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Estate of Mini v. Metro Supply & Service, Inc.

A-3976-02T2 (N.J. Super. App. Div. 2004) (Unpublished)

INSURANCE; LIABILITY; POLLUTANTS—Absent evidence that a product liability complaint is predicated on the discharge of a hazardous substance from the product, such as mulch, the hazardous substance liability exclusion in an insurance policy will not be given effect.

An man purchased mulch. Exposure to the mulch allegedly led to his death after a prolonged illness. His estate brought suit against the seller, specifically alleging that the man’s illness and death were caused by his exposure to the cedar mulch. The complaint also alleged that the seller was negligent in its production and sale of the mulch that was made from materials other than or in addition to, cedar containing unsafe and dangerous toxins.

The mulch company maintained a commercial general liability insurance policy. The policy contained a pollution exclusion clause, providing for no coverage for claims arising out of a pollution hazard. The insurance company concluded that the “foreign substance” described in the claim met the definition of a “pollutant,” and denied coverage. The lower court held that because a toxin in the mulch caused the injury, and not the mulch itself, the toxin could be considered a pollutant. Therefore, it granted the insurance company’s motion for summary judgment and denied the mulch company coverage.

The Appellate Division reversed, first noting that there was nothing in the underlying complaint that alleged that the individual had inhaled any toxin given off by the mulch. The complaint alleged “exposure” to the mulch. The complaint did not allege an active or physical event that could constitute a “discharge, dispersal, seepage, migration, release or escape of a pollutant.” It merely alleged a non-specific “exposure” to some unidentified substance. The Court concluded that this allegation could have reasonably been interpreted to allege a cause of action falling outside the scope of the pollution exclusion clause. In addition, the Court believed that coverage must be evaluated in light of the nature of the claim against the insured, not simply upon how a plaintiff chooses to phrase the complaint. Accordingly, the Court noted that there was no evidence that supported the claim that any type of pollutant was discharged from the mulch. Thus, the Court reversed the lower court’s ruling, and held that the insurance company was obligated to provide coverage to the mulch seller.

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