On appeal from Superior Court of New Jersey, Law Division, Monmouth County, L-0501-00.
Before Judges A. A. Rodredguez, *fn1 Lefelt and Lisa.
The opinion of the court was delivered by: Lisa, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
We consider in this case whether a pollution exclusion provision in a home builder's commercial liability insurance policy applies to personal injuries suffered by the homeowners when the home's heating units discharged carbon monoxide over a one year period. On cross-motions for summary judgment, the trial judge granted the motion of defendant, Selective Insurance, thereby upholding the applicability of the exclusion, and denied the motion of plaintiffs, Leo Haus, Inc. and its principal, Mati Haus (collectively referred to as "Haus"), which sought coverage. Haus now appeals. We affirm.
The undisputed facts in this coverage suit are derived from the allegations in the homeowners' suit against Haus: Haus built a new home for Arthur and Christine Aria. A certificate of occupancy was issued on February 12, 1998, and the Arias took occupancy in March 1998. The heating units installed in the home caused substantial toxic levels of carbon monoxide to enter the home's living areas. The Arias suffered from carbon monoxide poisoning from March 1998 until the problem with the heating units was discovered in March 1999. The Arias are both surgeons. As a result of the carbon monoxide poisoning, Dr. Christine Aria contends she has suffered a neurological disorder that may be permanent, and which has rendered her totally disabled to perform as a surgeon. Dr. Arthur Aria contends he has also suffered severe personal injuries, temporary and permanent, including high blood pressure, flu-like symptoms and severe headaches.
The Arias sued Haus and others, including the architect and the manufacturer and installer of the heating units. Haus reported the suit to Selective and demanded defense and indemnification. At all applicable times Haus was the holder of a commercial liability policy issued by Selective. Selective denied coverage because its policy contained an endorsement, captioned in large bold print letters: "POLLUTION EXCLUSION (LIMITED FORM) THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY," which provides:
We shall have no obligation under this coverage part: a. to investigate, settle or defend any claim or suit against any insured alleging actual or threatened injury or damage of any nature or kind to persons or property which: 1. arises out of the "pollution hazard;" or 2. would not have occurred but for the "pollution hazard;" or b. to pay any damages, judgments, settlements, losses, costs or expenses of any kind or nature that may be awarded or incurred by reason of any such claim or suit or any such actual or threatened injury or damage; or c. for any losses, costs or expenses arising out of any obligation, order, direction or request of or upon any insured or others, including but not limited to any governmental obligation, order, direction or request, to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, in any way respond to, or assess the effects of "pollutants."
"Pollutants" means any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
"Pollution hazard" means an actual exposure or threat of exposure to the corrosive, toxic or other harmful properties of any "pollutants" arising out of the discharge, dispersal, seepage, migration, release or escape of such "pollutants."
. . . . Parts a. and b. of this exclusion do not apply to: . . . . B. Injury or damage arising from the actual discharge or release of any "pollutants" that takes place entirely inside a building or structure if: 1. the injury or damage is the result of an exposure which takes place entirely within a building or structure; and 2. the injury or damage results from an actual discharge or release beginning and ending within a single forty-eight (48) hour period; and 3. the exposure occurs within the same forty-eight (48) hour period referred to in 2. above; and 4. within thirty (30) days of the actual discharge or release: a. the company or its agent is notified of the injury or damage in writing; or b. in the case of "bodily injury," the "bodily injury" is treated by a physician, or death results, and within ten (10) additional days, written notice of such injury or death is received by the company or its agents. Strict compliance with the time periods stated above is required for coverage to be provided. Judge Gilroy found these terms to be clear and unambiguous and found they apply to the facts presented, thereby excluding coverage. Haus argues the provisions are ambiguous, and must be construed in favor of the policyholder.
The principles of construction of insurance contracts are well settled. Fundamentally, an insurance contract, like any other contract, will be enforced as written. Clear and unambiguous terms of an insurance policy, therefore, need no further source of construction to merit their enforcement. Insureds are entitled, however, "to the broad measure of protection necessary to fulfill their reasonable expectations." Kievet v. Loyal Protective Life Ins. Co., 34 N.J. 475, 482 (1961). Coverage is thus afforded "to the full extent that any fair interpretation will allow." Ibid. (citations omitted). Therefore, in the event of an ambiguity in policy provisions that is reasonably susceptible to two interpretations, the construction resulting in coverage will be applied. Linden Motor Freight Co., Inc. v. Travelers Ins. Co., 40 N.J. 511, 525 (1963). Exclusionary provisions, because they are designed to restrict coverage, will be interpreted strictly. Butler v. Bonner & Barnwall, Inc., 56 N.J. 567, 576 (1970). Nevertheless, "exclusions are presumptively valid and will be given effect if 'specific, plain, clear, prominent, and not contrary to public policy.'" Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997) (citing Doto v. Russo, 140 N.J. 544 (1995)).
In light of these principles, we consider the terms of the pollution exclusion. Coverage is excluded for "injury" "to persons" which "arises out of the 'pollution hazard,'" which "means an actual exposure . . . to the . . . toxic or other harmful properties of any 'pollutants' arising out of the discharge, dispersal, seepage, migration, release or escape of such 'pollutants.'" "Pollutants" are defined to include any "gaseous . . . contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Here, carbon monoxide, a gaseous contaminant, was discharged, dispersed, released or escaped into the living areas of the home, causing injury to the Arias.
Against the apparent clarity of the provision and its applicability, Haus argues the provision is not intended to apply to a residential setting. He relies on Byrd v. Blumenreich, 317 N.J. Super. 496 (App. Div. 1999). We there considered "whether injury caused by the ingestion of the flaking and peeling lead paint chips arises 'out of the actual . . . discharge, dispersal, seepage, migration, release or escape of pollutants' within the meaning of [the policy] ...