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RENDERED: June 21, 1996; 2:00 p.m.
TO BE PUBLISHED
MODIFIED: July 19, 1996; 2:00 p.m.
MODIFIED: August 2, 1996; 2:00 p.m.

NO. 95-CA-0367-MR

MOTORISTS MUTUAL INSURANCE COMPANY APPELLANT

APPEAL FROM MADISON CIRCUIT COURT

v. HONORABLE JULIA HYLTON ADAMS, JUDGE
ACTION NO. 93-CI-0409

RSJ, INC., d/b/a REGENCY ONE
HOUR CLEANERS; CENTURY PENSION
INCOME FUND XXIII; FOX PARTNERS
V, ITS GENERAL PARTNER APPELLEES

OPINION
AFFIRMING

* * * * * * *

BEFORE: GARDNER, JOHNSON, and JOHNSTONE, Judges.
JOHNSTONE, JUDGE. At issue is the proper construction to be
given a "pollution exclusion" contained in a commercial general
liability policy issued by appellant. In a declaratory judgment
proceeding, the trial judge rejected the insurer's attempt to
escape liability for damages stemming from exposure to carbon
monoxide fumes due to a leak in the vent stack of the insured's
boiler. The trial judge based her refusal to give effect to the
exclusion upon a finding that the policy language is ambiguous,

citing the rationale utilized by a North Carolina court
construing an identical exclusion under comparable circumstances.
Finding no error in the decision of the trial judge, we affirm.

The facts are not in dispute. Appellee, RSJ, Inc.,
operates a dry cleaning business in a strip shopping center in
Lexington, Kentucky. The various businesses in the center share
a common attic. A vent pipe from a boiler used in the dry
cleaning business passes through the attic space. Immediately
adjacent to the dry cleaning business is an entity known as All
Alterations, operated by Ferdos and Maher Madhat. In an action
lodged in the Fayette Circuit Court, the Madhats alleged that
they sustained bodily injury due to the release of carbon
monoxide from a leak in the vent stack of a boiler utilized by
the dry cleaner.

The appellant insurer had issued to RSJ a commercial
general liability policy which contained a standard exclusionary
clause, commonly referred to as a "pollution exclusion." The
insurer denied coverage for the injuries sustained by the Madhats
on the basis of the exclusionary provision. RSJ thereafter
instituted this action in the Madison Circuit Court seeking a
declaration that coverage should be afforded under the policy.
The trial judge entered summary judgment requiring the insurer to
defend RSJ in the suit arising from the inadvertent release of
carbon monoxide during the course of RSJ's normal business
activities and later awarded attorney's fees incurred to date in
defending the Fayette County action.

(As Modified: August 2, 1996)

The insurer argues in this appeal that because the

language of the Madhats' complaint mirrors the exclusionary

language in the policy, the trial judge erred in failing to give

effect to the provision. It also attempts to distinguish the

case relied on by the trial judge, West American Insurance

Company v. Tufco Flooring East, Inc., 409 S.E.2d 692 (N.C. App.

1991), and cites several recent opinions supporting its position.

The insurer also complains that the trial judge failed to define

in what way the provision is ambiguous.

We preface our examination of this issue with a

recognition of the basic principles of construction articulated

by the Kentucky Supreme Court in St. Paul Fire & Marine Insurance

Company v. Powell-Walton-Milward, Inc., Ky., 870 S.W.2d 223

(1994):

Where an exclusion is susceptible to two
reasonable interpretations, the
interpretation favorable to the insured
is adopted. Foster v. Allstate Ins.
Co., Ky.App., 637 S.W.2d 655 (1981).

The rule of strict construction

against an insurance company certainly

does not mean that every doubt must be

resolved against it and does not

interfere with the rule that the policy

must receive a reasonable interpretation

consistent with the parties' object and

intent or narrowly expressed in the

plain meaning and/or language of the

contract. Neither should a nonexistent

ambiguity be utilized to resolve a

policy against the company. We consider

that courts should not rewrite an

insurance contract to enlarge the risk

to the insurer. U.S. Fidelity & Guar.

Co. v. Star Fire Coals, Inc., 856 F.2d

31 (6th Cir.1988).

An ambiguity may either appear on

the face of the policy or, in this case,

when a provision is applied to a

particular claim.

St. Paul Insurance, 870 S.W.2d 226-7 (emphasis added).

The provision at the core of the controversy is what

has become known as an "absolute pollution exclusion," which the

policy sets out in the following terms:

Section I - Coverages

Coverage A. Bodily injury and property
damage liability.

2. Exclusions
This insurance does not apply to:

. . . .

f. (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. Waste
includes materials to be
recycled, reconditioned or
reclaimed.

Because there is nothing inherently ambiguous in the

language employed, any ambiguity necessarily arises in the

application of the provision to the specifics of a particular

claim. St. Paul Insurance, supra. We agree with the trial judge

that the "pollution exclusion" in this policy proves ambiguous

when applied to the incident giving rise to this appeal.

In construing a question of first impression in this

Commonwealth, we find instructive the experience of other

jurisdictions which have grappled with the issue. Consider, for

example, the reasoning advanced by the Maryland Court of Appeals

in Sullins v. Allstate Insurance Company, 340 Md. 503, 667 A.2d

617, 624 (1995), in rejecting on the basis of ambiguity

application of an identical pollution exclusion for damages

incurred through exposure to lead paint:

Some courts hold that the existence of
conflicting judicial interpretations of
insurance policy terms is evidence of
ambiguity, while others hold such
conflict is not conclusive. (Citations
omitted).

. . . .

We hold that conflicting

interpretations of policy language in

judicial opinions is not determinative

of, but is a factor to be considered in

determining the existence of ambiguity.

In interpreting an insurance policy, we

must follow the rules of contract

construction set out in part II of this

opinion. However, if other judges have

held alternative interpretations of the

same language to be reasonable, that

certainly lends some credence to the

proposition that the language is

ambiguous and must be resolved against

the drafter.

That such diversity exists throughout the country is

borne out not only in the authority cited in this appeal, but in

"Construction and Application of Pollution Exclusion Clause in

Liability Insurance Policy," 39 A.L.R. 4th 1047. Like the court

in Sullins, however, we perceive the split in authority to be but

one factor to be evaluated in passing on the ambiguity of the

exclusion.

A second factor relevant to our inquiry is the basic

premise that terms used in insurance contracts "should be given

their ordinary meaning as persons with the ordinary and usual

understanding would construe them." City of Louisville v.

McDonald, Ky. App., 819 S.W.2d 319, 320 (1991). The drafters'

utilization of environmental law terms of art ("discharge,"

"dispersal," "seepage," "migration," "release," or "escape" of

pollutants) reflects the exclusion's historical objective

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