The Pennsylvania Supreme Court issued a landmark ruling on the applicability of the absolute pollution exclusion of a Commercial General Liability Policy to a workplace accident involving exposure to toxic fumes. Swartz, Campbell & LLC's Insurance Coverage Practice group provided representation to the prevailing insurer in Madison Construction Co. v. Harleysville Mutual Ins. Co., 21 E.D. Appeal Docket 1997 (Pa. July 27, 1999).

In Madison Construction, the policyholder, a concrete contractor, was sued by a bystander who was exposed to noxious fumes which were released during a curing of a concrete floor. The plaintiff lost consciousness and sustained physical injuries because of his inhalation of vapors at the construction site.

In a decision of first impression in Pennsylvania, the Pennsylvania Supreme Court held in a 4 to 3 opinion that the vapors of the curing agent constituted a "pollutant" and that the injuries were excluded from coverage, notwithstanding the fact that the injuries sustained were not environmental in scope. The majority rejected the proposition asserted by amicus curiae for the policyholders that the pollution exclusion was limited in its application to industrial accidents of an environmental nature and instead ruled that Pennsylvania courts must apply the plain language of insurance contract to adjudicate coverage disputes. Issues as to whether the absolute pollution exclusion of the Commercial General Liability policy should be applied to non-environmental injuries are more appropriately addressed to either the Legislature or the Insurance Commissioner.

The majority further concluded that the plaintiff's injuries arose out of the dispersal and migration of a "pollutant" given that but for the release of the fumes, the injury would not have been sustained. As such, the court rejected the notion that separate allegations of negligence contained in the complaint, including allegations that the policyholder had failed to warn the bystander of the hazards of exposure to the fumes, were sufficient to trigger a coverage obligation. In a brief footnote, the court stated that the "reasonable expectations" of the policyholder could not override the express terms of the insurance policy and that the "reasonable expectations" doctrine of policy construction was applicable only in very limited circumstances principally involving facts related to the contract formation. See Collister v. Nationwide Life Ins. Co., 479 Pa. 579, 388 A.2d 1346 (1978); Tonkovic v. State Farm Mut. Auto Ins. Co., 513 Pa. 445, 521 A.2d 920 (1987). In so doing, the court declined to entertain the argument advanced by amicus curiae for the policyholder that the insured's "reasonable expectations" regarding coverage may be premised on statements of insurance company representatives made during the regulatory approval process. Compare Morton Int'l, Inc. v. General Accident Ins. Co., 629 A.2d 831, 875 (N.J. 1993), cert. denied, 114 S.Ct. 2764 (1994).

The Pennsylvania Supreme Court's decision stands in contrast to the decisions reached by high courts of other jurisdictions which have eschewed the "plain language" approach of policy construction. See e.g. West American Ins. Co. v. Tufco Flooring, Inc., 409 S.E.2d 692 (N.C. 1991)(holding that discharge of fumes into the environment is necessary to trigger exclusion); Sullins v. Allstate Ins. Co., 667 A.2d 617 (Md. 1995)(terms "pollutant" and "contaminant" are virtually boundless; applying exclusion only to environmental pollution). See also Pipefitters Welfare Educ. Fund v. Westchester Fire Co., 976 F.2d 1037 (7^th Cir. 1992)(same).

The Madison Construction decision should stand as a bulwark against efforts to undermine the effectiveness of the absolute pollution exclusion in Pennsylvania and may provide support for other "plain language" jurisdictions to apply the exclusion to all claims arising from discharges of noxious substances. The decision is also instructive in non-environmental insurance coverage litigation given the court's pronouncements regarding the methodology to be employed in interpreting insurance contracts, most specifically, the curtailment of the "reasonable expectations" analysis. In a larger sense, Madison Construction reflects the Pennsylvania Supreme Court's neutral stance towards policy construction which levels the playing field for the insurance industry in coverage litigation.

Questions concerning Madison Construction Co. v. Harleysville Mutual Ins. Co. may be directed to the attention of William T. Salzer, Esquire. Information concerning the firm's insurance coverage litigation practice may be obtained by visiting the firm's web site located at www.swartzcampbell.com.