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Insurer not obligated to defend contractor in hazardous debris case

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construction debris

An insurer is not obligated to defend a construction company in a case involving hazardous fumes and dust because “there is no ambiguity” its policy’s pollution exclusion applies, a federal appeals court ruled Thursday in affirming a lower court ruling.

Lansing, Michigan-based Southern Owners Insurance Co. issued a general commercial liability to Shalimar, Florida-based BBG Design Build LLC that was in effect from July 2014 to July 2015 and included a pollution exclusion, according to the ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in BBG Design Build, LLC, Patricia Armor v. Southern Owners Insurance Co.

In 2014, BBG was working as the general contractor on a renovation project at Shelter House, a domestic violence resource center in Ft. Walton Beach, Florida, when Ms. Armor, a victim advocate who worked part time at the facility, allegedly suffered bodily injury from construction debris.

She filed suit, charging BBG was negligent because it failed to ensure property control and protections were in place to contain “construction debris.”

Southern Owners refused to defend or indemnify BBG because of its policy’s pollution exclusion. BBG sued the insurer for breach of contract, and the U.S. District Court in Tallahassee, Florida, granted the insurer summary judgment dismissing the case.

The ruling was affirmed by a unanimous three-judge appeals court panel. “If we confine our analysis to the allegations in the operative First Amended Complaint, Southern Owners had a duty to defend BBG in Armor’s underlying suit,” the ruling said.

However, “in special circumstances a court may consider extrinsic facts if those facts are undisputed and, had they been pled in the complaint, they clearly would have placed the claims outside the scope of coverage,” the ruling said, in citing an earlier case.

“Before Armor filed the First Amended Complaint, Southern Owners had pre-suit knowledge of uncontroverted facts that placed Armor’s claims outside the scope of the Policy’s coverage,” it said.

A “pre-suit demand” package from Ms. Armor’s attorney said she was injured after being “exposed to hazardous fumes and dust” because of BBG’s remodeling activities at the Shelter House, it said. 

The package also referred to Ms. Armor’s medical records, where she reported being exposed to fiberglass and was diagnosed with bronchitis from fiberglass exposure, it said.

Based on these assertions, which were corroborated by Ms. Armor’s medical records, “Southern Owners had knowledge that Armor was claiming bodily injury which would not have occurred in whole or part but for the alleged release or escape of pollutants,” it said.

Pointing to the policy’s pollution exclusion, the appeals panel said, “we agree with the district court that there is no ambiguity in the policy’s pollution exclusion, and it clearly encompasses the construction debris of the sort of which Armor complained – fiberglass particulates and other bits of dust in the air of construction work – which caused irritation to the lungs, eyes, and skin when it contaminated the air she breathed.

“Thus, this case is one of the rare cases where uncontroverted facts place the claim outside the scope of coverage, and the First Amended complaint is an attempt to plead into coverage despite the uncontroverted facts,” the appeals panel said in affirming the lower court’s ruling.

“They made the right decision,”  said Southern Owners attorney Gregory M. Shoemaker of Wade Palmer & Shoemaker PA in Pensacola, Florida. “It was a case where it was very clear to everyone at the very beginning that that exclusion applied.”

BBG’s attorney did not respond to a request for comment.

A federal appeals court held last month that a Chubb Ltd. unit was not obligated to defend a building operator sued in connection with spraying pesticides because of its coverage’s pollution exclusion.