Pollution exclusion update: Fourth Circuit certifies Chinese drywall case to Virginia Supreme Court

To update a previous post dealing with the application of the pollution exclusion in a Chinese drywall case, in Travco Ins. Co. v. Ward, No. 10-1710 (4th Cir. March 1, 2012), an insured had appealed from an order granting summary judgment to his homeowner's insurer in a Chinese drywall case. The District Court found that the insured had suffered a loss within the policy's coverage, but concluded that coverage was excluded by four provisions: the latent defect exclusion; the faulty material exclusion; the corrosion exclusion; and the pollution exclusion.

The Fourth Circuit in Travco recently certified the coverage issues to the Supreme Court of Virginia, including the following: for purposes of interpreting an "all risk" homeowners insurance policy, is any damage resulting from the Chinese drywall unambiguously excluded from coverage under the policy because it is loss caused by: . . . ('pollutants,', where pollutant is defined as 'any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste'?

On appeal, the insured's argument on the pollution exclusion is that it is ambiguous in the context of product liability claims, because the exclusion was intended to limit or exclude coverage for past environmental contamination. The insured relies on Unisun Ins. Co. v Schulwolf, 53 Va. Cir. 220 (Va. Cir. 2000), in which the Circuit Court declined to apply a pollution exclusion to lead-based paint.

A very similar issue was certified in Nationwide Mut. Ins. co. v. Overlook, but the Supreme Court of Virginia declined to accept the certified question of law, . See Builders Mut. Ins. Co. v. Parallel Design & Dev. LLC, 785 F. Supp. 2d 535, 545 n. 5 (E.D. Va. 2011).