view the exclusion in light of the whole policy to determine whether, in that context, the exclusion applies." Id. at 295. To that end, we must "examin[e] what the exclusion and similar exclusions are intended to accomplish." Id.

C. The use of terminology mirroring the purpose of the exclusion.

The absolute pollution exclusion in REO's policy is entitled "Pollution," and it excludes bodily injury arising out of the "actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants." "Pollutants" include any solid, liquid, gaseous or thermal "irritant or contaminant," including "smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." The eight enumerated pollutants collectively bring to mind byproducts of industrial pollution, Western Alliance, 686 N.E.2d at 999, rather than carbon monoxide from a furnace in an apartment house or a stove in a restaurant. *fn23 In light of the circumstances that generated the adoption of the absolute pollution exclusion, it is hardly astonishing that the word "waste" is used five times in the clause in question, that the words "clean up" or "cleaning up" are used three times, and that many other phrases in the clause *fn24 are obviously focused on subjects similar to the cleanup of waste sites. Thus, when one reads the entire clause, rather than limiting oneself to the word "fumes" in isolation, one cannot reasonably avoid the impression that the revised exclusion has to do with the byproducts of the manufacturing process and with massive environmental cleanup costs, the very concerns that, as a matter of undisputed history, led to the adoption of the new language. Ms. Richardson argues that the exclusion contains terms of art in environmental law, that those ...


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