287 A.3d 502
R.I.2023Background:
- Regan Heating & Air Conditioning (insured) performed work replacing a furnace at Robert O’Donnell’s house; ~170 gallons of home heating oil leaked into the basement causing property damage and a lawsuit by O’Donnell.
- Regan sought defense/indemnity under an Arbella commercial package policy (12/1/2014–12/1/2015); Arbella denied coverage relying on a Total Pollution Exclusion Endorsement (broad pollution exclusion) and a separate Limited Endorsement for building heating equipment.
- Arbella argued heating oil is a “pollutant” under the policy and the total endorsement excludes coverage; Regan argued the endorsements conflict and the pollutant definition is ambiguous and should be construed for the insured.
- The Superior Court granted Arbella’s motion for summary judgment and denied Regan’s; Regan appealed to the Rhode Island Supreme Court.
- The Supreme Court reviewed de novo, held the two endorsements are not in conflict but concluded the policy’s definition of “pollutant” is ambiguous as applied to home heating oil leaked into a basement, vacated the Superior Court judgment, directed entry of judgment for Regan on counts 1, 4, and 5, and remanded for further proceedings.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do the Total Pollution Endorsement and the Limited Endorsement conflict and render the policy ambiguous? | The endorsements both modify the same pollution language inconsistently; ambiguity favors insured. | Endorsements should be read seriatim; they modify different aspects and are consistent. | Read seriatim; no conflict; endorsements do not by themselves make the policy ambiguous. |
| Is the policy’s definition of “pollutant” ambiguous as applied to home heating oil in a basement? | The definition is broad and ambiguous (citing Nautilus); an ordinary insured could expect exclusion only for environmental pollution. | Oil is a liquid contaminant; courts (McGregor) treat spilled oil as classic pollution—exclusion applies. | The definition is ambiguous as applied to these facts; ambiguity resolved for the insured. |
| Should extrinsic evidence or insured expectations (e.g., insurer’s prior payouts) have been considered? | Hearing justice should have considered extrinsic evidence and reasonable expectations. | Contract language controls; no ambiguity to warrant extrinsic evidence. | Court did not need to resolve extrinsic-evidence claims because it found ambiguity; noted objective interpretation rules. |
| Remedy: Summary judgment for coverage? | Regan sought summary judgment declaring coverage and damages on certain counts. | Arbella sought summary judgment denying coverage. | Supreme Court vacated Superior Court SJ for Arbella, directed entry for Regan on counts 1, 4, and 5, and remanded for further proceedings. |
Key Cases Cited
- Nautilus Insurance Company v. Jabar, 188 F.3d 27 (1st Cir. 1999) (found pollution-definition ambiguous where terms like “irritant” and “contaminant” are broad and may be read to apply only to environmental contamination)
- McGregor v. Allamerica Insurance Company, 868 N.E.2d 1225 (Mass. 2007) (held spilled oil into the ground qualifies as pollution; insured could expect exclusion for such environmental contamination)
- Cheaters, Inc. v. United National Insurance Co., 41 A.3d 637 (R.I. 2012) (insurers’ exclusions should be read seriatim; exclusions ordinarily do not conflict)
- Bliss Mine Road Condominium Ass’n v. Nationwide Property & Cas. Ins. Co., 11 A.3d 1078 (R.I. 2010) (contract ambiguous when reasonably susceptible of different constructions)
- Nelson v. Allstate Ins. Co., 228 A.3d 983 (R.I. 2020) (rules for interpreting policy language; ambiguous terms construed for insured)
- Textron, Inc. v. Aetna Cas. & Sur. Co., 754 A.2d 742 (R.I. 2000) (divergent judicial interpretations of policy language indicates ambiguity)