Coverage: Vapor Intrusion Claims

Often, changes in environmental regulations and science come together to establish new types of claims.  New jurisprudence and case law can also join with these changes and further impact both insurers’ and insureds’ exposure to environmental liabilities.  This article explores the interaction between regulatory, scientific, and jurisprudence factors and how they may impact future claims.


Environmental Regulations


Conveyor Belts for Tort Claims

Key to considering specific emerging toxic tort claims is the understanding of how new claims arise.  Often, attorneys rely on some violation of a federal or state regulatory provision to springboard their action and lend credence to an otherwise questionable theory of liability.  Courts are increasingly using standards set by regulatory agencies to evaluate tort claims and their viability.  This happens three ways.  First, some courts adopt a view that tort claims are pre-empted under certain regulatory structures – thereby depriving plaintiffs of standing.[1]  Second, courts adopt regulatory standards as the standard of care or common law duty.[2]  Third, courts adopt regulatory set background levels or “tolerances,” (those levels that have been found to naturally exist in nature) to determine exposure and harm.[3]



Addressing the first issue, certain environmental laws such as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), actually preserve civil claims in their terms.  In the example of CERCLA, Section 113(f)(1) provides for a contribution right where one has cleaned-up the waste of another.  Though the right to contribution under Section 113(f)(1) has recently come under fire by the U.S. Supreme Court’s opinion in Cooper Industries, Inc. v. Aviall Services, Inc.[4], where the Court limited such rights to defendants of a CERCLA Section 106 or 107(a) “civil action,” CERCLA still provides a right to bring contribution actions.  The Clean Water Act’s Section 505 is another example of a statute that provides a private right of action.


For a long time it was perceived that where federal or state environmental laws were in place and did not affirmatively provide for some private right, tort claims were preempted.  However, the recent U.S. Supreme Court decision in Bates v. Dow Agrosciences LLC,[5] involving the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), rejected this limitation on tort claims.[6]    Specifically, the Court held that FIFRA only pre-empts requirements for “labeling and packaging.”[7]  All other traditional and products liability claims remained available, “even where an express warranty appears on the label.”[8]   Whether Bates will spurn a wave of tort claims remains to be seen.


Adoption of Environmental Standards:

Under the second and third issues, Courts are increasingly willing to accept government standards to evaluate tort actions.  In Ibervill Parish Waterworks District No. 3 v. Novartis Crop Protection Inc.[9], the Eleventh Circuit affirmed the decision of the District Court which held a plaintiff could not maintain his claims against a chemical manufacturer because he suffered no injury in fact where the contaminant levels did not exceed the federally set maximum contaminant level (MCL) on an annual basis.[10]  In the matter of Taco Cabana, Inc. v. Exxon Corp.[11] the Court relied on the State Water Code of Texas and regulations related to clean-up standards to dismiss a plaintiff’s action.  Because those standards dictated when corrective action was necessary, the court reasoned they also defined when “unreasonable levels” of contamination were present.[12]  This inclination by courts to adopt regulatory standards doesn’t mean they won’t entertain an expert’s opinion differing from those standards, but increasingly, courts are less likely to extend far from agency set standards.


Emerging Environmental Science


With new science come new claims as demonstrated by the example of vapor intrusion (VI).  VI is a concern for insurers, property owners and developers which involves the process by which some chemicals, specifically volatile organic compounds (VOC’s) in contaminated soil or groundwater diffuse upward through soil.  VOC’s penetrate buildings through foundation cracks, utility conduits, or other means, and intrude into indoor airspaces potentially exposing occupants to harmful vapors.[13]  Some contaminants found in indoor air are known carcinogens, or have been shown to have other harmful effects on human health if inhaled at high enough concentrations over a long enough period of time.  The EPA first issued guidance on how to evaluate vapor intrusion risks in 2001, establishing “safe” target levels for indoor air contaminants.  The science of vapor intrusion is at an early stage, and still evolving. 


Determination of safe levels of vapors is generally based on prior water-based models.  Under the CWA and the Safe Drinking Water Act (SDWA), the EPA has used daily water consumption tables to set the maximum contaminant level (MCL) of certain chemicals of concern.  For example, benzene (a primary component of gasoline) and tetrachloroethene or PCE (a chemical often used in dry cleaning) are set at 5 micrograms per liter (ug/L).  The EPA has determined that an average adult can consume 10 ppb of benzene or PCE per day without a significant risk for developing adverse health effects.[14]


Now relate this water consumption rate to the amount of air breathed by the average adult per day, which is about 20,000 liters per day.[15]  At this consumption rate, an initial air concentration of about 0.0005 ug/L would result in the EPA MCL standard.  Thus, a minor amount of vapors in the air can equate to a significant inhalation exposure throughout a 24-hour period.[16]  This reality is the basis for the concern over vapors claims.



The New Science: TCE

As a result of a new study by the National Academy of Sciences (NAS), the newest concern in the vapor arena is lower exposure levels to trichloroethylene (TCE).  TCE, a solvent widely used as a degreasing agent, is a common contaminant of air, soil, and water at manufacturing facilities, military installations, and hundreds of waste sites around the country.[17]  TCE is released into the air during degreasing operations and is found in soils and surface water as a result of direct discharges, and in groundwater from disposal operations.  TCE can also be released in indoor air if tap water is contaminated, if vapors enter from contaminated groundwater nearby, or by use of certain consumer products are used (e.g., adhesives, typewriter correction fluid, paint removers).[18]


With the July 27, 2006 release of its report analyzing the risk of exposure to TCE through vapor pathways, NAS has highlighted a new source of liability.[19]  The NAS’ findings included adverse effects to kidney, liver, reproductive, immune, and neurological systems.  The release of the NAS report marks a milestone in the regulation of TCE.  As a result of this study, the link between TCE and cancer is considered to be stronger than previously thought, and exposure to TCE through vapor pathways is more prominent than in the past, when the overriding focus was on exposure to TCE in water.  Ironically, the NAS study of TCE resulted from significant challenge to proposed EPA regulations aimed at dramatically decreasing the acceptable exposure level to TCE.  Because of the challenge, EPA abandoned the changes.  NAS, interested in resolving the toxicity issues surrounding TCE, performed its 18 month analysis to aid in EPA’s efforts.  As a result of NAS’ report, EPA currently intends to seek implementation of their previously proposed exposure levels.[20]


When this new science is coupled with the ever changing arena of environmental regulations, toxic tort claims are likely to arise.  As discussed above, any adoption by EPA of more stringent tolerances on TCE will ultimately lower the bar for Courts who are asked to decide the legitimacy of a litigant’s claims.  This means routine, low dose exposures previously believed to have been benign are now open for potential liability claims.  To insurers and insureds, these new claims can create a great deal of confusion in determining coverage.


The New Jurisprudence:


“Traditional” vs. “Non-Traditional” Pollution

In 1985, the insurance industry introduced a new policy exclusion touted to be an “absolute” or “total” pollution exclusion.  The exclusion replaced an earlier pollution exclusion often referred to as the “sudden and accidental” pollution exclusion that was the source of what one commentator has called, “the most hotly litigated insurance coverage questions of the late 1980s.”[21]  Much like its predecessor, the absolute pollution exclusion is generating significant litigation in the area of vapor claims. 


This is emphasized by recent opinions around the country differentiating “traditional” versus “non-traditional” pollution claims with vapor claims being classified under the non-traditional category.  The Supreme Court of New Jersey adopted this approach when it concluded a pollution exclusion clause was limited to “traditional” environmental pollution, and found coverage for a vapor claim.[22]  Yet, there are jurisdictions that are not following this trend.  Specifically, the Iowa Supreme Court in Bituminous Casualty Corp. v. Sand Livestock Systems, Inc.[23], recently rejected this idea of “traditional” versus “non-traditional” noting that carbon monoxide fumes from a concentrated hog farm were pollutants under the policy at issue.[24]


The argument comes down to the history of the absolute pollution exclusion.  As argued in MacKinnon v. Truck Ins. Exchange,[25] the “pollution exclusion” was drafted in response to the marked increase in environmental liability associated with new environmental statutes and the “environmental disasters of Times Beach, Love Canal and Torrey Canyon.”[26]  The first version of the exclusion – the so-called “qualified pollution exclusion” – excluded coverage for injuries and damages arising out of the “discharge, dispersal, release or escape” of “pollutants” unless such discharge dispersal, release or escape was “sudden and accidental.”[27]  When the insurance industry revised the exclusion in 1985 to eliminate the exception for the “sudden and accidental” release of pollution, it maintained the revision was not intended to broaden the exclusion’s scope, but was merely intended to continue to “exclude traditional environmental pollution rather than all injuries from toxic substances.”[28] 


Relying on this history, two lines of authority have developed in interpreting the revised “absolute” pollution exclusion.  A majority of jurisdictions apply the exclusion to “traditional environmental pollution” but not to “injuries involving the negligent use or handling of toxic substances that occur in the normal course of business,” i.e. “non-traditional” pollutants.[29]  These jurisdictions point to the “absurd or otherwise unacceptable results” of “an interpretation of ‘pollutant’ as applying literally to ‘any contaminant or irritant . . . .’”[30]  They also focus on the common meaning of the term “discharge, dispersal, release or escape” as “implying expulsion of the pollutant over a considerable area rather than a localized toxic accident occurring in the vicinity of intended use.”[31]  Examples of toxic accidents found not to be excluded include: the accidental spraying of insecticides, leaks of carbon monoxide from furnaces and the ingestion of paint chips.[32]  On the other end of the debate are those minority of jurisdictions who rely on the “plain” language of  the exclusion’s terms to hold that the “absolute” pollution exclusion is unambiguous and applies to all manner of negligent acts involving toxic substances even outside the scope of traditional environmental pollution.[33] 


In the South, states are slowly adopting the “non-traditional” argument.  Compare, Sullins v. Allstate Ins.Co., 667 A.2d 617 (Md. 1995), reconsid. Denied (Dec. 19, 1995) (exclusion does not apply to lead paint claim); Motorist Mut. Ins. Co. v. RSJ Inc., d/b/a Regency One Hour Cleaners, 926 S.W.2d 679 (Ky. Ct. App.1996) (exclusion does not apply to carbon monoxide); Essex Ins. Co. v. Avondale Mills, Inc., 639 So. 2d 1339 (Ala. 1994) (exclusion does not apply to asbestos released during building demolition); West America Insurance Co. v. Tufco Flooring East, Inc., 104 N.C. App. 312, 409 S.E.2d 692 (N.C. 1991) overruled on other grounds, (styrene fumes from a floor re-surfacing job that contaminated chicken in a processing plant not excluded); Doerr v. Mobil Oil Corp., 774 So.2d 119 (La. 2000) (clause does not apply to all contact with substances that may be classified as pollutants); and State Auto Property & Cas. Ins. Co. v. Arkansas Dep’t of Envtl. Quality, 2007 WL 1707358 (Ark. June 14, 2007) (finding the exclusion to be ambiguous), to State Farm Fire & Casualty Insurance Co. v. Deni Associates of Florida, Inc., 678 So. 2d 397 (Fla. Ct. App. 1996) (accidental ammonia spill from a blueprint machine excluded).


Until July of this year, Georgia appeared to side with majority.  In the 2002 Georgia Court of Appeals decision in Kerr-McGee v. Ga. Cas. & Sur. Co., the Court interpreted an insurer’s total pollution exclusion clause as ambiguous, and thus not excluding coverage.[34]  The insurer brought a declaratory judgment action to determine whether its exclusion stating, “this insurance does not apply to ‘bodily injury’ or ‘property damage’ which would not have occurred in whole or in part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants at any time.”[35] 


When an employee of the insured suffered injuries following his exposure to the unintended release of industrial chemical titanium tetrachloride within a plant not owned by the insured, the Court of Appeals determined the exclusion did not apply.[36]  The Court explained a reasonable insured could believe the exclusion did not apply when the insured neither caused nor contributed to the pollution.[37]  Key to this opinion, the Court determined the chemical release was not an environmental contamination and the chemical released was not a waste, but rather an industrial chemical. [38]  Thus, by classifying the chemical as industrial, i.e. non-traditional, rather than waste – i.e. traditional, the Court found there was sufficient ambiguity in the policy to resolve it against the insurer as drafter.[39] 


Yet, on July 16, 2007, the Court of Appeals in Auto-Owners, Inc. v. Reed, jumped lines on determining coverage under the “traditional” vs. “non-traditional” pollutant and the absolute pollution exclusion debate.  In a 5/2 decision, the Court reversed the Butts County Superior Court’s order denying Auto-Owner’s Motion for Summary Judgment and found the absolute pollution exclusion of a CGL policy excluded coverage to a commercial landlord in a suit involving his tenant’s exposure to carbon monoxide.


Writing for the majority, Judge Andrews held: “There is no dispute that carbon monoxide is a fume and a gaseous irritant or contaminant.  Therefore, it falls clearly within the policy exclusion.” 2007 Ga. App. LEXIS 840 (2007).  Andrews next took aim at the dissents and argued the Court’s prior 1995 ruling in American States Ins. Co. v. Zippro Constr. Co. supports this finding.[40]  Notable is the Court’s determination that the asbestos in American States was “not an environmental pollutant, it was completely contained inside the house and is indistinguishable from the carbon monoxide” in the present case.


The Court of Appeals appears to have forgotten its past analysis of Zippro in Kerr-Mcgee, wherein it made the clear opposite finding to support coverage for exposure to titanium tetrachloride fumes in an enclosed space, noting:


American States Ins. Co. v. Zippro Constr. Co., involved asbestos fibers, which contaminated the house and environment from old construction material when removed and the insured under the policy was the person causing the contamination of the environment, which also was a clear release and escape into the environment outside the house by removal. [41]

Apparently picking up on this conflict, Judge Andrews went further and held Kerr-McGhee is not binding authority because it was “one judge’s opinion where two judges joined.”  The Court otherwise suggested Zippro is the decisive opinion on point and is controlling.


That one judge just happened to be Judge Ellington who was also on the panel and challenged the Majority’s two-page holding with a six-page dissent arguing this was an issue of first impression.  The dissent would have held the exclusion ambiguous and thus, the existence of coverage for carbon monoxide where, as presented here, “an accidental carbon monoxide leak…originates and remains confined within the insured property.”  To support this holding, the dissent points to seven jurisdictions where a release inside an enclosed space, without release into the environment, is not excluded under an absolute exclusion.  (CO, DC, Ill, KY, MA, NY, OH).


Ultimately, the dissent would have limited the exclusion to “environmental pollutants,” i.e. spills, CERCLA, and other more traditional notions of pollution, where, “an irritant or contaminant that is harmful or toxic to persons or the environment generally has moved into the surrounding environment.”  In support of this position, the dissent focused on the historical background of the absolute exclusion and its intent to protect against environmental statutes.


In all, the Court’s ruling in Auto-Owners and departure from Kerr-Mcgee would seem to move Georgia out of the group of states that provides coverage under the absolute pollution exclusion where the pollutant is limited to an enclosed space.  For now, exposures to chemicals in the workplace and home leave attorneys with heartburn when trying to advise insurers of coverage.  Though an appeal of Auto-Owners to the Supreme Court was docketed on August 2, 2007, Case No. S07C1768, this may not be the decisive case on this issue, for even in jurisdictions who have adopted the “non-traditional” / historical line of analysis, a significant percentage have found carbon monoxide is a historically known and accepted “pollutant” and thus, nonetheless denied coverage.  The Supreme Court could adopt this approach and avoid the entire enclosed space / “non-traditional” pollutant debate altogether.


Final Comment


With ever shifting sands of environmental science, regulations, and jurisprudence, all should stay advised of growing potential liabilities.  Recent changes in the science of TCE have prompted the proposed implementation of dramatically lower tolerance levels by EPA, which will likely be adopted by the Courts in interpreting harm and duty.  Moreover, recent legal decisions suggest claims related to chemical vapors leave in limbo insurance coverage.  Together, this demonstrates just how science, regulations and jurisprudence can come together to create a new cause of action. <

[1] Madonia, Joseph F. and Conlon, Alison C., New Developments in the Evolving Relationship Between Toxic Tort Liabilities and Environmental Regulations, Mealey’s Emerging Toxic Torts, 15:24 (2007) citing Iberville Parish Waterworks District No. 3 v. Novartis Crop Protection, Inc.  45 F. Supp. 2d 934 (S.D. Ala. 1995) (affirmed without opinion, 204 F.3d 1122 (11th Cir. 1999).

[2] Id. citing Taco Cabana, Inc. v. Exxon Corp., 5 S.W.3d 773 (Tex. App. 1999).

[3] Id. citing Smith v. Carbide ad Chemicals Corp., 298 F. Supp. 2d 561 (W.D. Ky. 2004).

[4] 543 U.S. 157, 125 S. Ct. 577, 580 (2004).

[5] 125 S. Ct. 1788 (2005).

[6] Id. at 1798-1800. 

[7] Id. at 1798. 

[8] Id. at 1798-99.

[9] Madonia, supra, citing 45 F. Supp. 2d 934 (S.D. Ala. 1995) (affirmed without opinion, 204 F.3d 1122 (11th Cir. 1999).

[10] Id.

[11] 5 S.W.3d 773 (Tex App. 1999).

[12] Id. at 780.

[13] Testimony of Carl Johnson, Deputy Commissioner for Air and Waste Management, before the New York State Assembly Standing Committee on Environmental Conversation (April 21, 2005).

[14] Griebel, Russell C., What’s all this talk about potential intrusion risk?, Air and Waste Management Association (2007).

[15] Id.

[16] Id.

[17] The National Academy of Sciences, (2006).

[18] Id.

[19] See id.

[21] Stempel, J., Interpretation of Insurance Contracts: Law and Strategy for Insurers and Policyholders 825 (1994).

[22] Nav-Its, Inc. v. Selective Insurance Company of America, (NO. A–20/21. N.J. Supreme Ct., 2005).

[23] No. 135/05-1063, 2007 Iowa Sup. LEXIS 23 (Feb. 23, 2007).

[24] See also, Continental Casualty Company v. Advance Terrazzo & Tile Company, Inc., 462 F.3d 1002 (8th Cir. 2006) (Minnesota law, an absolute pollution exclusion clause in a general liability policy held to be unambiguous as applied to pollutants occurring in the course of normal business activities).

[25] 31 Cal. 4th 635, 642 n. 1 (Aug. 14, 2003).

[26] Id. at 643.

[27] Id. at 644.

[28] Id. 

[29] Id. at 642.

[30] Id. at 645-46. 

[31] Id. at 646. 

[32] See Id. at 642 n.2. 

[33] Id. at 646-47.

[34] 256 Ga. App. 458 (2002).

[35] Id. at 461.

[36] Id.

[37] Id. at 462-463.

[38] Id. at 462-463.

[39] Id. at 464.

[40] 216 Ga. App. 499, 500-501 (1995).

[41] 256 Ga.  at 462.



Christopher R. Reeves, EPD, EPA, Georgia, Environmental, attorney, litigator, litigation, water, pollution, lawyer, finley, law, firm, regulations, administrative, climate change, esq, toxic, land


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