Richardson v. Nationwide Mut. Ins. Co., 01-SP-1451.

• Decision Date: 12 June 2003
• Docket Number: No. 01-SP-1451.,01-SP-1451.
• Citation: 826 A.2d 310
• Parties: Antoinette RICHARDSON, Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Appellee.
• Court: D.C. Court of Appeals

826 A.2d 310

Antoinette RICHARDSON, Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Appellee.

No. 01-SP-1451.

District of Columbia Court of Appeals.

Argued April 23, 2002.

Decided June 12, 2003.

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

Catherine M. Colinvaux, Waltham, MA, with whom David P. Durbin, Washington, DC, 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, Washington, DC, filed a brief for the Complex Insurance Claims Litigation Association, amicus curiae.

Before SCHWELB, GLICKMAN, and WASHINGTON, Associate Judges.

SCHWELB, Associate Judge:

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....¹

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).² 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,³ with the views of the District agency responsible for the regulation of insurance,⁴ and with the more persuasive rulings of other courts that have addressed similar issues,⁵ 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.⁶ 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., 134 N.J. 1, 629 A.2d 831, 848-55, 868-70 (1993) (same), cert. denied, 512 U.S. 1245, 114 S.Ct. 2764, 129 L.Ed.2d 878 (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 policy-holders, 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 Fire & Cas. 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...