SILOAM SPRINGS HOTEL, LLC v. CENTURY SURETY COMPANY
391 P.3d 111
| Okla. | 2017Background
- Century Surety issued a commercial general liability policy to Siloam Springs Hotel (policy period Nov 13, 2012–Nov 13, 2013) that included an "Indoor Air Exclusion" barring coverage for injury, damage, or personal/advertising injury "arising out of... any ... qualities or characteristics of indoor air regardless of cause."
- On Jan 17, 2013 hotel guests were allegedly injured by carbon monoxide from a pool-heater leak; Century denied coverage invoking the Indoor Air Exclusion.
- Siloam sued for a declaratory judgment; the federal district court granted summary judgment to Century, holding the exclusion unambiguous and applicable.
- The Tenth Circuit remanded on procedural diversity grounds and suggested certification to the appropriate state supreme court given state regulatory interests. The Western District certified a single question to the Oklahoma Supreme Court: whether Oklahoma public policy prohibits enforcement of the Indoor Air Exclusion.
- The Oklahoma Supreme Court answered No: Oklahoma public policy does not bar enforcement of the exclusion, because no Oklahoma statute or controlling authority expressly prohibits such an exclusion and courts should not invalidate negotiated insurance terms absent clear statutory or constitutional public policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Oklahoma public policy prohibits enforcement of the Indoor Air Exclusion | The exclusion (as applied to a sudden carbon monoxide leak) would deny compensation to victims where a reasonable person would expect liability coverage, so enforcement violates public policy | Parties are free to contract for the scope of coverage; no Oklahoma statute or controlling precedent forbids such an exclusion | Held: Public policy does not prohibit enforcement of the exclusion (majority) |
| Whether the court should reformulate the certified question to reach coverage/ambiguity issues | Siloam argued that ambiguity and application questions remain even if public policy is allowed to stand | Century argued certification should be limited to the public policy question only | Court exercised discretion to answer only the certified public policy question (majority); Justice Kauger would have reformulated and resolved ambiguity and coverage first |
| Whether absence of a statutory public-policy mandate (like compulsory auto insurance) permits enforcement of exclusions | Siloam urged courts to invalidate exclusions that defeat reasonable expectations of coverage absent statute | Century said absent statutory articulation the Legislature—not courts—defines public policy, so exclusions stand | Held: Without legislative or controlling decisional authority articulating contrary public policy, courts will not nullify the contractual exclusion |
| (Separate concurrence/dissent view) Whether the Indoor Air Exclusion, properly interpreted, excludes sudden carbon monoxide leaks | Hotel contended "qualities or characteristics" implies latent/continuous conditions only | Insurer construed clause broadly to include temporary/sudden contamination ("regardless of cause") | Dissent/concurring opinion (Kauger, J.): clause is ambiguous and should be construed for the insured; thus exclusion does not bar coverage for the sudden CO leak (but majority did not reach this) |
Key Cases Cited
- Ball v. Wilshire Ins. Co., 221 P.3d 717 (Okla. 2009) (invalidating automobile insurance exclusion to the extent it conflicted with Oklahoma's compulsory liability insurance public policy)
- Shepard v. Farmers Ins. Co., Inc., 678 P.2d 250 (Okla. 1983) (insurance provisions are enforceable as written but contracts violating public policy are void)
- Haworth v. Jantzen, 172 P.3d 193 (Okla. 2007) (ambiguities in insurance exclusions construed against insurer; example of conflicting exclusion language)
- Siloam Springs Hotel, L.L.C. v. Century Sur. Co., 781 F.3d 1233 (10th Cir. 2015) (remanded on diversity grounds; recommended certifying coverage questions to state supreme court given state interest in insurance regulation)
- Century Surety Co. v. Casino West, Inc., 329 P.3d 614 (Nev. 2014) (interpreting materially similar indoor-air language as ambiguous and construing it in favor of insured in carbon monoxide pool-heater case)