ELR Citation: ELR 20702
No(s). 89-55953 (9th Cir. Mar 25, 1991)

The court holds that the pollution exclusion clause of a general commercial liability insurance policy bars coverage for an insured's costs of defending an environmental pollution action involving styrene gas emissions and pollution control equipment installation. After a planning commission issued an order suspending a fiberglass bathtub manufacturer's use of styrene and revoking its operating permit in response to neighbors' complaints about odors emanating from the manufacturer's plant, the manufacturer sought coverage under its insurance policy for the defense of the actions against it and for reimbursement of the cost of complying with the city's orders. The district court granted the insurer's motion for summary judgment, holding that the insured manufacturer's claims were barred by the policy's terms. On appeal, the court holds that although the manufacturer's styrene emissions are encompassed in the "your work" provision in the "products-completed operations hazard" (PCOH) exception to the pollution exclusion clause, coverage is barred under the discharge of pollutants limitation to the PCOH clause. The manufacturer's styrene emissions amount to the disposal of waste in the form of a discharged pollutant, since the manufacturer had its plant designed with exhaust stacks to discharge the styrene into the atmosphere. Moreover, since the manufacturer and its insurer intended generally by adopting the pollution exclusion clause to exempt from coverage damages caused by pollutants, the PCOH exception, as modified by the limitations, cannot be interpreted to include the manufacturer's styrene emissions. The PCOH exception focuses on products and completed operations, and styrene gas liberated during the manufacturing process is not encompassed by these terms. Further, the court concludes that the insurer would not likely have agreed to the terms of the PCOH without the inclusion of the limitations, one of which was intended to eliminate coverage for incidents like the manufacturer's emissions of styrene gas. Finally, the court holds that because the pollution exclusion clause barred coverage of the manufacturer's claims, the insurer did not breach its duty of good faith and fair dealing or waive policy exclusions. Since the initial facts available to the insurer dictated that coverage was not available under the policy, the insurer had no duty to investigate the entire underlying claim.

Counsel for Appellant
Arthur Fine
Mitchell, Silberberg & Knupp
11377 W. Olympic Blvd., Los Angeles CA 90064
(213) 312-2000

Counsel for Appellee
Jeffrey S. Barron, Robert S. Wolfe
Morris, Polich & Purdy
Chase Plaza, 801 S. Grand Ave., 17th Fl., Los Angeles CA 90017
(213) 626-4347

Before Hug and Canby, JJ.)