Hydrogen sulfide gas – breath so bad its uninsurable. The Hog’s Breath Saloon poured enough grease into the La Junta sewer system it created a 5-8 foot obstruction causing a toxic gas buildup that injured 2 workers clearing it up. They sued. The Saloon had an insurance policy with a pollution exclusion. The trial court applied the exclusion and denied coverage. The court of appeals reversed, concerned that calling cooking grease a pollutant could lead to absurd results. The Court disagreed. It held that dumping enough cooking grease to create a huge clog, violating a city ordinance, and causing a toxic gas buildup is a pollutant. The “Reasonable Expectations Doctrine” didn’t apply because reasonable insureds would not be deceived into believing that injuries caused by dumping that much grease into a sewer were insured. The insurance didn’t cover the workers’ injuries.
Tag Archives: Policy Exclusions
Mountain States Mutual Casualty Co. v. Christopher Roinestad and Gerald Fitz-Gerald, and Tim Kirkpatrick, d/b/a Hog’s Breath Saloon & Restaurant, 2013CO14 (February 25, 2013)
Owning a nightclub is so full of drama there is a reality TV show about it. This case starts with a bar fight, but ends with a lawsuit against an insurance broker. A Bar’s Patron is injured during a fight and sues. Bar’s insurance policy had an assault and battery exclusion and denied coverage. Bar didn’t think its policy had the exclusion, so Bar sued Broker. Bar settles with Patron and executes a “Bashor” agreement, assigning any proceeds from Bar’s claims. But the claims against Broker are dismissed because of the assignment. The court of appeals held: 1) Broker must show the settlement was unreasonable, 2) Bar could still claim assigned damages, 3) Broker’s failure to obtain the insurance requested gave rise to a negligence claim, and 4) that claim was assignable because it was a commercial, not personal transaction. Summary Judgment for Broker reversed and the case was reinstated.
Colorado Pool Systems, Inc. and Patrick Kitowski v. Scottsdale Insurance Company and Don Hansen, 2012COA178 (October 25, 2012)
“It’s not my fault—it was an accident!” In this case, a swimming pool had to be rebuilt. An adjuster told the insured the work would be covered, but the insurer later denied coverage under a general commercial liability insurance policy. Construing the policy, the court held: 1) “accident” is an ambiguous term that means any damage not intended; 2) an “occurrence” is damage to non-defective work, but not to defective work, because defective work is required to be repaired; and 3) the Construction Professional Commercial Liability Insurance Act is retroactive, but unconstitutional as applied. The insured also brought a negligent misrepresentation claim. The court held that because “accident” was ambiguous in the policy, the claim was actionable. It was also reasonable for the insured to rely upon the adjuster’s statements as if they were fact. Summary Judgment was reversed.
Sometimes good law goes bad. It gets on a motorcycle, crashes and kills a passenger. And then the Supreme Court holds that the passenger was only covered by the liability portion of an insurance policy, but not the uninsured/underinsured motorist (UM/UIM) portion of the same policy. And then the legislature amends the law that the Supreme Court interpreted to permit “same policy” exclusions. Once again, a passenger is injured and is paid under the liability portion, but denied UM/UIM coverage. Did that Supreme Court case go bad? No. Here, as in the companion case, the types of covered events an insurer can validly restrict include “same policy” exclusions that do not violate stacking amendments or the prohibition on setoffs. Nor are such exclusions contrary to public policy, because the new statute does not require full indemnification. Thus, the denial of coverage was upheld.
Uninsured/underinsured motorist (UM/UIM) coverage has recently been hotly disputed both in court and in legislatures. This case, together with a companion case, addresses the situation where a passenger is injured by the insured in the insured’s vehicle. Passenger obtains liability coverage insufficient to cover losses, but is denied UM/UIM payments. The policy contains a “same policy” exclusion denying UM/UIM coverage when a person has liability coverage under the same policy. Passenger claims the exclusion is statutorily invalid. The court of appeals disagreed and held that the statute, CRS 10-4-609, does allow a policy to stack liability and UM/UIM coverage, but does not prohibit “same policy” exclusions. Although setoff provisions are prohibited, the court held the exclusion is not a “setoff.” Thus, the exclusion was valid and so was the denial of UM/UIM coverage.
Raw sewage is a pollutant. When renters discovered toxic mold and raw sewage in their property, they sued the owner, who in turn submitted the suit for coverage under State Farm insurance policies. The policies (a renters policy and a personal injury umbrella policy) contained absolute pollution exclusions. The court of appeals upheld the trial court’s determination that raw sewage was a pollutant, and, therefore, the owner’s liability to the renters for claims arising from raw sewage were not covered under State Farm’s policy.