Pollution Exclusion Applied to Sewage Odors, South Carolina Appeals Court Decides

An appellate court in South Carolina has ruled that a pollution exclusion precluded coverage for a homeowner’s lawsuit against a public service district seeking to recover damages he alleged had been caused by offensive sewage odors.

The Case

A South Carolina homeowner filed a complaint against the East Richland County Public Service District for inverse condemnation, trespass, and negligence. The complaint alleged that the district had installed a sewage force main and an air relief valve on the homeowner’s street and that the valve released offensive odors on his property multiple times a day. The homeowner contended that the odor ultimately caused him to buy a new piece of property and move, but that he was unable to sell his old property.

The district tendered the complaint to the South Carolina Insurance Reserve Fund pursuant to its insurance policy, but the Fund denied coverage based on the policy’s pollution exclusion.

The Fund subsequently filed a complaint against the district seeking a declaratory judgment that it had no duty to defend or indemnify the district in the homeowner’s action.

The trial court determined that the Fund owed no duty to defend or indemnify the district.

The district appealed, asserting that the pollution exclusion was inapplicable because it did not mention offensive odors or explain why odors should be considered to be pollution when they were not harmful and not regulated.

The Appellate Court’s Decision

The appellate court affirmed.

In its decision, the appellate court held that the pollution exclusion applied because the odors could properly be classified as “fumes” or “gases,” both of which were listed in the exclusion.

The appellate court rejected the district’s contention that odors had to be harmful in some way to be considered pollutants, stating that it would not “impose such a limitation on the plain language of the policy.” The fact that the odors were comprised of irritating and offensive gases sufficed to demonstrate that the odors were “encompassed within the ordinary meaning of the pollution exclusion’s terminology.”

Citing testimony that the air release valve was essential to the operation of the sewer line because it prevented the lines from exploding, the appellate court concluded that releases of the odors were not accidental and unexpected and, therefore, that the exclusion applied.

The case is South Carolina Insurance Reserve Fund v. East Richland County Public Service District, No. 5393 (S.C. Ct. App. March 23, 2016).

Rivkin Comment

Several other courts also have held that foul odors were encompassed by pollution exclusions. See, e.g., City of Spokane v. United Nat. Ins. Co., 190 F. Supp. 2d 1209, 1221 (E.D. Wash. 2002) (holding pollution exclusions “clearly and unambiguously” excluded coverage for losses related to odors emanating from a compost facility); Kruger Commodities, Inc. v. U.S. Fidelity and Guar., 923 F. Supp. 1474, 1479-80 (M.D. Ala. 1996) (finding a pollution exclusion applied to odors produced by an animal rendering plant even though the relevant chemicals were not hazardous and did not violate environmental laws); Wakefield Pork, Inc. v. Ram Mut. Ins. Co., 731 N.W.2d 154, 160 (Minn. Ct. App. 2007) (finding that a complaint alleging harm from gases and odors emanating from manure at a nearby pig farm was “plainly” within a policy’s pollution exclusion that mentioned gases and fumes); City of Bremerton v. Harbor Ins. Co., 963 P.2d 194, 195-98 (Wash. Ct. App. 1998) (finding no coverage for damages resulting from a treatment plant’s emission of foul odors and toxic gases when a pollution exclusion “unambiguously exclude[d] claims arising from ‘fumes’ and ‘gases’”).