Insurer denied right to treat cleaning agents as "pollutant" and avoid liability coverage
Safety King Incorporated provides cleaning services and specializes in cleaning and treating ductwork. It uses a sanitizing agent, triclosan, which is an antimicrobial found in a variety of uses, including personal hygiene products and cosmetics, although it is also categorized as a pesticide. Safety King purchased liability coverage through Hastings Mutual Insurance Company. In 2007, a homeowner filed suit against Safety King, arguing that the children in the home suffered injury by mis-use of the sanitizing agent. Hastings Mutual argued that it did not have to provide coverage to Safety King because its pollution exclusion applied to Safety King's use of a known pesticide. The trial court agreed and refused to enforce the liability insurance contract.The Court of Appeals overturned the lower court's opinion. It noted that "clear and specific exclusionary provisions must be given effect, but are strictly construed against the insurer and in favor of the insured." The term "pollution" was not defined in the policy and the Court noted that it essentially denotes a substance that under the circumstances is out of place and causes injury through irritation or contamination. It pointed out that flouride and many other compounds are useful in one context, but would be "pollution" in other circumstances. On that basis, contract terms of this nature "should not be considered in isolation and contracts are to be interpreted to avoid absurd or unreasonable conditions and results."
The Court cited Supreme Court precedent from the 1950s establishing that " due regard must be had to the purpose sought to be accomplished by the parties as indicated by the language used, read in the light of the attendant facts and circumstances. Such intent when ascertained must, if possible, be given effect and must prevail as against the literal meaning of expressions used in the agreement." Hastings had agreed to provide liability coverage to Safety King with full knowledge of its business operations, and "[t]he purpose of insurance is to insure," in this case, "against losses to third parties arising out of the operation of the insured's business." Under these circumstances, it would be improper and unfair to exclude coverage for Safety King's operations, simply because they involved the use of a compound that is included in the definition of "pesticides."