Noxious fumes emitted from defective drywall are "pollutants" for purposes of applying total pollution exclusions in commercial general liability (CGL) policies, according to a recent decision by a federal court in Mississippi. Based on this conclusion, the United States District Court for the Southern District of Mississippi, in Prestige Properties, Inc. v. National Builders and Contractors Ins. Co., No. 1:12CV205-HSO-RHW, 2013 WL 5592453 (S.D. Miss. Oct. 10, 2013), granted summary judgment in favor of an insurer under Mississippi law and dismissed with prejudice a coverage action brought by the insured, a building contractor.
In early 2006, Prestige Properties, Inc. (Prestige) was contracted by a homeowner to repair damage caused by Hurricane Katrina. Id. at *1. The repair work included replacing drywall. Id. The homeowner subsequently sued Prestige as part of an omnibus class action involving certain defective "Chinese drywall." Id. The underlying complaint alleged that Prestige installed the defective drywall, "which ha[d] resulted in harm and damages to" the homeowner. Id. at *2. According to the complaint, "chemical components of the drywall break down and produce noxious gases that cause corrosion and damage to personal property, including appliances, wiring and other objects with metal surfaces" and further, that "exposure to these gases causes personal injury resulting from eye irritation, sore throat, nausea, fatigue, shortness of breath, fluid in the lungs and neurological harm." Id.
National Builders and Contractors Insurance Company (NBCI) had issued to Prestige a CGL policy for the relevant policy period. The policy included a "Total Pollution Exclusion Endorsement" that defined "pollutant" to mean "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Id. at *3. Based on the language of this exclusion, NBCI denied Prestige's claim for a defense and indemnity. Id. Prestige subsequently brought suit against NBCI, seeking coverage. Id. Both parties filed motions for summary judgment regarding the effect of the "Total Pollution Exclusion Endorsement." Id.
The Court first looked to precedent in deciding the case. The Court noted that in American States Ins. Co. v. Nethery, 79 F.3d 473 (5th Cir. 1996), the Fifth Circuit, applying Mississippi law, found that paint and glue fumes qualified as gaseous chemicals under the meaning of a pollution...