In 2017, the Missouri Supreme Court handed down its Doe Run decision, where it interpreted, as a matter of first impression, an insurance policy’s so-called “absolute pollution exclusion,” holding that it barred coverage for environmental-degradation claims arising from the release of toxic industrial byproducts. We believe this policyholder-adverse decision is limited by its facts and reasoning, and thus policyholders can still invoke the earlier and more favorable Hocker Oil and Wyatt decisions when seeking insurance coverage in other contexts.
In 2017, the Missouri Supreme Court, in Doe Run Resources Corp. v. American Guarantee & Liability Insurance, decided, for the first time, the meaning of an insurance policy’s so-called “absolute pollution exclusion.” This exclusion is significant for policyholders in all industries and occupations, as it is a ubiquitous exclusion found in standard commercial general liability and other policies. The exclusion seeks to bar insurance coverage for pollution-related claims, typically by stating there is no coverage for injury, damage, or medical expense that results from the “actual, alleged, or threatened discharge, dispersal, escape, migration, release, or seepage of any pollutant,” and further defining “pollutant” to mean “any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, or waste.” This exclusion’s scope and application can have tremendous consequences for policyholders, as oftentimes insurance coverage worth millions upon millions of dollars hangs in the balance. Thus, the line of Missouri cases culminating in Doe Run warrants careful consideration.
The first of those cases is Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., a 1999 Missouri Court of Appeals decision. In this case, a gas station storage tank’s drain plug failed, causing some 2,000 gallons of gasoline to spill onto a neighbor’s land. The neighbor sued and the gas station’s insurer relied on the pollution exclusion to deny coverage. The appellate court, in rejecting that denial and holding there was coverage, analyzed the policy from the perspective of a “layperson in the business of operating gasoline stations.” Clearly, a gas station owner’s main source of liability is gasoline; it would be odd then, the court noted, to sell that owner insurance excluding coverage for gasoline. Further, the policy did not specifically state that gasoline was a “pollutant,” and in the owner’s eyes gasoline was not a “pollutant” but rather the business product it transported, stored, and sold on a daily basis. Thus, the Hocker court found the pollution exclusion to be ambiguous in this context and therefore gave it a functional and practical interpretation based on the policyholder’s reasonable business expectations.
Next came American National Property v. Wyatt, a 2013 decision also by the Missouri Court of Appeals. Wyatt concerned carbon monoxide personal injuries that occurred when a grandmother who held a homeowner’s liability policy inadvertently left her car running in her home’s closed garage. When the injured persons sued, the insurer again denied coverage based on the pollution exclusion, and the appellate court again found there was coverage. The court rejected the insurer’s argument that the terms “irritant” and “contaminant” should be read to exclude “any injury by anything that can irritate or contaminate,” finding that practically every substance in existence would qualify as a “pollutant” under that interpretation, thereby expanding the exclusion’s scope “beyond what an ordinary person would deem a pollutant.” The court instead discussed the pollution exclusion’s history, agreeing with other courts that its purpose was to exclude coverage for “traditional environmental pollution.” The court concluded that a reasonable policyholder would not think of accidental in-home carbon monoxide accumulation and poisoning as such “pollution”; rather, the policyholder would expect coverage for the well-known risk of carbon monoxide. Thus, the Wyatt court also interpreted the pollution exclusion in a functional or practical matter, emphasizing pollution’s traditional connection to heavy industry.
The next case—Doe Run Resources Corp. v. Lexington Insurance Co., a 2013 decision by the United States Court of Appeals for the Eighth Circuit—took a different approach. Like the eventual Missouri Supreme Court case, this case concerned Doe Run, a large integrated lead producer that maintains mining, milling, smelting, and processing operations throughout the western hemisphere. The issue before the federal appellate court was coverage for a lawsuit in which a neighboring landowner alleged Doe Run’s operations had caused her land environmental property damage. The insurer denied coverage based on the pollution exclusion, and this time the court agreed. Applying Missouri law, the court reviewed the landowner’s allegations and found they asserted prototypical environmental damage claims that fit squarely within the pollution exclusion. Further, the court rejected the landowner’s reliance on Hocker Oil, stating it was expressly limited to gasoline, indicating it was a “minority position” that had received no further support in Missouri law and had been widely rejected elsewhere, and reasoning that, unlike gasoline to a gas station owner, here the alleged pollutants (discarded and abandoned lead concentrate and tailings) were not business products to Doe Run. Ultimately, the federal appellate court made an Erie prediction that the Missouri Supreme Court would find no coverage, in part because Doe Run was “a sophisticated insured” and the neighbor’s lawsuit involved “the kind of underlying environmental liability claims that the exclusion was primarily intended to exclude.”
Finally, in 2017, the Missouri Supreme Court weighed in. Its case arose from Doe Run’s operations in La Oroya, Peru, which local residents alleged had created a toxic dust of lead, arsenic, cadmium, and sulfur dioxide that harmed their bodies and property. The court stated the issue as “whether an insurance policy’s general pollution exclusion bars defense coverage of a toxic tort claim arising from alleged industrial pollution,” calling it one of first impression. Ultimately, the court agreed with the insurer that the pollution exclusion barred coverage. First, the court focused on the exclusion’s “contaminant” and “irritant” language, noting that these terms undoubtedly encompass toxic lead particulate matter that is released into the environment. Second, the court rejected the residents’ reliance on Hocker Oil, ruling that Doe Run’s business product was manufactured lead, not toxic particulate matter. Accordingly, the Missouri Supreme Court ruled that, based on the pollution exclusion, Doe Run had no insurance coverage for the residents’ lawsuits.
Doe Run is a significant decision both unto itself and for what it indicates about the pollution exclusion under Missouri law. For instance, it cites without criticism each of the three predecessor cases discussed here—Hocker Oil, Wyatt, and the Eighth Circuit’s decision—thereby suggesting each remains good law. This is particularly significant as to Hocker Oil and Wyatt, as some federal courts applying Missouri law had criticized the reasoning of those policyholder-friendly decisions. It further indicates that the three cases can and should be read in harmony, which suggests policyholders can still invoke and benefit from Hocker Oil’s and Wyatt’s functional and practical approaches to policy interpretation. And finally, even though Doe Run ultimately denied coverage for the policyholder, it did so in the context of a traditional heavy-industry manufacturer facing so-called prototypical environmental damage claims, matters that commentators consider at the pollution exclusion’s core. This suggests limitations to Doe Run’s scope and impact.
The attorneys in Lathrop Gage’s nationwide insurance recovery practice have expertise in analyzing and litigating insurance coverage and exclusions issues like those discussed here. We will continue to monitor and advise about developments on these important topics.
 531 S.W.3d 508 (Mo. 2017).
 997 S.W.2d 510 (Mo. App. S.D. 1999).
 400 S.W.3d 417 (Mo. App. W.D. 2013).
 719 F.3d 868 (8th Cir. 2013).
 531 S.W.3d 508 (Mo. 2017).
 See, e.g., United Fire & Cas. Co. v. Titan Contractors Serv., 751 F.3d 880, 885 (8th Cir. 2014) (expressing “doubt that the Supreme Court of Missouri would apply Hocker Oil in the manner urged” by a policyholder challenging a pollution exclusion-based coverage denial because it found Hocker Oil to be “out of step with Missouri's deeply-entrenched” law of policy interpretation); id. at 885 n.2 (criticizing Wyatt’s “limited consideration of Missouri case law and its failure even to address contrary [Missouri authority],” and thus stating that Wyatt was not “especially instructive as to how the Supreme Court of Missouri would decide” the pollution exclusion issue).
 For instance, the Missouri Supreme Court found Hocker Oil inapplicable because the case did not involve Doe Run’s business products, thereby suggesting the outcome might change if business products were at issue. Similarly, the Missouri Supreme Court recited Wyatt’s legal rule that “an ordinary purchaser of insurance would not interpret this policy to exclude coverage for anything that could potentially irritate or contaminate,” thereby suggesting such terms must be given a functional and practical—not literal—interpretation.
The information contained in this document is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop Gage shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.
About this Blog
Lathrop GPM is one of the largest law firms in the United States representing policyholders, providing policyholders with the necessary guidance and legal counsel to handle everything from negotiating coverage and managing risk to litigating insurance disputes and recovery. The Road to Insurance Recovery blog is dedicated to helping readers better understand and manage the complexities of the modern business insurance policy.