FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CENTURY SURETY COMPANY, No. 10-17309
Plaintiff-Appellant, D.C. No.
v. 3:07-cv-00636-
CASINO WEST, INC., RCJ-RAM
Defendant-Appellee. District of Nevada,
Reno
ORDER
Filed April 6, 2012
Before: Carlos F. Lucero,* Consuelo M. Callahan, and
N. Randy Smith, Circuit Judges.
ORDER
We certify to the Supreme Court of Nevada the questions
set forth in Part III of this order.
Further proceedings in this court are stayed pending receipt
of the answer to the certified questions. This case is with-
drawn from submission until further order of this court or an
order declining to accept the certified questions. If the
Supreme Court of Nevada accepts the certified questions, the
parties will file a joint report six months after the date of
acceptance and every six months thereafter, advising us of the
status of the proceeding.
*The Honorable Carlos F. Lucero, Circuit Judge for the Tenth Circuit,
sitting by designation.
3763
3764 CENTURY SURETY v. CASINO WEST
I.
Pursuant to Rule 5 of the Nevada Rules of Appellate Proce-
dure, we certify to the Supreme Court of Nevada questions of
law regarding the proper interpretation of the insurance policy
exclusions at issue in this appeal. It appears that “there is no
controlling precedent in the decisions” of the Supreme Court
of Nevada regarding the interpretation of insurance policy
exclusions involved in this case, and the answers to these cer-
tified questions are “determinative” of the pending appeal.
Nev. R. App. P. 5(a). Our phrasing of the issues is not meant
to restrict the Supreme Court of Nevada’s consideration of the
case, and “[w]e recognize that the Court may, in its discretion,
reword the certified question[s].” Progressive Gulf Ins. Co. v.
Faehnrich, 627 F.3d 1137, 1140 (9th Cir. 2010).
II.
Century Surety Company (Century) is designated the
appellant in the Supreme Court of Nevada, because Century
appeals the district court’s findings on these issues. Casino
West, Inc. (Casino West) is therefore designated the respon-
dent in this request.
The caption of the case is:
CENTURY SURETY COMPANY, Plaintiff-
Appellant,
v.
CASINO WEST, INC., Defendant-Appellee.
The names and addresses of counsel for the parties are as
follows:
James Wayne Bradshaw, McDonald Carano Wilson, LLP,
Reno, NV; H. Douglas Galt, Woolls & Peer, Los Angeles,
CA, for Appellant.
CENTURY SURETY v. CASINO WEST 3765
Scott A. Glogovac and Gregory J. Livingston, Burton, Bar-
tell & Glogovac, Reno, NV, for Appellee.
III.
The questions of law to be answered are:
(1) Does the pollution exclusion in Century’s insurance policy
exclude coverage of claims arising from carbon monoxide
exposure?
(2) Does the indoor air quality exclusion in Century’s insur-
ance policy exclude coverage of claims arising from carbon
monoxide exposure?
IV.
The statement of facts is as follows:
Casino West owns and operates the Casino West Motel in
Yerington, Nevada. Century is an insurance company that
insured Casino West under a comprehensive general liability
insurance policy.
Four individuals died while staying in a room at the Casino
West Motel. The Washoe County Medical Examiner/Coroner
determined that the deceased individuals died of acute carbon
monoxide poisoning. Carbon monoxide fumes from the
motel’s pool heater room had permeated into the deceased
individuals’ room, because the air intake openings had been
blocked. The effects of the carbon monoxide poisoning
included cerebral edema1 and blood carboxyhemoglobin satura-
1
“Cerebral edema” is “[b]rain edema.” Taber’s Cyclopedic Medical
Dictionary 665 (20th ed. 2005). “Edema” is “[a] localized or generalized
condition in which the body tissues contain an excessive amount of tissue
fluid.” Id. “Edema may result from . . . chemical substances such as bacte-
rial toxins, venoms, caustic substances, and histamine.” Id.
3766 CENTURY SURETY v. CASINO WEST
tion.2
Century’s policy was in force when the individuals died.
The policy generally obligated Century to “pay those sums
that the insured becomes legally obligated to pay as damages
because of ‘bodily injury’ or ‘property damage’ to which this
insurance applies.” Century had a duty under the policy to
defend the insured against any suit seeking those damages,
but no duty to defend against suits seeking damages to which
the insurance policy did not apply.
The policy contains two exclusions crucial to the disposi-
tion of this case. The first is the “pollution exclusion,” which
Century adopted in 2001. The pollution exclusion reads as
follows:
This insurance does not apply to:
...
f. Pollution
(1) “Bodily injury” or “property damage” arising out
of the actual, alleged or threatened discharge, dis-
persal, seepage, migration, release or escape of “pol-
lutants”:
(a) At or from any premises, site or location which
is or was at any time owned or occupied by, or
rented or loaned to, any insured. However, this sub-
paragraph does not apply to:
2
“Carboxyhemoglobin” is a “combination of hemoglobin and carbon
monoxide formed in the blood when carbon monoxide is inhaled with
resulting loss of ability of the blood to combine with oxygen . . . .” Web-
ster’s Third New International Dictionary of the English Language, 336
(unabr. 1993).
CENTURY SURETY v. CASINO WEST 3767
(i) “Bodily injury” if sustained within a building and
caused by smoke, fumes, vapor or soot from equip-
ment used to heat that building;
...
(iii) “Bodily injury” or “property damage” arising
out of heat, smoke or fumes from a “hostile fire”
....
The policy defines “pollutants” as “any solid, liquid, gaseous
or thermal irritant or contaminant, including smoke, vapor,
soot, fumes, acids, alkalis, chemicals and waste.” The “build-
ing heating exception” to the pollution exclusion, added in
2001, is subsection (1)(a)(i). The “hostile fire exception” to
the pollution exclusion is subsection (1)(a)(iii).
The second crucial exclusion is the “indoor air quality
exclusion,” which is part of the special exclusions and limita-
tions endorsement attached to the policy. The indoor air qual-
ity exclusion reads as follows:
A. In consideration of the premium charged this pol-
icy has been issued subject to the following exclu-
sions being added to Coverages A & B:
This insurance does not apply to:
...
6. Mold, Fungi, Virus, Bacteria, Air Quality, Con-
taminants, Minerals or Other Harmful Materials
...
b. “Bodily injury”, “property damage”, or “personal
and advertising injury” arising out of, caused by, or
alleging to be contributed to in any way by any
3768 CENTURY SURETY v. CASINO WEST
toxic, hazardous, noxious, irritating, pathogenic or
allergen qualities or characteristics of indoor air
regardless of cause . . . .
Century received notice of the incident and retained pre-
litigation defense counsel for Casino West. Later, Century
sent Casino West a letter stating it would handle the case, but
it reserved its right to deny coverage. In the letter, Century
referenced the endorsement and stated that the exclusions
might preclude coverage for deaths caused by exposure to
carbon monoxide.
After Century received copies of the autopsy reports for the
deceased individuals, Century sent Casino West a letter stat-
ing that there did not appear to be any coverage in light of the
autopsy reports and the endorsement. However, Century
offered to continue to allow its retained defense counsel to
assist Casino West until the estates of the deceased individu-
als filed formal lawsuits. Once the estates filed suit, Century
would determine whether coverage was precluded.
Century subsequently sent Casino West a letter stating that
the injuries caused by the incident were not covered by the
policy. Century also advised Casino West that it would stop
retaining its defense counsel, because no formal lawsuit had
been filed against Casino West.
After Century sent that letter, the heirs and estate of Juan
Pablo Chavez, one of the deceased individuals, filed a wrong-
ful death suit against Casino West in the Washoe County Dis-
trict Court. Century denied coverage for the claims asserted
by the Chavez plaintiffs.
Casino West entered into settlement agreements with the
estates of two of the remaining deceased individuals.
The estate of Donna Vega-Robles (the fourth deceased
individual) and the guardian ad litem of Ms. Vega-Robles’s
CENTURY SURETY v. CASINO WEST 3769
son then filed a wrongful death suit against Casino West in
the Lyon County District Court. Century also denied coverage
for the claims asserted by the Vega-Robles plaintiffs.
After denying coverage for Casino West’s insurance
claims, Century filed suit in federal court (based on diversity
jurisdiction) against Casino West for declaratory relief. Cen-
tury sought a judgment declaring that Century had no duty to
defend or indemnify Casino West with respect to wrongful
death suits arising from the deaths of the four individuals at
Casino West’s premises. Casino West counterclaimed for
breach of contract, bad faith, and insurance unfair trade prac-
tices; Casino West also filed an independent bad faith suit.
Century requested summary judgment or partial summary
judgment on its complaint, Casino West’s counterclaim, and
Casino West’s complaint. At issue was the application of the
two key exclusions in Century’s insurance policy covering
Casino West.
The district court entered an order denying Century’s
motion for summary judgment. The district court found that
the exclusions at issue were ambiguous and therefore did not
preclude coverage. The pollution exclusion was ambiguous,
because “an ordinary policyholder may not reasonably char-
acterize carbon monoxide emitted from a motel pool heater as
pollution,” and “a reasonable policyholder might not view the
exception regarding fumes from the building’s heater as an
indication that all other possible types of indoor fumes would
be excluded as ‘pollutants.’ ” The indoor air quality exclusion
was ambiguous, because, while it was “reasonable to consider
carbon monoxide” within its ambit, it was also reasonable to
construe the exclusion “as applying only to ongoing air qual-
ity issues that result from biological organisms, asbestos or
silica.” Century then requested that the district court allow
Century to appeal the order denying summary judgment to the
Ninth Circuit, which Casino West opposed. The district court
denied Century’s motion. Later, Century paid Casino West
3770 CENTURY SURETY v. CASINO WEST
certain costs Casino West had incurred in the wrongful death
actions. Century and Casino West then jointly requested to
allow appeal of the district court order denying summary
judgment to the Ninth Circuit. The district court granted the
joint motion allowing appeal. The Ninth Circuit then granted
permission for an interlocutory appeal.
V.
The nature of the controversy is as follows:
Under Nevada law, “if an insurer wishes to exclude cover-
age by virtue of an exclusion in its policy,” the insurer “must
(1) write the exclusion in obvious and unambiguous language
in the policy, (2) establish that the interpretation excluding
covering under the exclusion is the only interpretation of the
exclusion that could fairly be made, and (3) establish that the
exclusion clearly applies to this particular case.” Powell v.
Liberty Mut. Fire Ins. Co., 252 P.3d 668, 674 (Nev. 2011).
If an insurance contract provision is unambiguous, Nevada
courts will “interpret and enforce it according to the plain and
ordinary meaning of its terms.” Id. at 672. Nevada courts “are
not free to modify or vary the terms of an unambiguous agree-
ment.” All Star Bonding v. State, 62 P.3d 1124, 1126 (Nev.
2003) (internal quotation marks omitted). Terms not defined
in an insurance policy must be given their plain and ordinary
meaning. Catania v. State Farm Life Ins. Co., 598 P.2d 631,
633 (Nev. 1979) (“[I]nsurance clauses should be taken and
understood in their plain, ordinary and popular sense . . . .”);
Reno Club, Inc. v. Young Inv. Co., 182 P.2d 1011, 1016 (Nev.
1947) (“In the absence of clear evidence of a different inten-
tion, words must be presumed to have been used in their ordi-
nary sense, and given the meaning usually and ordinarily
attributed to them.”). Even the use of terms in a broad sense
may not create an ambiguity. See Powell, 252 P.3d at 674
(noting that anti-concurrent clauses in insurance policies are
CENTURY SURETY v. CASINO WEST 3771
often broad, but such clauses are valid so long as they are suf-
ficiently clear).
However, “any ambiguity or uncertainty in an insurance
policy must be construed against the insurer and in favor of
the insured.” Benchmark Ins. Co. v. Sparks, 254 P.3d 617,
621 (Nev. 2011) (internal quotation marks omitted). A provi-
sion in an insurance policy is ambiguous “if it is reasonably
susceptible to more than one interpretation.” Id. (internal quo-
tation marks omitted). “When a provision in an insurance pol-
icy is ambiguous, the provision should be construed to
effectuate the reasonable expectations of the insured.” Id. at
622 (internal quotation marks omitted). However, “[a]bsent
the finding of an ambiguity in the policy, the reasonable
expectations doctrine does not help” an insured. Farmers Ins.
Exch. v. Young, 832 P.2d 376, 379 n.3 (Nev. 1992).
A reading of an insurance provision “must include refer-
ence to the entire policy and be read as a whole in order to
give reasonable and harmonious meaning to the entire poli-
cy.” Siggelkow v. Phoenix Ins. Co., 846 P.2d 303, 304 (Nev.
1993). Finally, “[a] contract,” such as an insurance policy,
“should not be construed so as to lead to an absurd result.”
Reno Club, 182 P.2d at 1017.
A.
The scope of the pollution exclusion “has been repeatedly
litigated, spawning conflicting judicial decisions throughout
the country.” Apana v. TIG Ins. Co., 574 F.3d 679, 682 (9th
Cir. 2009). Most state court decisions fall into “one of two
broad camps.” Id. “Some courts apply the exclusion literally
because they find the terms to be clear and unambiguous.” Id.
(listing cases). Some have even found the exclusion clear and
unambiguous when applied to carbon monoxide poisoning,
similar to the case here. See, e.g., Nautilus Ins. Co. v. Country
Oaks Apartments Ltd., 566 F.3d 452, 458 (5th Cir. 2009) (“In
sum, the emission of carbon monoxide from a furnace into an
3772 CENTURY SURETY v. CASINO WEST
apartment unambiguously satisfies the pollution exclusion’s
requirement of a ‘discharge, dispersal, seepage, migration,
release, or escape.’ ”).
“Other courts have limited the exclusion to situations
involving traditional environmental pollution, either because
they find the terms of the exclusion to be ambiguous or
because they find that the exclusion contradicts policyholders’
reasonable expectations.” Apana, 547 F.3d at 682-83 (listing
cases); Meridian Mut. Ins. Co. v. Kellman, 197 F.3d 1178,
1181-82 (6th Cir. 1999) (listing cases). The Seventh Circuit
explained the rationale for such a limitation:
Without some limiting principle, the pollution exclu-
sion 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 reaction to chlorine in a public pool.
Although Drano and chlorine are both irritants or
contaminants that cause, under certain conditions,
bodily injury or property damage, 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).
Nevada has not expressly decided the scope of the pollution
exclusion, and the relevant Nevada case law outlined above
does not indicate which approach the state would adopt.
Casino West contends that the fact that so many courts have
reached different opinions conclusively establishes the exclu-
sion as ambiguous. However, Casino West has not cited any
Nevada cases so holding, and we have not found any on our
own. Given the magnitude of the hotel industry in Nevada, we
believe the question of the ambiguity of this standard insur-
CENTURY SURETY v. CASINO WEST 3773
ance exclusion is one of exceptional importance to Nevada
insurers and insureds. Thus, we respectfully request the
Nevada Supreme Court provide an answer to this question of
Nevada state law.
B.
Unlike the scope of the pollution exclusion, the scope of
the indoor air quality exclusion has not been repeatedly liti-
gated. In fact, there do not appear to be any published cases
construing this exclusion. However, the same general argu-
ments regarding ambiguity apply to this exclusion in the same
way they apply to the pollution exclusion.
As indicated above, Nevada has not expressly decided the
scope of the indoor air quality exclusion, and the relevant
Nevada case law outlined above does not indicate how the
state would deal with the issue. We also believe the question
is important to Nevada insurers and insureds, and therefore
respectfully request the Nevada Supreme Court provide an
answer to this question of Nevada law.
C.
These questions are determinative in this case. If both
exclusions are ambiguous, as the district court found, then
Casino West’s claims would be covered by Century. How-
ever, if one or both of the exclusions is unambiguous, then the
opposite result would occur and Century would have no duty
to defend or indemnify Casino West with regard to the wrong-
ful death suits.
VI.
Because this appeal presents “open question[s] of Nevada
state law that will determine the outcome of this case . . . [w]e
respectfully request that the Supreme Court of Nevada accept
and decide the question[s] certified.” Progressive Gulf Ins.,
3774 CENTURY SURETY v. CASINO WEST
627 F.3d at 1140. We agree to abide by the decision of the
Supreme Court of Nevada, because “[t]he written opinion of
the Supreme Court stating the law governing the questions
certified . . . shall be res judicata as to the parties.” Nev. R.
App. P. 5(h); see Progressive Gulf Ins., 627 F.3d at 1140.
VII.
The Clerk of the Court is hereby directed to immediately
transmit to the Supreme Court of Nevada, under official seal
of the Ninth Circuit, a copy of this order and request for certi-
fication and all relevant briefs and excerpts of record pursuant
to Rule 5 of the Nevada Rules of Appellate Procedure.
IT IS SO ORDERED.
____________________________
CONSUELO M. CALLAHAN
Circuit Judge, U.S. Court of
Appeals for the Ninth Circuit