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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff v. : : : : : : DNS AUTOMOTIVE , INC., et al., : Defendants : ...o0o... Case No. AMD 99-2928

MEMORANDUM This is a diversity case in which plaintiff Nationwide Mutual Insurance Company seeks a declaratory judgment of "non-coverage" in respect to a series of liability insurance policies issued to defendant David Shaw and covering related entities and persons also defendants herein (together "the Shaws"). Pending before me are the parties' cross motions for summary judgment on the issue of whether the absolute pollution exclusions contained in the Nationwide policies operate to deny coverage under the policies in respect to claims asserted against the defendants by a personal injury plaintiff in a pending state court lawsuit. For the reasons stated below, I am persuaded that the absolute pollution exclusions are applicable and enforceable and therefore I shall grant Nationwide's motion and deny defendants' motion. Under Maryland law, the determination by a court of the existence of a duty to defend turns primarily on the allegations contained in the underlying complaint. See, e.g., Brohawn v. Transamerica Ins. Co., 276 Md. 396, 347 A.2d 842 (1975). Thus, the "facts" relevant to coverage are those alleged in the complaint in the underlying action. Those allegations may be summarized as follows. Defendants own and/or operate an automotive repair facility in Baltimore County. The facility is located in a strip mall type commercial structure. During the period 1993 through 1996, certain renovations

were made to the building, including removal and reinstallation of walls. Thereafter, in 1996, the Shaws engaged in "large scale and continuous" automotive painting operations resulting in the release of "fumes, exhausts and discharges of noxious gases and particulates."1 As a result of the release of the described "fumes . . . exhausts and . . . noxious gases," Robert F. Hopkins, Jr., who was also a tenant on the premises and who operated an auto parts business in a nearby unit, suffered "respiratory, pulmonary and neurologic"injuries, manifested by "headaches, behavioral changes, loss of balance, trouble sleeping, sexual dysfunction, difficulty in concentrating, short attention span, irritable bowel disease" and other symptoms. Consequently, Hopkins and his wife have filed the underlying damages action relying on several common law theories against numerous defendants, including the Shaws. Nationwide is providing a defense to the Shaws under a reservation rights pending the outcome of this declaratory judgment action. For present purposes at least, there is no dispute that, but for the absolute pollution exclusion, the Nationwide policy would apply to the claims asserted by the Hopkinses in their state court damages action and the Shaws would be entitled to a defense and quite likely indemnity as well. The absolute pollution exclusion relevant to the pending motions is one that has been litigated in many cases. It provides that liability coverage does not apply to: Bodily injury, property damage or loss, cost or expense 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 that is or was at any time owned or occupied by, or rented or loaned to, any insured; [or] . . .

Defendants have submitted an affidavit denying the allegation included in the state court action that they carried on significant painting operations; they suggest that they did little more than "touchups." Proper resolution of the coverage issue on the basis of the allegations in the state court complaint makes consideration of the affidavit inappropriate, however. -2-

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c. At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations . . . (2) If the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor. The Nationwide policies defined "pollutants" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." The fundamentalprinciples applicable to the interpretation of insurance contracts were summarized in Sullins v. Allstate Ins. Co., 340 Md. 503, 508-09, 667 A.2d 617, 619 (1995): In Maryland, insurance policies, like other contracts, are construed as a whole to determine the parties' intentions . . . . Words are given their customary ordinary, and accepted meaning, unless there is an indication that the parties intended to use the words in a technical sense . . . . A word's ordinary signification is tested by what a reasonably prudent layperson would attach to the term . . . . If the language in an insurance policy suggests more than one meaning to a reasonably prudent lay person, it is ambiguous . . . . A term which is clear in one context may be ambiguous in another . . . . Where terms are ambiguous, extrinsic and parol evidence may be considered to ascertain the intentions of the parties . . . . Maryland does not follow the rule, adopted in many jurisdictions, that an insurance policy is to be construed most strongly against the insurer. Nevertheless, if no extrinsic or parol evidence is introduced, it will be construed against the insurer as the drafter of the instrument. (citations and internal quotations omitted). Recognizing that the allegations in the Hopkins lawsuit (identifying injuries arising from the release of "fumes, exhausts and discharges of noxious gases and particulates") falls squarely within the precise definition of "pollutant" contained in the Nationwide policies ("any . . . gaseous . . . irritant or contaminant, including . . . vapor . . . [and] fumes"), and that the other requisites of the absolute pollution exclusion are plainly satisfied, the Shaws make a two-pronged argument in an effort to avoid the effect of the exclusion. First, they contend that the definition of

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"pollutants" is ambiguous as a matter of law and that I should therefore "interpret" the term against Nationwide. Next, they contend that the exclusion should be applied only to "environmental injury" and not to personal injury claims such as those asserted in the Hopkins complaint. To be sure, there is respectable case law support for the Shaws' contentions.2 Nevertheless, I am constrained by controlling authority to

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The Sixth Circuit recently made the following observation:

State and federal courts are split on the issue of whether an insurance policy's total pollution exclusion bars coverage for all injuries caused by contaminants, or whether the exclusion applies only to injuries caused by traditional environmental pollution. Many courts, including the Sixth Circuit, have held that a pollution exclusion clause in a CGL insurance policy applies only to injuries caused by traditional environmental pollution. See, e.g., . . . Sullins v. Allstate Ins. Co., 340 Md. 503, 667 A.2d 617 (1995) . . . The Seventh Circuit has explained the reasoning behind limiting the application of pollution exclusion clauses only to injuries caused by traditional environmental pollution as follows: Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results. To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries suffered by one who slips and falls on the spilled contents of a bottle of Drano, and for bodily injury caused by an allergic reaction to chlorine in a public pool. Although Drano and chlorine are both irritants or contaminants that cause, under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as pollution. To redress this problem, courts have taken a common sense approach when determining the scope of pollution exclusion clauses . . . . The bond that links these cases is plain. All involve injuries resulting from everyday activities gone slightly, but not surprisingly, awry. There is nothing that unusual about paint peeling off of a wall, asbestos particles escaping during the installation or removal of insulation, or paint drifting off the mark during a spray painting job. A reasonable policyholder, these courts apparently believed, would not characterize such routine incidents as pollution. Pipefitters , 976 F.2d at 1043-44. Other courts, however, have held that a pollution exclusion bars coverage for all injuries caused by the release of contaminants, even where the contaminant is dispersed into a confined or indoor area. See, e.g., Assicurazioni Generali, S.p.A. v. Neil , 160 F.3d 997, (continued...) -4-

reject it. See Assicurazioni Generali, S.p.A. v. Neil , 160 F.3d 997, 1004-05 (4th Cir. 1998)(applying Maryland law); Sullins, supra ; Bernhardt v. Hartford Fire Ins. Co ., 102 Md.App. 45, 648 A.2d 1047 (1994); see also American States Ins. v. Netherly , 79 F.3d 473 (5th Cir. 1996); American States Ins. Co. v. Technical Surfacing, Inc., 50 F.Supp.2d 888 (D.Minn. 1999); Brown v. American Motorists Ins. Co ., 930 F.Supp. 207 (E.D.Pa. 1996), aff'd , 111 F.3d 125 (3rd Cir. 1997)(table); and see Home Exterminating Co. v. Zurich-American Ins. Group , 921 F.Supp. 318 (D.Md. 1996). It is clear that the absolute pollution exclusion was triggered by the manner in which, according to the complaint filed in the Hopkins case, the Hopkins' claim arose. Accordingly, Nationwide is entitled to judgment. A judgment order follows.

Filed: March 21, 2000

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