Pollution Exclusion's Ambiguity Thwarts Insurer's Attempt to Deny Coverage

Courts around the country continue to split over the scope of the absolute pollution exclusion. At least for policyholders in Indiana, it appears the question has been finally answered in favor of policyholders. A recent opinion from the Indiana Court of Appeals traces the history of courts' interpretations of the absolute pollution exclusion over the last 14 years, and it's clear that the exclusion is ambiguous. State Automobile Mut. Ins. Co. v. Flexdar, Inc., 2010 Ind. App. LEXIS 2170 (Nov. 22, 2010).

Opinions interpreting the exclusion break along two lines: (1) a broad interpretation that can seem limitless, and (2) a more narrow reading limited to traditional pollution. In Flexdar, the insured was faced with a traditional pollution situation. Its operations required the use of trichloroethylene (TCE). The used TCE, along with other waste, was collected in 55 gallon drums for subsequent disposal. As Flexdar wound down operations in 2003, investigators discovered