Nationwide Mutual Insurance v. Richardson

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 10, 2001 Filed November 2, 2001

No. 00-7203

Nationwide Mutual Insurance Company,
Appellee

v.

Antoinette Richardson,
Appellant

Appeal from the United States District Court
for the District of Columbia
(No. 99cv01322)

---------

CERTIFICATION OF QUESTION OF LAW
by the United States Court of Appeals
for the District of Columbia Circuit to
the District of Columbia Court of Appeals
pursuant to D.C. Code s 11-723 (2001)

---------

David P. Sutton argued the cause for appellant. With him
on the brief was Robert J. Pleshaw.

Catherine M. Colinvaux argued the cause for appellee.
With her on the brief was David P. Durbin.

 Before: Ginsburg, Chief Judge, Edwards and Sentelle,
Circuit Judges.

Opinion for the Court filed by Circuit Judge Edwards.

Edwards, Circuit Judge: The disposition of this appeal
depends upon the proper application of District of Columbia
law to resolve a dispute over the scope of a pollution exclu-
sion clause in a liability insurance policy. The contested
provision, which is common in commercial comprehensive
general liability insurance policies, excludes liability coverage
for injuries or damage arising out of events involving the
release or escape of "pollutants." Courts around the country
have divided in construing the scope of the pollution exclusion
clause. Some courts read the clause expansively and thereby
give broad reach to the exclusion, and others find the clause
ambiguous and construe it narrowly in favor of insured
parties seeking coverage.

The District of Columbia Court of Appeals has yet to
consider the scope of the pollution exclusion clause under
District of Columbia law. We are mindful that a "federal
court ... should normally decline to speculate on ... a
question of local doctrine." East v. Graphic Arts Indus.
Joint Pension Trust, 107 F.3d 911, 911 (D.C. Cir. 1997)
(quoting Delahanty v. Hinckley, 845 F.2d 1069, 1070 (D.C.
Cir. 1988)). In deciding whether to certify such a question to
the District of Columbia Court of Appeals, we ask whether
District of Columbia law is "genuinely uncertain" with respect
to the dispositive question, Dial A Car, Inc. v. Transp., Inc.,
132 F.3d 743, 746 (D.C. Cir. 1998) (citing Tidler v. Eli Lilly &
Co., 851 F.2d 418, 426 (D.C. Cir. 1988)), and whether the case
"is one of extreme public importance," id. (citing Joy v. Bell
Helicopter Textron, Inc., 999 F.2d 549, 563-64 (D.C. Cir.
1993)). Where there is a "discernable path for the court to
follow," we do not avoid deciding the question. Id. District
of Columbia law presents no such path in this case, and, while
the scope of the pollution exclusion clause has been the
subject of extensive litigation in other jurisdictions, we can
find no common ground of opinion among the courts that have
construed the clause. Finally, the question is one of signifi-

cant import to the public. Because the pollution exclusion
clause appears in the standard commercial comprehensive
general liability policy, it potentially affects the insurance
coverage of most businesses in the District of Columbia. See,
e.g., Doerr v. Mobil Oil Corp., 774 So.2d 119, 123 n.1 (La.
2000) ("Some form of this pollution exclusion is part of the
standard [commercial general liability] policy purchased by
almost all large and small businesses since the mid-1980s.")
(citation omitted).

Given the extreme public importance of the question, the
likelihood of its recurrence in future cases, and the absence of
a discernable answer within local law, we certify the following
question of law to the District of Columbia Court of Appeals
pursuant to D.C. Code s 11-723:

In light of the facts set forth below, does the pollution
exclusion clause apply to injuries arising from alleged
carbon monoxide poisoning?

I. Background

A. Procedural and Factual Background

The parties to this litigation have included Antoinette Rich-
ardson, an intervenor before the District Court and now the
appellant; REO Management, Inc. ("REO"), the defendant
before the District Court; and Nationwide Mutual Insurance
Co. ("Nationwide"), the plaintiff before the District Court and
now the appellee.

The facts in this case are largely undisputed. Ms. Richard-
son worked in the District of Columbia as a security guard in
an apartment complex managed by REO Management. REO
is organized under the laws of the District of Columbia, where
it has its principal place of business. At the time of the
events in question, REO held a comprehensive general liabili-
ty insurance policy (Policy No. 52PR-147-539-0001M) ("the
policy"), which it had purchased from Nationwide, an Ohio
corporation. The policy provided liability protection for the
apartment complex where Ms. Richardson worked.

 In February, 1995, a gas furnace or furnaces in the apart-
ment complex where Ms. Richardson worked allegedly began
to leak carbon monoxide. Ms. Richardson and another per-
son in the apartment complex claimed to have been overcome
and disabled by carbon monoxide fumes. Ms. Richardson
sued REO and two other defendants in District of Columbia
Superior Court, alleging negligent maintenance of the fur-
naces and failure to supervise and train properly the people
who worked on them. In her complaint, she stated that she
was at all relevant times a resident of Maryland.

In May, 1999, Nationwide filed an action for a declaratory
judgment in the United States District Court for the District
of Columbia seeking a declaration that it was not obligated to
defend or indemnify REO in Ms. Richardson's underlying
Superior Court lawsuit. Nationwide asserted that the pollu-
tion exclusion clause in REO's insurance policy barred cover-
age for damages arising out of Ms. Richardson's claims. The
policy provides, in relevant part:

This insurance does not apply to: ... f. Pollution (1)
"Bodily injury" or "property damage" arising out of the
actual, alleged or threatened discharge, dispersal, seep-
age, migration, release or escape of pollutants.... Pol-
lutants means any solid, liquid, gaseous or thermal irri-
tant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste.

Nationwide moved for summary judgment based, in part,
on the pollution exclusion clause. In December 1999, Ms.
Richardson filed a motion to intervene in the declaratory
judgment action in the District Court. She alleged, inter
alia, that the defendant REO was a "shell corporation,"
lacking any assets except the insurance policy. She further
alleged that her interests could not adequately be represent-
ed by REO, because her negligence suit in Superior Court
against REO gave rise to a conflict of interest.

The District Court issued an Order and Memorandum
Opinion denying Ms. Richardson's motion to intervene as of
right pursuant to Federal Rule of Civil Procedure 24(a) on
the grounds that she lacked a sufficient interest relating to

the subject of the action, because she had yet to receive an
enforceable judgment in her underlying Superior Court suit.
Instead, the District Court allowed her to intervene permis-
sively pursuant to Rule 24(b), on the condition that she
advance only those arguments that the defendant REO had
failed to make. At the same time, the District Court granted
Nationwide's motion for summary judgment, holding that the
pollution exclusion clause "clearly and unambiguously" barred
coverage for Ms. Richardson's alleged injuries. The District
Court determined that District of Columbia law governed the
case and that no court in the District of Columbia had
interpreted the relevant language. While it acknowledged
that courts in other jurisdictions have taken different ap-
proaches to interpreting pollution exclusion clauses, the Dis-
trict Court held that to find the clause ambiguous in this case
"would be to seek out ambiguities in the contract where none
exist." Ms. Richardson appealed.

B. History of the Pollution Exclusion Clause.

The pollution exclusion clause that appears in REO's insur-
ance policy is part of a standard form commercial comprehen-
sive general liability policy. The clause's history is well-
known. Before 1966, the standard comprehensive general
liability form provided coverage for property damage and
bodily injury caused by "accident." Jeffrey W. Stempel,
Interpretation of Insurance Contracts s T1.1, at 826 (1994).
Courts often interpreted the standard policy to cover injuries
related to environmental pollution. Am. States Ins. Co. v.
Koloms, 687 N.E.2d 72, 79 (Ill. 1997) (detailing the history of
the pollution exclusion clause). The insurance industry re-
sponded by changing the policy to cover "occurrences" and
attempting to define occurrences to exclude long-term envi-
ronmental pollution. See id. at 79-80. Courts nonetheless
continued to interpret the policy to cover damages resulting
from such pollution. Id. at 80 (citing New Castle County v.
Hartford Accident & Indem. Co., 933 F.2d 1162, 1197 (3d Cir.
1991)).

Beginning in 1970, insurers began adding an endorsement
to the standard-form policy excluding coverage for damage

arising out of "the discharge, dispersal, release or escape of
smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals,
liquids or gases, waste materials or other irritants, contami-
nants or pollutants into or upon land, the atmosphere or any
water course or body of water." Stempel, supra, s T1.1, at
826-27 (citation omitted). The clause contained an exception
for discharges that were "sudden and accidental." Id. at 826.
The clause was incorporated into the standard comprehensive
general liability policy itself in 1973. Koloms, 687 N.E.2d at
80. Much litigation ensued over the meaning of the "sudden
and accidental" exception. See generally Stempel, supra,
s T1.2 (describing the litigation).

Insurance companies responded to the litigation by adopt-
ing a new version of the exclusion in the mid-1980s, known as
the "absolute" or "total" pollution exclusion clause. See Ko-
loms, 687 N.E.2d at 81. This version is virtually identical to
the one that appears in the REO insurance policy. The new
version eliminated the "sudden and accidental" exception and
the requirement that the discharge be "into or upon land, the
atmosphere or any water course." Stempel, supra, ss T1.1,
T1.3, at 826, 828-29 (quoting both versions). The amended
clause was intended by the insurance industry to bar cover-
age for the costs of environmental cleanups. See W. Am. Ins.
Co. v. Tufco Flooring E., Inc., 409 S.E.2d 692, 699 (N.C. Ct.
App. 1991), overruled on other grounds by Gaston County
Dyeing Mach. Co. v. Northfield Ins. Co., 524 S.E.2d 558, 565
(N.C. 2000); see also Essex Ins. Co. v. Tri-Town Corp., 863
F. Supp. 38, 39-40 (D. Mass. 1994) ("[T]he insurance industry
reacted with lightning speed to the possibility that ... it
could find itself indemnifying industries facing the staggering
retroactive pollution clean-up costs imposed by the 1980
enactment of the Comprehensive Environmental Response
Compensation and Liability Act [citation omitted].").

II. Analysis

A. Intervention

On appeal, Ms. Richardson argues that the District Court
erred in denying her the opportunity to intervene as of right

and without conditions. However, before this court, Nation-
wide does not oppose Ms. Richardson's request that she be
permitted to argue all issues on appeal that were raised below
concerning the scope of the pollution exclusion clause. Ms.
Richardson has therefore not claimed that she was prejudiced
in her appeal before this Court by the District Court's ruling
on her motion to intervene.

If the District of Columbia Court of Appeals determines
that the pollution exclusion clause does not foreclose liability
coverage of a claim of the sort raised by Ms. Richardson, it
may be necessary for this court to remand the case to the
District Court for further proceedings. In that event, it will
be up to the District Court to determine in the first instance
whether Ms. Richardson may develop facts in support of the
argument that the clause is inapplicable to the carbon monox-
ide leak that allegedly caused her injuries. It is unnecessary
for us to decide at this point whether, if the case is remanded,
the District Court will be required to permit Ms. Richardson
to present arguments outside the scope of the conditions set
forth by the District Court in its Memorandum Opinion and
Order. Instead, we merely find that since Ms. Richardson
was not prejudiced in her appearance before this court, we
need not now resolve her claim that she should have been
allowed to intervene as of right.

B. The Pollution Exclusion Clause

1. District of Columbia Law Governs the Policy's Inter-
pretation

The District Court correctly determined that District of
Columbia law governs the interpretation of the insurance
policy. The District Court sat in diversity because the
amount in controversy exceeded $75,000 and the parties were
completely diverse. "A federal court sitting in diversity
jurisdiction applies the choice of law rules of the forum state
(or district or territory)...." Liberty Mut. Ins. Co. v. Trav-
elers Indem. Co., 78 F.3d 639, 642 (D.C. Cir. 1996) (citing
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496
(1941)). District of Columbia courts apply the law of the
state with the more substantial interest in the matter. Blair

v. Prudential Ins. Co. of Am., 472 F.2d 1356, 1359 (D.C. Cir.
1972) (citing Fowler v. A & A Co., 262 A.2d 344, 348 (D.C.
1970)). In this case, the District of Columbia has the most
substantial interest, since it is both the location where the
underlying events occurred and the place of the insured's
headquarters. See Greycoat Hanover F St. Ltd. P'ship v.
Liberty Mut. Ins. Co., 657 A.2d 764, 768 (D.C. 1995); Poto-
mac Elec. Power Co. v. Cal. Union Ins. Co., 777 F. Supp. 968,
973 (D.D.C. 1991). Thus, the insurance policy must be inter-
preted in accordance with District of Columbia law.

2. Legal Approaches to the Pollution Exclusion Clause

The District of Columbia Court of Appeals has never
directly addressed the scope of the pollution exclusion clause
as applied to an event, such as residential carbon monoxide
poisoning, that does not involve typical forms of environmen-
tal pollution. Under District of Columbia law, an insurance
policy is a contract whose construction is based on its lan-
guage. Cameron v. USAA Prop. & Cas. Ins. Co., 733 A.2d
965, 968 (D.C. 1999). The burden is on the insurer to spell
out in "terms understandable to the man in the street" any
provisions that would exclude coverage. Id. (quoting Holt v.
George Washington Life Ins. Co., 123 A.2d 619, 621 (D.C.
1956)). Unless the language of such a provision is unambigu-
ous, doubts are to be resolved in favor of the insured. Id.
(citations omitted). This is because insurers draft the con-
tracts, with the help of experts and lawyers. Id. (citing
Hayes v. Home Life Ins. Co., 168 F.2d 152, 154 (D.C. Cir.
1948)). The doctrine of contra preferentum, however, does
not permit "forced constructions" or otherwise strained read-
ings in order to create obligations against insurers. See id.
(citing Boggs v. Motors Ins. Corp., 139 A.2d 733, 735 (D.C.
1958)). Nor does mere disagreement among parties as to the
meaning of a term constitute ambiguity. Byrd v. Allstate
Ins. Co., 622 A.2d 691, 693-94 (D.C. 1993) (citations omitted).

Under District of Columbia law, where a provision in an
insurance policy is unambiguous, it must be enforced as
written unless contrary to public policy. See Smalls v. State
Farm Mut. Auto. Ins. Co., 678 A.2d 32, 35 (D.C. 1996). Only

when a provision's meaning is ambiguous is it interpreted in a
manner consistent with the "reasonable expectations" of the
insured. See id. This rule stands in contrast to the law in
some other states, in which courts apply the doctrine of the
insured's "reasonable expectations" to construe even unam-
biguous provisions in favor of the insured. See, e.g., Reg'l
Bank of Colo., N.A. v. St. Paul Fire & Marine Ins. Co., 35
F.3d 494, 497 (10th Cir. 1994) (stating that, under Colorado
law, even if an insurance policy is unambiguous, it is con-
strued in light of the reasonable expectations of the ordinary
policyholder).

The question, therefore, is whether the District of Colum-
bia Court of Appeals would find the pollution exclusion clause
ambiguous as applied to the facts of this case. In attempting
to determine how the District of Columbia Court of Appeals
would rule on this issue, the District Court gave some weight
to the fact that the Fourth Circuit applied District of Colum-
bia law in finding the pollution exclusion clause unambiguous
when applied to the release of manganese fumes. Nation-
wide Mut. Ins. Co. v. Nat'l REO Mgmt., Inc., Civ. Action No.
99-1322, Mem. Op. at 14 (D.D.C. July 26, 2000) (citing Nat'l
Elec. Mfrs. Ass'n v. Gulf Underwriters Ins. Co., 162 F.3d 821
(4th Cir. 1998)). While we take the Fourth Circuit's efforts
to determine how the Court of Appeals would rule into
account, we do not find its conclusion decisive in this case.
The Fourth Circuit found the pollution exclusion provision to
be unambiguous based on its plain language. Nat'l Elec.
Mfrs. Ass'n, 162 F.3d at 825. It then considered whether to
apply the "reasonable expectations" doctrine to restrict the
provision to environmental pollution. Id. The court correct-
ly found that District of Columbia law forbids application of
the reasonable expectations doctrine to alter an otherwise
clear policy provision. Id. We remain uncertain, however,
whether the provision is, in fact, unambiguous under District
of Columbia law, and the Fourth Circuit's determination on
that point is not conclusive.

Courts across the nation are hopelessly divided over wheth-
er the clause is ambiguous as applied to carbon monoxide,
other fumes, and substances such as lead paint. Because so

many courts have addressed the issue, several approaches
have emerged. A number of courts have found the provision
ambiguous and have construed it in favor of insured parties in
cases that do not involve typical forms of environmental
pollution. Some have done so because the clause uses words,
such as "dispersal," "discharge," "irritant," and "contami-
nant," that are recognizable as terms of art in environmental
law. See, e.g., Nautilus Ins. Co. v. Jabar, 188 F.3d 27, 30 (1st
Cir. 1999) (finding the provision ambiguous in a case involving
fumes from roofing products, because it uses terms of art and
because, if read literally, its scope would be "virtually bound-
less"); Kenyon v. Sec. Ins. Co. of Hartford (DPIC Cos.), 626
N.Y.S.2d 347, 350 (N.Y. Sup. Ct. 1993) (finding the provision
ambiguous in a case involving residential carbon monoxide
poisoning, because it uses words recognized as terms of art in
environmental law), aff'd, 616 N.Y.S.2d 133 (N.Y. App. Div.
1994). Other courts have found that the clause's general
purpose - shielding insurers from the costs of environmental
cleanups - prevents it from barring coverage for everyday
industrial and residential accidents. See, e.g., Stoney Run Co.
v. Prudential-LMI Commercial Ins. Co., 47 F.3d 34, 36-37
(2d Cir. 1995) (finding the provision ambiguous in a case
involving residential carbon monoxide poisoning, because it is
reasonable to interpret it as applying only to environmental
pollution in light of its general purpose); Sullins v. Allstate
Ins. Co., 667 A.2d 617, 620 (Md. 1995) (finding a similar
version of the provision ambiguous as applied to lead paint
because it could reasonably be interpreted to apply only to
environmental pollution). Some courts have reasoned that
the pollution exclusion clause must be ambiguous if so many
courts have given it conflicting interpretations. See, e.g.,
Meridian Mut. Ins. Co. v. Kellman, 197 F.3d 1178, 1183 (6th
Cir. 1999) (finding the provision ambiguous in light of "the
disarray that characterize[s] this area of law"); Motorists
Mut. Ins. Co. v. RSJ, Inc., 926 S.W.2d 679, 681 (Ky. Ct. App.
1996) (finding the provision ambiguous as applied to carbon
monoxide poisoning because of its conflicting judicial interpre-
tations and because of its use of "environmental law terms of
art").

 Other courts have found that a strictly literal reading of the
provision could yield absurd results. The Seventh Circuit, in
an oft-quoted case, analyzed the problem as follows:

The terms "irritant" and "contaminant," when viewed in
isolation, are virtually boundless, for "there is virtually
no substance or chemical in existence that would not
irritate or damage some person or property." Westches-
ter Fire Ins. Co. v. City of Pittsburgh, 768 F. Supp. 1463,
1470 (D. Kan. 1991). Without some limiting principle,
the pollution exclusion clause would extend far beyond its
intended scope, and lead to some absurd results. To
take but two simple examples, reading the clause broadly
would bar coverage for bodily injuries suffered by one
who slips and falls on the spilled contents of a bottle of
Drano, and for bodily injury caused by an allergic reac-
tion to chlorine in a public pool. Although Drano and
chlorine are both irritants or contaminants that cause,
under certain conditions, bodily injury or property dam-
age, one would not ordinarily characterize these events
as pollution.

Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co.,
976 F.2d 1037, 1043 (7th Cir. 1992). The court noted that, to
avoid absurd results, many courts have taken a "common
sense approach" when determining the scope of pollution
exclusion clauses, holding that the clauses do not apply to
"injuries resulting from everyday activities gone slightly, but
not surprisingly, awry." Id. at 1043-44 (citations omitted);
see also Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 948
(Ind. 1996) ("Clearly, [the pollution exclusion] clause cannot
be read literally as it would negate virtually all coverage.
For example, if a visitor slips on a grease spill then, since
grease is a 'chemical,' there would be no insurance coverage.
Accordingly, this clause requires interpretation.").

Another group of courts has found the pollution exclusion
clause not to preclude coverage for releases of carbon monox-
ide and other fumes, without finding the clause ambiguous.
See, e.g., Reg'l Bank of Colo., N.A., 35 F.3d at 497 (finding
that a carbon monoxide exposure incident was not excluded

from insurance coverage, regardless of whether the policy's
pollution exclusion clause was ambiguous); W. Alliance Ins.
Co. v. Gill, 686 N.E.2d 997, 999 (Mass. 1997) (finding that the
clause did not bar coverage for carbon monoxide exposure
because its use of environmental law terms of art suggested
that it applied to industrial or environmental pollution and
holding that the exclusion must be interpreted "in a common-
sense manner"); Thompson v. Temple, 580 So. 2d 1133, 1135
(La. Ct. App. 1991) (finding that a similar pollution exclusion
clause did not exclude coverage for injuries caused by a
leaking heater where the intent of the insurance industry was
to exclude coverage for entities that knowingly pollute the
environment).

On the other hand, a number of courts have found the
pollution exclusion provision to be unambiguous and to bar
coverage for incidents like the one underlying this suit. At
least one court has specifically found that the clause's lan-
guage does not reflect the specialized language of environ-
mental law. See Nat'l Elec. Mfrs. Ass'n, 162 F.3d at 825
(applying District of Columbia law and finding the provision
unambiguous as applied to welders exposed to manganese
fumes because it contains "neither technical terms nor terms
of art"). In other cases, courts have focused on the clause's
broad language, which does not explicitly exempt non-
environmental damage. See, e.g., Assicurazioni Generali,
S.p.A. v. Neil, 160 F.3d 997, 1000 (4th Cir. 1998) (finding that
a similar provision's expansive language applies to carbon
monoxide injuries); Certain Underwriters at Lloyd's London
v. C.A. Turner Constr. Co., 112 F.3d 184, 188 (5th Cir. 1997)
(finding a similar provision unambiguous as applied to a
welding accident because its plain language does not limit its
application to environmental harm); Reliance Ins. Co. v.
Moessner, 121 F.3d 895, 901, 903-04 (3rd Cir. 1997) (finding
the provision unambiguous in a case involving carbon monox-
ide poisoning because of its plain language, but finding that,
under Pennsylvania law, the insured's reasonable expecta-
tions could override the plain meaning); Essex Ins. Co., 863
F. Supp. at 40-41 (finding the provision applicable to carbon
monoxide poisoning caused by a Zamboni machine in an ice

rink because of its plain language); Bernhardt v. Hartford
Fire Ins. Co., 648 A.2d 1047, 1050-51 (Md. Ct. Spec. App.
1994) (finding the provision unambiguous because its lan-
guage is "quite specific" and people of ordinary intelligence
would not conclude that it was inapplicable to tenants' carbon
monoxide poisoning).

With so many courts coming to diametrically opposed con-
clusions about the clause's clarity and meaning, it is difficult
to know which line of cases the District of Columbia Court of
Appeals would follow. Because the issue is important and
likely to recur, and because courts have taken conflicting
approaches to the clause's interpretation, we hereby certify
the question to the District of Columbia Court of Appeals in
accordance with D.C. Code s 11-723. We append to this
certification the relevant portions of the District Court rec-
ord. In addition, the Clerk of the Court shall forward copies
of all or such portion of the record, including the parties'
briefs, that the Court of Appeals may require in order to
answer the certified question. See D.C. Code s 11-723(d)
(2001).