Ambiguity strikes again. While the heavily litigated pollution exclusion is well-known in the insurance world, its progeny—the indoor air exclusion—only recently has started making its way around the block. Insurers should be aware of the trend in cases holding that indoor air quality exclusions are ambiguous. Such holdings are resulting in courts applying a strict and narrow construction. For example, in Siloam Springs Hotel v. Century Sur. Co., No. 17-6208 (10th Cir. 2018), the Tenth Circuit recently held that an insurer is on the hook for a carbon monoxide leak in Oklahoma, finding that an indoor air quality exclusion does not bar coverage.
The case stems from an incident at a hotel where several guests sustained injuries after being poisoned by a carbon monoxide leak that followed a repair to an indoor-swimming pool heater. The hotel sought coverage under its liability policy but the insurer denied coverage, relying on the indoor air quality exclusion, which bars coverage for injuries “arising out of, caused by, or alleging to be contributed to in any way by any toxic hazardous, noxious irritating, pathogenic or allergen qualities or characteristics of indoor air regardless of cause.”
The district court granted summary judgment in favor of the insurer, holding that the policy exclusion was unambiguous, and precluded coverage for the insured’s claim. See Siloam Springs Hotel, L.L.C. v. Century Sur. Co., CIV-13-572-M, 2014 WL 1924106, at *2 (W.D. Okla. May 14, 2014), rev’d and remanded, 906 F.3d 926 (10th Cir. 2018) (“Siloam II”). The district court reasoned that:
based upon the exclusion’s title—“Mold, Fungi, Virus, Bacteria, Air Quality, Contaminants, Minerals or Other Harmful Materials”—and the specific language of the exclusion—“any toxic, hazardous, noxious, irritating, pathogenic or allergen qualities or characteristics of indoor air regardless of cause”, the Court finds the Indoor Air Exclusion, while a very broad exclusion, [it] unambiguously applies to more than just situations involving toxic indoor air caused from the development of mold, fungi or some other degradation of structure but applies as well to situations involving toxic indoor air caused by a one-time, sudden infiltration of a toxic, hazardous, or noxious gas, such as carbon monoxide.
But after the district court’s decision, the case embarked on a complex procedural journey that included a series of remands and appeals unrelated to the merits issue which...
