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INDIANAPOLIS-Insurers in Indiana have won legislative backing that could, if signed into law, allow them to unequivocally exclude pollution coverage from future commercial general liability policies.

The bill was promoted in response to an Indiana Supreme Court ruling in May 1996 that said that the absolute pollution exclusion in CGL policies was ambiguous.

Policyholder lawyers, however, have criticized the measure as a backhanded way of rewriting the exclusion (BI, March 10).

See Updates on next pagBill would affirm exclusion

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Nevertheless, the Legislature last week passed the measure, which would amend the Indiana Insurance Code to explicitly exclude pollution coverage from CGL policies. The bill has been sent to the governor, who is expected to decide next week whether or not to sign it.

The bill was drawn up in response to the case of American States Insurance Co. vs. Kiger, in which the Indiana high court stepped out of line with decisions in most other states and ruled that the 1985 pollution exclusion was ambiguous. The bill would eradicate environmental coverage from CGL policies issued in Indiana after June 30, 1997, and list in detail what could be deemed pollutants.

If the bill is signed into law, it will provide a legislative affirmation of the absolute exclusion of pollution coverage, which insurers intended under the 1985 exclusion, said Robert J. Hurns, associate counsel at the National Assn. of Independent Insurers in Des Plaines, Ill.

The bill also would make clear to both insurers and policyholders what is covered by CGL policies, said Fred McGarvey, vp in the Skokie, Ill., office of the American Insurance Assn.

"It clarifies for insurers who are writing this coverage exactly what they are covering, and it provides predictability for both insurers and policyholders," he said.