Public Policy Did Not Prohibit Enforcement of Indoor Air Exclusion, Oklahoma Supreme Court Decides

March 23, 2017 | Insurance Coverage

The Oklahoma Supreme Court, in response to a question certified by the U.S. District Court for the Western District of Oklahoma, has ruled that the public policy of Oklahoma did not prohibit enforcement of an indoor air exclusion in a commercial lines insurance policy.

The Case

Several guests inside a hotel in Siloam Springs, Arkansas, allegedly suffered bodily injury due to carbon monoxide poisoning after carbon monoxide leaked from the hotel’s indoor swimming pool heater.

Thereafter, Siloam Springs Hotel, L.L.C., sought coverage for the guests’ claims under a commercial lines policy that included general liability insurance coverage.

After the insurer denied coverage, based on the indoor air exclusion in an endorsement to the policy, Siloam filed suit.

The district court asked the Oklahoma Supreme Court to decide the following question:

Does the public policy of the State of Oklahoma prohibit enforcement of the Indoor Air Exclusion, which provides that the insurance afforded by the policy does not apply to “‘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 toxic, hazardous, noxious, irritating pathogenic or allergen qualities or characteristics of indoor air regardless of cause”? 

The Oklahoma Supreme Court’s Decision

The court answered the certified question in the negative.

In its decision, the court explained that freedom of contract was limited when it conflicted with the public policy of Oklahoma. It added that, in Oklahoma, a contract violated public policy if it “clearly” tended to injure public health, morals, or confidence in the administration of law, or if it undermined the security of individual rights with respect to either personal liability or private property.

The court then ruled that the indoor air exclusion did not run afoul of any public policy concerns. The court found “no clearly articulated public policy in Oklahoma, statutory or otherwise,” that prohibited enforcement of the indoor air exclusion in this case. The court concluded that the insurer and Siloam “were free to negotiate and contract for coverage as they saw fit.”

The case is Siloam Springs Hotel, LLC v. Century Surety Co., No. 114872 (Okla. Feb. 22, 2017).

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  • Robert Tugander

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