Evanston Insurance v. Harbor Walk Development, LLC
2011 U.S. Dist. LEXIS 109807
| E.D. Va. | 2011Background
- Evanston Insurance seeks a declaration that it has no duty to defend or indemnify Harbor Walk in three related Underlying Lawsuits alleging injuries and property damage from Chinese drywall.
- Harbor Walk and related defendants are sued in three actions: a class action in District of Virginia, and two Virginia circuit court actions alleging bodily injury and property damage from drywall emissions.
- Evanston issued three commercial general liability policies to Harbor Walk with aggregate, products-completed operations, per-occurrence limits, and a self-insured retention for the last policy; coverage is limited to designated premises or projects.
- The policies contain a pollution exclusion defining pollutants and excluding bodily injury or property damage arising from discharge, dispersal, seepage, migration, release, or escape of pollutants.
- The Homeowner Defendants allege damages to persons and property and seek testing, monitoring, removal, and replacement of drywall, aligning with claims Evanson argues fall within the pollution exclusion.
- Virginia choice-of-law governs interpretation of the policies, and the court applies Virginia law to contract interpretation while using federal summary-judgment standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the pollution exclusions are ambiguous | Evanston argues exclusions are unambiguous and cover indoor pollution as drafted. | Homeowner Defendants argue the terms are environmental-arts terms and thus ambiguous, favoring coverage. | Unambiguous; exclusions apply to non-traditional indoor pollution. |
| Whether the pollutants and injuries fall within the exclusion scope | Gases from drywall constitute pollutants causing bodily injury and property damage within the exclusion. | Pollution exclusion is limited to traditional environmental pollution, not indoor drywall emissions. | Gases from drywall meet pollutants; injuries fall within exclusion. |
| Whether all claims in the Underlying Lawsuits are barred by the exclusions | All asserted claims involve emissions from drywall and thus are excluded. | Some claims may not be within the exclusion’s scope or may involve other coverages. | All claims are barred under the pollution exclusions; no duty to defend or indemnify. |
| If exclusions do not apply, do design-premises limitations or other policy terms deny coverage | Even with alternatives, design-premises limitations could bar coverage for particular properties and timelines. | Limitations do not undercut the pollution exclusion analysis and may not bar coverage where exclusions apply. | Policy limitations discussed only to the extent relevant; pollution exclusion controls. |
Key Cases Cited
- City of Chesapeake v. States Self-Insurers Risk Retention Group, Inc., 271 Va. 574 (Virginia 2006) (pollution exclusion interpreted under Virginia law; define 'pollutants')
- Firemen's Ins. Co. v. Kline & Son Cement Repair, Inc., 474 F. Supp. 2d 779 (E.D. Va. 2007) (indoor pollution within broad pollution exclusion; non-traditional pollution covered)
- Granite State Ins. Co. v. Bottoms, 243 Va. 228 (Va. 1992) (ambiguous exclusions require clear language; not controlling here but influential)
- Overlook, LLC v. Nationwide Mutual Insurance Co., 2011 WL 1988396 (E.D. Va. 2011) (unambiguous pollution exclusion applied to Chinese drywall context (district court decision))
- Penn-America Ins. Co. v. Coffey, 368 F.3d 409 (4th Cir. 2004) (duty to defend analyzed under Eight Corners Rule; insurer bears burden on exclusions)
- TRAVCO Ins. Co. v. Ward, 715 F. Supp. 2d 699 (E.D. Va. 2010) (pollution exclusion context; non-traditional pollution addressed)
- Seals v. Erie Ins. Exch., 277 Va. 558 (Va. 2009) (contract interpretation dictates plain meaning; ambiguity resolved against insurer)
- Virginia Farm Bureau Mut. Ins. Co. v. Williams, 278 Va. 75 (Va. 2009) (reasonableness doctrine not adopted for exclusion interpretation)
- Lower Chesapeake Associates v. Valley Forge Ins. Co., 260 Va. 77 (Va. 2000) (exclusions to coverage must be clear and unambiguous)
- PMA Capital Ins. Co. v. U.S. Airways, Inc., 271 Va. 352 (Va. 2006) (Virginia contract interpretation principles for insurance policies)