11th Circuit Holds Pollution Exclusion Applies to Carbon Monoxide Poisoning

In its recent decision in Scottsdale Insurance Co. v. Pursley, 2012 U.S. App. LEXIS 17437 (11^th Cir. Aug. 20, 2012), the United States Court of Appeals for the Eleventh Circuit, applying Georgia law, had occasion to consider the application of a total pollution exclusion in a general liability policy to an underling claim involving fatal inhalation of carbon monoxide.

Scottsdale insured Richard Pursley, a boat mechanic, under a general liability policy for liabilities arising out of his boat engine repair business.  It was alleged in the underlying wrongful death lawsuit that Pursley negligently performed repairs on plaintiff’s boat, which allowed for exhaust from an onboard generator to enter the boat’s engine room and ultimately into other parts of the boat, including the sleeping quarters.  One night following Pursley’s repairs, the plaintiff turned on the generator to operate the boat’s air conditioner, and then went to sleep.  He died that night of carbon monoxide poisoning.  Scottsdale denied coverage to Pursley in the subsequent wrongful death lawsuit on the basis of its policy’s total pollution exclusion, and commenced a declaratory judgment action against Pursley and the underlying plaintiff.  The United States District Court for the Northern District of Georgia ruled in favor of Scottsdale.

On appeal, the underlying plaintiff argued, among other things, that the lower court’s application of the pollution exclusion ignored the historical purpose of the exclusion as well as Georgia public policy.  The Eleventh Circuit, however, observed that in Reed v. Auto-Owners Ins. Co., 667 S.E.2d 90 (Ga. 2008), the Georgia Supreme Court held that the pollution exclusion applied to a carbon monoxide poisoning claim arising out of the insured’s maintenance of a rental house.   Specifically, the Reed court rejected the insured’s contention that the pollution exclusion is limited to matters considered traditional environmental pollution.  Thus, finding the underlying facts analogous to those in Reed, the Eleventh Circuit held that the exclusion applied to bar coverage.