A little under two years ago, we wrote about the fatal Oxford comma—you know, the one that comes before “and” in a list—and the impact of its omission on a court’s interpretation of a Maine employment statute. The court effectively gave a $10 million lesson in grammar and ambiguity, but its holding was not revolutionary to a coverage attorney.
When faced with insurance coverage interpretation questions, such as ambiguities or undefined terms, courts consistently apply well-known interpretation principles: (1) clear and unambiguous terms are given their plain and ordinary meaning; (2) where there are ambiguities, the policy should be interpreted against the insurer and in favor of coverage; and (3) exclusions must be narrowly construed.
In a case handled by this firm, the Eastern District of Virginia recently applied these principles and found that there was coverage for the policyholder’s loss, in part relying on the Webster’s Dictionary definition of “smoke.”
Zenith sought coverage after a construction contractor failed to use water while operating a “wet saw” at Zenith’s warehouse and caused clouds of concrete particulate to permeate the building. Allied initially acknowledged its coverage obligations under a CGL policy, made a $5,000 payment, and then abruptly denied coverage based on the policy’s pollution exclusion. The policy excluded coverage for losses resulting from the discharge of pollutants, defined as any “solid, liquid, gaseous or thermal irritant or contaminant.” However, the policy also contained an exception to that exclusion for instances where the release of a pollutant results in one of several “specified cause[s] of loss,” including smoke. Allied argued the smoke exception did not apply because there was no documented fire.
Judge Anthony Trenga analyzed whether clouds of concrete particulate could constitute “smoke,” such that the exception to the pollution exclusion would be triggered and coverage would be available. Noting that the policy did not define “smoke,” the court highlighted at least two different dictionary definitions of the term: “the gaseous products of burning materials” and “a suspension of particles in a gas.” The court accordingly held that there was coverage for Zenith’s loss because “[t]he text and structure of the policy (including the other ‘specified causes of loss’) are insufficient to conclude that the parties intended to adopt the more narrow definition of ‘smoke’ for the purposes of the pollution exclusion.” Rather, “[w]ell-settled principles of Virginia insurance law … require the court to adopt the interpretation favoring coverage; ‘smoke’ as used in the policy refers to any visible suspension of particles in a gas, including the concrete dust suspended in ambient air in Zenith’s warehouse.”
Policies do not always have exhaustive definition sections and often pivotal terms are left undefined, creating ambiguities. Here, when applying a plain and ordinary meaning of “smoke,” the court’s analysis was guided at least in part by Merriam-Webster. Better hold onto those dictionaries!