On December 28, 2017, the Ohio Court of Appeals (Eighth District) held in GrafTech International, Ltd., et al. v. Pacific Employers Ins. Co., et al., No. 105258 that coverage for alleged injurious exposures to coal tar pitch was barred by a liability insurance policy’s absolute pollution exclusion. Applying Ohio law, the court concluded that Pacific Employers had no duty to defend GrafTech or pay defense costs in connection with claims by dozens of workers at Alcoa smelting plants that they were exposed to hazardous substances in GrafTech products supplied to Alcoa as early as 1942.
The pollution exclusion at issue provides, in part, that
[t]his insurance does not apply to any injury, damage, expense, cost, loss, liability or legal obligation arising out of or in any way related to pollution, however caused. Pollution includes the actual, alleged or potential presence in or introduction into the environment of any substance if such substance has, or is alleged to have, the effect of making the environment impure, harmful, or dangerous.
“Environment” is defined to include “any air, land, structure or the air therein, watercourse or water, including underground water.” The exclusion further stipulates that “[w]e have no duty to defend any suit arising out of or in any way related to pollution excluded by this endorsement.”
“The alleged toxic exposure in this case occurred in an industrial setting that would be a prime example of a ‘traditional’ case of environmental pollution,” the court said. It rejected GrafTech’s argument based on Andersen v. Highland House Co., 93 Ohio St.3d 547 (2001) (carbon monoxide from malfunctioning residential heater not a “pollutant” unless specifically enumerated as such) that “localized” releases of pollution in part of a manufacturing plant fell outside the exclusion. “Nothing in the words used by the parties suggests that the ‘air’ inside a ‘structure’ was intended to make the pollution exclusion inapplicable to minimal, localized releases of pollutants into the air within a structure. . . . Nothing in the way the parties defined the word ‘pollution’ makes the pollution exclusion apply only to a release of pollutants in a structure that is so pervasive that it renders the air throughout the entire structure harmful or impure.”
The court also dismissed GrafTech’s suggestion that tort allegations in underlying worker complaints – essentially, that it failed to provide a safe product which in its normal use released toxic chemicals – stated a potentially covered claim and gave rise to a defense obligation. “These are allegations that GrafTech’s products had the effect of making the environment impure, harmful, or dangerous. The pollution exclusion thus applies.”
White and Williams represents Pacific Employers Insurance Company in this case.